GOLDEN STATE VINTNERS INC, S-1, 1998-04-30

GOLDEN STATE VINTNERS INC
S-1, 1998-04-30

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GOLDEN STATE VINTNERS, INC.
(Exact name of registrant as specified in its charter)
----------------

<TABLE>
<S> <C> <C>
DELAWARE 2084 77-0412761
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

500 DRAKE'S LANDING ROAD
GREENBRAE, CALIFORNIA 94904
(415) 461-4400
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------------

BRIAN R. THOMPSON
CHIEF FINANCIAL OFFICER
500 DRAKE'S LANDING ROAD
GREENBRAE, CALIFORNIA 94904
(415) 461-4400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------

Copies to:

<TABLE>
<S> <C>
TIMOTHY F. SYLVESTER, ESQ. FRANK H. GOLAY, ESQ.
RIORDAN & MCKINZIE SULLIVAN & CROMWELL
300 SOUTH GRAND AVENUE, 29TH FLOOR 444 SOUTH FLOWER STREET, SUITE 1200
LOS ANGELES, CALIFORNIA 90071 LOS ANGELES, CALIFORNIA 90071
(213) 629-4824 (213) 955-8000
</TABLE>

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

Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

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

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

If 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,
please check the following box. / /
----------------
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
<S> <C> <C> <C> <C>
Class B Common Stock, $.01 par
value........................... 4,945,000 shares $19.00 $93,955,000 $27,717
</TABLE>

(1) Includes 645,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the registration fee.

(3) Calculated pursuant to Rule 457(a) based upon an estimate of the maximum
offering price.
----------------
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 SAID 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 30, 1998

4,300,000 SHARES
GOLDEN STATE VINTNERS, INC.
CLASS B COMMON STOCK
(PAR VALUE $.01 PER SHARE)
----------------

Of the 4,300,000 shares of Class B Common Stock offered hereby, 2,150,000
shares are being sold by the Company and 2,150,000 shares are being sold by the
Selling Stockholders. See "Principal and Selling Stockholders". The Company will
not receive any proceeds from the sale of the shares being sold by the Selling
Stockholders.

The Company has two classes of authorized Common Stock, Class B Common
Stock, which is offered hereby, and Class A Common Stock. Holders of Class B
Common Stock generally have identical rights to holders of Class A Common Stock,
except that holders of Class B Common Stock are entitled to one vote per share
and holders of Class A Common Stock are entitled to 10 votes per share on all
matters submitted to a vote of stockholders. Class A Common Stock is convertible
at any time into Class B Common Stock on a share-for-share basis. Immediately
upon completion of this offering, the shares of Class B Common Stock sold in
this offering will represent 9.2% of the combined voting power of all classes of
voting stock and 45.4% of the economic interest (or rights of holders of common
equity to participate in distributions in respect of common equity) in the
Company ( % and %, respectively, if the Underwriters' over-allotment
option is exercised in full).

Prior to this offering, there has been no public market for the Class B
Common Stock. It is currently estimated that the initial public offering price
per share will be between $16 and $19. For factors to be considered in
determining the initial public offering price, see "Underwriting".

SEE "RISK FACTORS" COMMENCING ON PAGE 9 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS B COMMON STOCK.

Application has been made for quotation of the Class B Common Stock on the
Nasdaq National Market under the symbol "VINT".
----------------

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>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS(2)
-------------- ------------- ------------- -------------------
<S> <C> <C> <C> <C>
Per Share.................................. $ $ $ $
Total(3)................................... $ $ $ $
</TABLE>

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(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting".

(2) Before deducting expenses of the Company and the Selling Stockholders
estimated at $1,600,000. The Company has agreed to pay the offering expenses
of the Selling Stockholders, other than the Underwriting Discount.

(3) The Company and certain Selling Stockholders have granted the Underwriters a
30-day option to purchase up to an additional 645,000 shares of Class B
Common Stock at the initial public offering price per share, less the
Underwriting Discount, solely to cover over-allotments. If such option is
exercised in full, the total Initial Public Offering Price, Underwriting
Discount, Proceeds to Company and Proceeds to Selling Stockholders will be
$ , $ , $ and $ , respectively. See
"Underwriting".
----------------

The shares of Class B Common Stock offered hereby are offered severally by
the Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that certificates for the shares of Class B Common Stock will be ready
for delivery in New York, New York, on or about , 1998, against payment
therefor in immediately available funds.

GOLDMAN, SACHS & CO.

HAMBRECHT & QUIST

J.P. MORGAN & CO.
----------

The date of this Prospectus is , 1998.
<PAGE>
[PHOTOS OF THE COMPANY'S VINEYARDS, FACILITIES, OPERATIONS AND PRODUCTS]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS B COMMON
STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN
SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, 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 CONCERNING THE COMPANY AND THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO OF GSV APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM
"COMPANY" OR "GSV" WHEN USED IN THIS PROSPECTUS REFERS TO GOLDEN STATE VINTNERS,
INC., A DELAWARE CORPORATION, AND ITS CONSOLIDATED SUBSIDIARIES AND
PREDECESSORS. EXCEPT AS SET FORTH IN THE CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES THERETO OR AS OTHERWISE SPECIFIED HEREIN, ALL INFORMATION IN THIS
PROSPECTUS ASSUMES (I) THE CHANGE OF THE NAME OF GSV FROM "GOLDEN STATE
ACQUISITION CORP." TO "GOLDEN STATE VINTNERS, INC.", (II) THE CONVERSION OF ALL
OF GSV'S OUTSTANDING SHARES OF CLASS B COMMON STOCK INTO SHARES OF CLASS A
COMMON STOCK, (III) THE CREATION BY GSV OF A NEW CLASS B COMMON STOCK, (IV) THE
CONVERSION OF ALL OF GSV'S OUTSTANDING SHARES OF CLASS E COMMON STOCK AND CLASS
K COMMON STOCK INTO SHARES OF THE COMPANY'S NEWLY-CREATED CLASS B COMMON STOCK,
(V) A 2.9-FOR-1 STOCK SPLIT FOR EACH OF GSV'S OUTSTANDING SHARES OF CLASS A
COMMON STOCK AND CLASS B COMMON STOCK, (VI) THE COMPANY'S FISCAL YEAR PERIODS
RUNNING FROM JULY 1 TO JUNE 30 OF EACH YEAR REFERENCED AND (VII) NO EXERCISE OF
THE UNDERWRITERS' OVER-ALLOTMENT OPTION. AS USED IN THIS PROSPECTUS, THE TERM
"PREMIUM WINE" REFERS TO WINE THAT RETAILS FOR $3.00 OR MORE PER 750 MILLILITER
(ML) BOTTLE OR THE EQUIVALENT PRICE FOR DIFFERENT SIZED BOTTLES, IN ACCORDANCE
WITH INDUSTRY CUSTOM.

THE COMPANY

GSV is one of the largest vertically integrated suppliers of premium bulk
wines, wine processing and storage services, wine grapes and case goods in the
United States. The Company is a contract supplier of choice for many of the
leading branded wineries in California because of its reputation for quality and
service, extensive vineyard holdings, strategically located facilities and
ability to tailor a full range of products and services to meet the particular
needs of its customers. The Company believes that its strong customer
relationships, low-cost operations and ability to successfully integrate
vineyard and facility acquisitions have enabled GSV to capitalize on recent wine
industry trends, including the growth of the premium wine market and the trend
by many of the leading branded wineries to outsource wine production. Over the
last five years, GSV has increased its revenues at a compounded annual rate of
19% from $47.0 million in fiscal 1993 to $95.8 million in fiscal 1997.

The Company provides a broad range of high quality winemaking and processing
services, barrel fermentation and bottling and storage services to many of the
largest branded wineries in California and to a number of international
wineries. The Company supplies premium bulk wine pursuant to long-term supply
agreements with Sutter Home Winery ("Sutter Home"), Canandaigua Wine Company
("Canandaigua"), Sebastiani Vineyards ("Sebastiani"), IDV North America
("Heublein"), Vincor International, Inc. ("Vincor"), Mildara Blass and other
wineries. The Company also delivers contract wine processing, barrel
fermentation and storage services under contracts with, among others, The Wine
Group, Robert Mondavi Winery ("Mondavi") and Beringer Wine Estates ("Beringer").
The Company also sells wine grapes, primarily to EJ Gallo Winery ("Gallo").

GSV produces private label case goods for a number of clients, such as
Archer Daniels Midland Co. ("ADM"), JC Boisset USA ("Boisset") and Trader Joe's.
The Company is the largest exporter of bulk wine from California, according to
Gomberg, Fredrikson & Associates ("Fredrikson"), a wine industry consulting
firm, and, in fiscal 1997, the Company derived approximately 12% of its revenues
from the sale of bulk wine and case goods outside of the United States. The
Company also supplies brandy (a distilled derivative of wine) to Heublein
pursuant to a long-term agreement and is the second largest brandy producer in
the United States.

3
<PAGE>
source high quality wine grapes at a competitive cost. The Company's wine
processing facilities are generally modern, efficient and automated, and allow
for large scale, low-cost production of premium bulk wine and case goods and the
delivery of a full line of winemaking, processing and storage services. Over the
last four years, the Company has greatly expanded its presence in the California
wine industry by acquiring vineyards and wine and brandy processing facilities
and quickly integrating these acquisitions into GSV's winemaking operations.

The growth in the Company's sales is attributable in part to the growth of
the premium wine market. Over the past 10 years, there has been a shift in
consumer preferences in the United States from generic or "jug" wines to high
quality, branded premium varietal wines sold primarily in 750ml bottles. Since
1987, sales of premium California table wines have increased at a 15% compounded
annual rate, from approximately $932 million in 1987 to approximately $3.8
billion in 1997, according to Fredrikson. In 1997, premium table wines accounted
for 78% of the $4.8 billion California table wine market (expressed in winery
sales revenues), compared to 52% of the $1.8 billion California table wine
market in 1987. The Company believes that this major shift in consumer
preferences has occurred due to (1) the maturing "baby-boomer" generation
entering its prime wine consumption period; (2) a growing consumer interest in
premium wines in general; (3) a growing interest in and sophistication about
food that lends itself to expanded consumption of premium wines; and (4) the
improving quality and reputation of California premium wines.

The Company's recent financial performance has also benefited from the
increasing trend by a number of California's leading branded wineries to
outsource various steps in the winemaking process. With the growth in demand for
premium wines, these wineries have focused on the marketing of their brands and
have invested significant financial resources in building brand awareness and
loyalty through marketing and distribution. Additionally, the growing demand for
premium wine has strained the winemaking capacity of a number of leading branded
wineries. These wineries have demonstrated a strategic preference towards
focusing their resources on brand building as opposed to facility expansion.
These and other factors in the wine industry have resulted in an increasing need
for California's large, branded wineries to outsource the production of premium
wine. As a quality-oriented, low-cost provider of contract winemaking and
processing services, the Company is well positioned to continue to capitalize on
these wine industry trends.

BUSINESS STRENGTHS

GSV's key business strengths include:

LOW-COST PROVIDER. To position the Company advantageously among its bulk
wine processing competitors, GSV seeks to be the low-cost provider of bulk wine
and contract winemaking and processing services. The economies of scale of the
Company's large, efficient vineyards and facilities and GSV's expertise in
managing its winemaking facilities translate into low production costs, which
allow the Company to price its winemaking products and services at prices that
may be lower than the marginal production costs of these products and services
to its customers.

4
<PAGE>
products and services in any step of the winemaking process, while focusing the
use of their resources to leverage their particular strengths.

LARGE, COST EFFECTIVE VINEYARDS. The Company is one of the largest vineyard
owners in California. GSV's 9,600 acres of vineyard properties are large and
highly productive, which results in lower grape production costs. For example,
in 1997 the average cost of grape production at the Company's vineyards was well
below the 1997 market price for such grapes. The Company's ownership of
extensive vineyards also allows GSV to control the varieties of grapes it grows,
enabling the Company to tailor its product offerings to the changing needs of
its branded winery customers.

STRATEGICALLY LOCATED FACILITIES. The location of the Company's five
wineries in or adjacent to most of California's primary wine growing regions
allows the Company to offer its customers winemaking, processing and storage
services at several conveniently located facilities. In addition, the size of
the Company's facilities enables GSV to aggregate the winemaking needs of
several customers, producing wine at a lower marginal cost than each customer
could at their own facilities and reliably delivering large quantities of
quality wine.

STRONG CUSTOMER RELATIONSHIPS. The Company has developed relationships with
many of the largest branded wineries in California as well as with a number of
international branded wineries. The Company has used long-term contracts to
create and maintain business relationships with such customers as Gallo,
Heublein, Sutter Home, Canandaigua, Sebastiani, The Wine Group, Mondavi,
Beringer, Vincor and Mildara Blass. As competition among the major wineries in
California intensifies, management believes that a number of these wineries will
continue to outsource the production of a major portion of their premium wines.

GROWTH STRATEGY

GSV's strategic objective is to strengthen its position as a leading
supplier of premium bulk wine, wine processing and storage services and case
goods to the leading branded wineries in California and to a number of
international winemakers. In addition to building on its business strengths, the
Company's strategy for achieving this goal has the following key elements:

UPGRADE AND EXPAND WINEMAKING OPERATIONS. The Company recently authorized
capital expenditures of up to $20 million, primarily to upgrade, maintain and
expand its existing winemaking facilities in Fresno and Monterey over the next
two years. In addition, the Company will continue to evaluate opportunities to
make strategic greenfield investments in selected wine regions of California.

PURSUE STRATEGIC ACQUISITIONS. The Company's recent acquisitions have
enabled it to expand the range of premium winemaking and processing services
that it offers to its branded winery customers. Additionally, the Company has
often been able to improve the financial performance of acquired operations
through cost reductions and productivity increases. While the Company has found
it increasingly difficult to identify attractive acquisition opportunities, GSV
will continue to examine acquisition opportunities that make sense financially
and can be integrated efficiently with the Company's existing operations.

EXPAND INTERNATIONALLY. The Company will seek to strengthen its position as
the leading bulk wine exporter from California and will continue to market its
winemaking and processing services to leading international wineries. The
Company also plans to further leverage its relationships with leading
international winemakers to internationally source bulk wine for the Company's
customers in North America. Finally, the Company believes there are significant
growth opportunities in a variety of international winemaking regions, including
Australia, South America and Southern Europe, and that the premium bulk wine
processor and contract service provider models that the Company has successfully
implemented in California can be applied internationally.

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

The Company (referred to as "New GSV" below) was incorporated for the
purpose of acquiring all of the outstanding capital stock of Golden State
Vintners, currently one of the Company's consolidated subsidiaries (referred to
as "Old GSV" below), on April 27, 1995. The Company constitutes the successor
company to Old GSV and is reflected in the statement of operations data
beginning on April 27, 1995 and the balance sheet data beginning on June 30,
1995. The statement of operations data and the balance sheet data through April
26, 1995 are the results of Old GSV. The information contained in the tables
below should be read in conjunction with and is qualified in its entirety by
"Selected Consolidated Financial Data", "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the audited and unaudited
Consolidated Financial Statements of Old GSV and the Company and the Notes
thereto, each of which is included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NEW GSV
-------------------------------------------
OLD GSV SIX
--------------------------------- MONTHS
ENDED
YEAR ENDED JUNE 30, JULY 1, APRIL 27, YEAR ENDED JUNE 30, DECEMBER
1994 TO 1995 TO 31,
-------------------- APRIL 26, JUNE 30, -------------------- ---------
1993 1994 1995 1995 1996 1997 1996
--------- --------- ----------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................ $ 47,048 $ 44,063 $ 42,851 $ 4,037 $ 71,755 $ 95,785 $ 76,073
Cost of sales (1)............................... 38,713 34,241 34,772 3,949 58,468 71,662 57,285
Gross profit.................................... 8,335 9,822 8,079 88 13,287 24,123 18,788
Selling, general, and administrative expenses
(2)........................................... 1,676 2,768 3,364 951 5,042 7,408 3,781
Income (loss) from operations................... 6,659 7,054 4,715 (863) 8,245 16,715 15,007
Interest expense................................ 2,813 3,189 2,797 920 5,344 5,880 2,971
Income (loss) before income taxes............... 3,846 3,828 1,874 (1,784) 2,507 10,158 11,650
Net income (loss)............................... 6,618 3,503 1,874 (1,784) 1,924 6,170 7,071
Preferred stock dividends....................... -- -- -- -- (1,290) (1,314) (679)
--------- --------- ----------- ---------- --------- --------- ---------
Income (loss) available to common stockholders.. $ 6,618 $ 3,503 $ 1,874 $ (1,784) $ 634 $ 4,856 $ 6,392
--------- --------- ----------- ---------- --------- --------- ---------
--------- --------- ----------- ---------- --------- --------- ---------
Earnings (loss) per common share (3):
Basic......................................... $ (.26) $ .09 $ .71 $ .93
---------- --------- --------- ---------
---------- --------- --------- ---------
Diluted....................................... $ (.26) $ .09 $ .71 $ .91
---------- --------- --------- ---------
---------- --------- --------- ---------
OTHER FINANCIAL DATA:
Depreciation and amortization................... $ 1,946 $ 2,279 $ 1,926 $ 755 $ 3,319 $ 4,207 $ 3,316
Capital expenditures............................ 1,007 3,639 3,222 8,967 3,536 4,778 2,118
EBITDA (4)...................................... 12,934 8,959 6,418 (342) 10,893 19,887 17,937
OTHER DATA:
Tons of grapes crushed (5)...................... 128,022 110,285 119,103 156,722 163,521 163,521
Vineyard property (in acres).................... 7,850 7,850 9,600 9,600 9,600 9,600

<CAPTION>
1997
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................ $ 89,530
Cost of sales (1)............................... 66,033
Gross profit.................................... 23,497
Selling, general, and administrative expenses
(2)........................................... 11,550
Income (loss) from operations................... 11,947
Interest expense................................ 3,446
Income (loss) before income taxes............... 8,020
Net income (loss)............................... 4,897
Preferred stock dividends....................... (636)
---------
Income (loss) available to common stockholders.. $ 4,261
---------
---------
Earnings (loss) per common share (3):
Basic......................................... $ .62
---------
---------
Diluted....................................... $ .59
---------
---------
OTHER FINANCIAL DATA:
Depreciation and amortization................... $ 3,560
Capital expenditures............................ 2,248
EBITDA (4)...................................... 14,828
OTHER DATA:
Tons of grapes crushed (5)...................... 197,841
Vineyard property (in acres).................... 9,600
</TABLE>
<TABLE>
<CAPTION>
OLD GSV NEW GSV
-------------------- ---------------------------------------------------------
JUNE 30, JUNE 30, DECEMBER 31, 1997
-------------------- ------------------------------- ------------------------
1993 1994 1995 1996 1997 ACTUAL PRO FORMA(6)
--------- --------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital...................... $ 5,755 $ 10,011 $ 8,735 $ 9,335 $ 9,386 $ 12,368 $ 12,368
Total assets......................... 45,741 53,537 80,941 90,435 102,111 138,273 138,273
Total long-term debt................. 27,119 30,900 44,322 42,973 49,781 49,890 49,890
Redeemable preferred stock........... -- -- 9,978 10,034 8,813 8,880 8,166
Stockholders' equity................. 10,286 13,789 10,037 10,670 12,574 16,835 17,550

<CAPTION>
AS ADJUSTED(7)
---------------
<S> <C>
BALANCE SHEET DATA:
Working capital...................... $ 17,959
Total assets......................... 138,273
Total long-term debt................. 32,090
Redeemable preferred stock........... -
Stockholders' equity................. 49,107
</TABLE>

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

(1) In accordance with purchase accounting rules applied to the Company's
acquisition of Old GSV, inventory was increased to estimated fair value. The
inventory step-up increased cost of sales for the period April 27, 1995 to
June 30, 1995 and the year ended June 30, 1996 by $471 and $1,563,
respectively.

(2) Management incentives relating to stock appreciation rights and bonuses
increased selling, general and administrative expenses by $33, $930, $2,141,
$1,157 and $8,800 for the period April 27, 1995 to June 30, 1995, the years
ended June 30, 1996 and 1997 and the six months ended December 31, 1996 and
1997, respectively.

(3) See Note 2 of the Notes to Consolidated Financial Statements for an
explanation of the basic and diluted earnings per share computations.

(4) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. EBITDA is not a measure of financial performance under
generally accepted accounting principles and should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity.

(5) It is industry custom to convert one ton of wine grapes to 170 gallons of
wine, and to convert gallons of wine into cases of twelve 750ml bottles at
the rate of 2.3775 gallons per case. All grapes crushed in the twelve month
period ended June 30, 1995 are shown under New GSV.

(6) Pro forma to give effect to the conversion of all shares of the 8% Junior
Exchangeable Redeemable Preferred Stock (the "Junior Preferred Stock") into
shares of Class B Common Stock as if such conversion had occurred on
December 31, 1997.

(7) Assumes that the issuance and sale of the 2,150,000 shares of Class B Common
Stock offered by the Company hereby at an assumed initial public offering
price of $17.50 per share and the application of the estimated net proceeds
therefrom occurred on December 31, 1997.

6
<PAGE>
SUMMARY SUPPLEMENTAL PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS DATA
(IN THOUSANDS)

The Company's acquisition of all of the outstanding capital stock of Old GSV
on April 27, 1995 was accounted for as a purchase, resulting in new bases of
assets and liabilities effective April 27, 1995. Also, effective December 31,
1997, the Company restructured certain management incentives. The restructured
incentives will not have a material impact on the Company's net income in future
periods but, as a result of vested stock options, will impact the Company's
future earnings per share. The summary supplemental consolidated financial data
set forth below are presented herein to reflect on a pro forma basis the
comparative consolidated financial data without (i) the inventory step-up
included in the audited results of the Company for the period April 27, 1995 to
June 30, 1995 and the year ended June 30, 1996 and (ii) the impact of certain
management incentives included in the actual results for the period July 1, 1994
to April 26, 1995, the period April 27, 1995 to June 30, 1995, the years ended
June 30, 1996 and 1997 and the six months ended December 31, 1996 and 1997. For
comparative purposes, such pro forma data for the periods July 1, 1994 to April
26, 1995 (Old GSV) and April 27, 1995 to June 30, 1995 (New GSV) have been
combined and reflected below under "Year Ended June 30, 1995". This information
should be read in conjunction with "Supplemental Pro Forma Consolidated
Statement of Operations Data", "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the audited and unaudited
Consolidated Financial Statements and Notes thereto, each of which is included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................................. $ 47,048 $ 44,063 $ 46,888 $ 71,755 $ 95,785 $ 76,073 $ 89,530
Cost of sales (1)........................ 38,713 34,241 38,250 56,905 71,662 57,285 66,033
--------- --------- --------- --------- --------- --------- ---------
Gross profit (1)......................... 8,335 9,822 8,638 14,850 24,123 18,788 23,497
Selling, general and administrative
expenses (2)........................... 1,676 2,768 3,119 4,113 5,267 2,624 2,750
--------- --------- --------- --------- --------- --------- ---------
Income from operations (1)(2)............ 6,659 7,054 5,519 10,737 18,856 16,164 20,747
Interest expense......................... 2,813 3,189 3,716 5,344 5,880 2,971 3,446
Other expense, net....................... -- 37 47 394 677 386 481
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes (1)(2)........ 3,846 3,828 1,756 4,999 12,299 12,807 16,820
Income taxes (3)......................... 1,557 325 467 1,583 4,847 5,043 6,655
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary items........ 2,289 3,503 1,289 3,416 7,452 7,764 10,165
Extraordinary items (4).................. 4,329 -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income............................... $ 6,618 $ 3,503 $ 1,289 $ 3,416 $ 7,452 $ 7,764 $ 10,165
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>

- ------------------
(1) For the years ended June 30, 1995 and 1996, cost of sales was reduced and
gross profit, income from operations and income before income taxes were
effectively increased by $471 and $1,563, respectively, after adding back
the effects of the inventory step-up.

(2) For the years ended June 30, 1995, 1996 and 1997 and the six months ended
December 31, 1996 and 1997, selling, general and administrative expenses
were reduced and income from operations and income before income taxes were
effectively increased by $1,195, $930, $2,141, $1,157 and $8,800,
respectively, after adding back the impact of the management incentives.

(3) For the years ended June 30, 1995, 1996 and 1997 and the six months ended
December 31, 1996 and 1997, income taxes have been computed on income before
income taxes after adjustment for the effects of the adjustments described
in (1) and (2) above.

(4) For the year ended June 30, 1993, gain on debt restructuring of $2,172 and
the tax benefit of utilization of net operating loss carryforwards of $2,157
were recorded.

7
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Class B Common Stock Offered:
The Company..................... 2,150,000 shares

The Selling Stockholders........ 2,150,000 shares

Total......................... 4,300,000 shares

Common Stock to Be Outstanding
After the Offering (1):

Class A Common Stock............ 4,114,888 shares

Class B Common Stock............ 5,364,385 shares

Voting Rights:

Class A Common Stock............ Ten votes per share

Class B Common Stock............ One vote per share

Use of Proceeds................... Repayment of certain outstanding indebtedness,
repurchase of senior preferred stock, working capital
and other general corporate purposes. Certain Selling
Stockholders intend to use a portion of the net proceeds
they receive from the sale of shares of Class B Common
Stock to redeem outstanding participating securities
issued to the U.S. Small Business Administration. See
"Use of Proceeds".

Proposed Nasdaq National Market
Symbol........................ VINT
</TABLE>

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

(1) Based on an aggregate of 9,479,273 shares of Class A Common Stock and Class
B Common Stock outstanding as of April 30, 1998, after giving effect to the
offering, and assumes no exercise of the Underwriters' over-allotment
option. Excludes (i) 362,834 shares of Class A Common Stock and 223,491
shares of Class B Common Stock reserved for issuance pursuant to the
Company's 1996 Stock Option Plan (the "1996 Option Plan") of which options
to purchase 362,834 shares of Class A Common Stock and 139,200 shares of
Class B Common Stock are outstanding, (ii) 348,000 shares of Class B Common
Stock reserved for issuance pursuant to the Company's 1998 Director Stock
Option Plan (the "Director Plan") of which options to purchase 59,972 shares
of Class B Common Stock are outstanding and (iii) 764,729 shares of Class B
Common Stock reserved for issuance pursuant to outstanding options issued
outside of the Company's option plans. See "Capitalization", "Description of
Capital Stock" and "Management--Stock Option Plans".

RISK FACTORS

See "Risk Factors" beginning on page 9 for a description of certain risks
relevant to an investment in the Class B Common Stock.

TRADEMARK INFORMATION

The Company's trademarks include GOLDEN STATE VINTNERS, and the proprietary
labels EDGEWOOD ESTATE, SUMMERFIELD, SUMMERFIELD RESERVE, MONTHAVEN, CUTLER
CREEK, BOUNTY, J. WILE, MUIRFIELD, WESTON and LEBLANC. This Prospectus also
contains trademarks and trade names of other companies.

8
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY
AND ITS BUSINESS PROSPECTS BEFORE PURCHASING SHARES OF CLASS B COMMON STOCK
OFFERED BY THIS PROSPECTUS. EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN,
THE MATTERS DISCUSSED IN THIS PROSPECTUS CONTAIN FORWARD-LOOKING STATEMENTS THAT
ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, INCLUDING WITHOUT LIMITATION,
THE RISKS DESCRIBED BELOW.

CONCENTRATION OF CUSTOMERS

During fiscal 1997, five customers accounted for more than 56.0% of the
Company's revenues, with Gallo and Heublein accounting for approximately 17.1%
and 15.7%, respectively. For fiscal 1998, the Company estimates that five
customers will account for approximately 50% of the Company's revenues, with
Gallo and Heublein accounting for approximately 17% and 13%, respectively. The
Company's revenues from brandy production during fiscal 1997 accounted for
approximately 12% of total revenues and were derived primarily from sales to one
customer, Heublein. While many of the Company's largest customers have entered
into some form of long-term contract with the Company, there can be no assurance
that each of these relationships will continue following the expiration of these
contracts or that the volume of business the Company is currently conducting
with such customers will continue at such levels. The loss of any one of the
Company's major customers or a significant reduction in the volume of their
business with the Company could have a material adverse effect on GSV's
business, financial condition and results of operations.

In the Company's 1997 and 1998 fiscal years, approximately 87.0% and 86.0%,
respectively, of the Company's grape production (on a per ton basis) were
contracted for sale to Gallo. Such grape sales accounted for more than 17.0% of
the Company's revenues in fiscal 1997 and are estimated to account for
approximately 17% of its revenues in fiscal 1998. However, the Company has
restructured its grape supply arrangements with Gallo, and as the Company goes
into the 1998 summer harvest, most of its grape production will not be subject
to guaranteed purchase contracts with Gallo or with any other customer. As a
result of these restructuring efforts, GSV will experience a significant decline
in grape sale revenues and may experience a decline in total revenues for the
Company's 1999 fiscal year. Further, if the wine industry were to experience a
significant decline in the price of premium varietal grapes, there can be no
assurance that the Company could profitably use or sell such grapes, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company continues to have long-term grape supply
contracts with Gallo, covering Zinfandel and Chardonnay grapes.

AGRICULTURAL RISKS

Grape production is subject to a variety of agricultural risks. Extreme
weather conditions can materially and adversely affect the quality and quantity
of grapes produced. In 1995 and 1996, variability in production yields in
California's Central Valley contributed to a significant decline in the tonnage
of grapes produced by virtually all vineyards, including those of the Company.
Additionally, in January 1997, severe flooding in the San Joaquin River Basin
destroyed a number of protective levees, damaging a portion of the Company's
Gravelly Ford vineyards, which damage was not entirely insured. There can be no
assurance that inclement weather in the future will not affect a substantial
portion of the Company's vineyards in any year and have a material adverse
effect on the Company's business, financial condition and results of operations.

Vineyards are also susceptible to certain diseases, insects and pests, which
can increase operating expenses, reduce yields and damage or kill vines. In
recent years phylloxera, a louse that feeds on and may ultimately destroy the
roots of grape vines, has infested many vineyards in the wine grape producing
regions of California, causing grape yields to decrease. Phylloxera infestation
has been widespread

9
<PAGE>
in California, particularly in Napa, Sonoma, Mendocino and Monterey Counties,
where the soil and climate provide an ideal environment for the pest. As a
result of this widespread infestation, thousands of vineyard acres throughout
the State of California have been replanted with phylloxera-resistant rootstock
or, in some cases, taken out of production completely. The cost of controlling
this pest was significant to affected vineyard owners.

Substantially all of the Company's vineyards are planted on their own
rootstock that is not phylloxera-resistant. In the fall of 1997, phylloxera was
discovered in certain acres of the Company's vineyards. The Company believes
that the scope of this phylloxera infestation is modest, though there can be no
assurance in that regard. Additionally, GSV believes the climate, soil and water
conditions in California's San Joaquin Valley slow the development of phylloxera
in vineyard roots. Further, in the 1997 harvest, the yields from the Company's
phylloxera-infested acres were not notably lower than yields from surrounding,
non-infested acreage. There can, however, be no assurance that phylloxera will
not spread throughout adjoining vineyard acres, reduce yields and require a
significant investment in replanting with disease-resistant root stock, all of
which would have a material adverse effect on the Company.

Other pests that may infest vineyards include leafhoppers, thrips,
nematodes, mites, insects, orange tortrix 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 and
birds can also pose a problem for vineyards, and wine grapevines are also
susceptible to certain virus infections which may cause reduction of yields. In
addition, the presence of potentially harmful nematodes in relatively high
numbers has been detected in certain acres of the Company's vineyards. None of
these infestations or infections currently poses a major threat to the Company's
vineyards, although they could do so in the future and could subject the
vineyards to severe damage, which could have a material adverse effect on the
Company.

RISKS RELATING TO THE PRODUCTION OF BULK WINE

While the Company has substantial experience in producing and processing
bulk wine, the Company may still experience production difficulties and delays
with respect to the delivery of finished wine. The Company generally guarantees
the quality of the wine produced, which could result in the Company bearing
financial responsibility for wine that fails to meet agreed upon quality
standards. From time to time, the Company has received claims from customers
based on alleged defects in wine produced by the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations". Such
production difficulties could have a material adverse effect on the Company's
business, results of operations and financial condition.

DEPENDENCE ON CONSUMER DEMAND

The growth of the wine industry and the success of the Company's business
depend to a significant extent on a number of factors relating to discretionary
consumer spending, including 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. 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, or if there
should be any significant decline in general economic conditions or
uncertainties regarding future economic prospects that adversely affect
discretionary consumer spending generally, or purchases of wine specifically,
demand for wine and for the Company's products and services could decline.

In recent years there has been substantial publicity regarding the possible
health benefits of moderate wine consumption. The results of a number of studies
suggest that moderate consumption of wine (or other alcoholic beverages) could
result in decreased mortality and other health benefits.

10
<PAGE>
Alternatively, 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.

DEMAND FOR BULK WINE

Bulk wine and related services accounted for approximately 52.0% of GSV's
revenues in its 1997 fiscal year and is estimated to account for approximately
51% of revenues in its 1998 fiscal year. Recently, the Company has focused its
resources on the expansion of this portion of its business. Any loss of a major
bulk wine customer would reduce GSV's bulk wine revenues, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.

CASE GOODS SALES

Sales of case goods and related services accounted for approximately 17.0%
of the Company's revenues in its 1997 fiscal year and is estimated to account
for approximately 19% of revenues in its 1998 fiscal year. A significant portion
of the Company's case goods revenues consisted of short-term private label case
goods sales. Additionally, the Company's higher margin proprietary case goods
revenues resulted from sales of the Company's relatively unknown proprietary
brands of premium wines. Any significant increase in the supply of premium wine
in the California wine market that is not met by a corresponding demand could
adversely affect the Company's case goods sales.

WINE GRAPE SUPPLY; PRICING

As recently as the 1996 harvest, the California wine industry experienced a
shortage of grapes due to insufficient plantings of premium varieties in the
early 1990s, acreage taken out of production due to phylloxera infestation and
reduced yields due to poor weather. The Company believes that the demand for
wine grapes has also increased substantially over recent years and has generally
outpaced grape supply. As a result, prices for premium California wine grapes
were at historically high levels following the 1996 harvest and through the 1997
harvest. A number of recent developments, including (1) plantings of new
vineyards, (2) yield enhancements through technological advances, (3) denser
plantings of vines, (4) availability of wine from foreign sources and (5)
excellent weather in the 1997 growing season, have resulted in a greatly
increased grape supply, resulting in downward price pressure following the 1997
harvest. In addition, the supply of wine grapes is expected to increase
significantly in the near future as the vines from recent plantings mature and
their grapes become marketable. Such increases in supply may cause California
premium wine grape prices and wine prices to decline significantly, which could
have a material adverse effect on the Company's business, financial condition
and results of operations.

ENVIRONMENTAL RISKS

The Company's current operations emit ethanol and require the periodic usage
of various chemical herbicides, fungicides and pesticides, some of which contain
hazardous or toxic substances. The emission and usage of these chemicals are, to
varying degrees, subject to federal and state regulation. The Company believes
that its properties and operations have been and continue to be in material
compliance with relevant environmental regulations. At the same time, if
hazardous substances are discovered to have emanated from the Company's
properties, the Company could be subject to material liability arising from the
remediation of such potential harm.

11
<PAGE>
SEASONALITY OF BUSINESS; QUARTERLY REVENUES; FLUCTUATING RESULTS

The wine grape business is extremely seasonal and the Company recognizes the
vast majority of its revenues in the first six months of its fiscal year. GSV is
not positioned to maximize quarter-to-quarter results, and its quarterly results
should not be considered indicative of those to be expected for a full year. The
Company recorded 79.4% of its 1997 fiscal year revenues during the first six
months of the Company's 1997 fiscal year. It is expected that GSV's revenues of
$89.5 million for the six months ended December 31, 1997 will account for a
similar percentage of the Company's revenues for its 1998 fiscal year. GSV has
historically operated at a loss in the last two fiscal quarters due to limited
sales during such quarters. Seasonality of revenues also affects the Company's
cash flow requirements. In the past, GSV has borrowed funds under 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. GSV also
borrows substantial sums from late summer through the fall to finance inventory
build-up during the fall crush season. Such seasonality in revenues and
borrowings may lead to significant fluctuations in the Company's reported
quarterly results. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".

COMPETITION; INDUSTRY FRAGMENTATION

The wine industry is extremely competitive. The Company competes with
several well-capitalized companies in the production of bulk wine. Further, many
of the Company's current and prospective competitors have substantially greater
financial, production, personnel and other resources than the Company. In order
to meet near-term shortfalls in supply, a number of wineries have commenced
purchases of wine from foreign sources. Because of higher production costs in
the United States and the higher prices of grapes in California, especially in
comparison to the prices of years past, some wineries can achieve significant
cost savings, even after taking into account shipping costs, by importing bulk
wine from abroad. Some countries, such as France, have launched marketing
campaigns to increase their sales in the United States. Foreign competition can
be expected to continue and increase. In addition, the Company's principal
winery customers compete with each other and with other wineries located in the
United States, Europe, South America, South Africa and Australia. Wine also
competes with other alcoholic, and to a lesser degree, nonalcoholic beverages,
and to the extent wine consumers reduce consumption of wine in favor of such
other beverages, demand for wine and the Company's products and services could
decline.

FACILITY EXPANSION

The Company is currently operating a number of its wine processing
facilities at close to full capacity. The Company recently authorized capital
expenditures of up to $20 million, primarily to upgrade, maintain and expand its
facilities over the next two years. The Company intends to increase the annual
processing capacity at its Fresno facility by approximately 20,000 tons of
grapes and to expand Fresno wine cooperage capacity by approximately four
million gallons. GSV will also expand its Monterey wine processing facility's
annual capacity by approximately 15,000 tons of grapes and increase annual
barrel fermentation capacity by approximately 18,000 barrels. GSV's efficient
use of capital resources in the next two years to expand wine production will be
important for the Company to maintain its position as one of the leading
suppliers of premium bulk wine and related wine processing services in the
United States. The Company's ability to complete this and subsequent expansions
may be subject to substantial delays due to shortages of stainless steel tanks
and other important materials and equipment, delays that the marketplace
periodically experiences. Other factors that may delay such improvements are
higher than anticipated expenditures, adverse weather and delays in construction
by contractors. The Company has already encountered such delays in its proposed
expansion and upgrade of its Monterey facility. Failure to deploy such capital
resources successfully or complete any expansion of the Company's operations on
a timely basis or underestimating the costs and time required to improve the

12
<PAGE>
Company's facilities could have a material adverse effect on the Company's
results of operations and prospects.

GROWTH THROUGH ACQUISITION

In the last three years the Company has virtually doubled the size of its
operations through the acquisition of vineyard acres and wine and brandy
production facilities. These acquisitions have resulted in significant growth in
revenues and net income for the Company on a year-to-year basis. In the future,
there can be no assurance that acceptable acquisition opportunities will be
available to the Company or that the Company will be able to profitably
integrate any such future acquisition. Thus, it is unlikely that GSV's previous
level of acquisition-related activity will continue in the Company's 1998 and
1999 fiscal years and beyond.

FIXED FARMING COSTS

The Company incurs relatively fixed annual farming costs per vineyard acre.
Revenues from grape sales and wine processing and production are not realized
until harvest and vary depending upon numerous factors. Vineyard productivity
varies from year to year depending upon weather and other factors, and
significant variations in annual yields should be expected from time to time.
Because production costs are not significantly variable in light of productivity
or revenue levels, weak harvests or lower grape prices cannot be fully mitigated
by cost reductions and could have an adverse effect upon profitability.

RELIANCE ON KEY PERSONNEL

The Company believes its continued success depends on the active involvement
of Jeffrey B. O'Neill, the Company's Chief Executive Officer, and Brian R.
Thompson, the Company's Chief Financial Officer. There can be no assurance that
these persons will remain in their management positions with the Company, and
the loss of the services of either of these persons could have an adverse effect
on the Company's business, financial condition and results of operations.

CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER MEASURES

The Company has two classes of Common Stock: Class A Common Stock, which is
entitled to 10 votes per share, and Class B Common Stock, which is entitled to
one vote per share. The Class A Common Stock and Class B Common Stock vote
together on substantially all matters. Following this offering, SBIC Partners,
L.P. ("SBIC Partners"), Exeter Equity Partners, L.P. ("EE Partners") and Exeter
Venture Lenders, L.P. (individually, "EV Lenders", and, collectively with EE
Partners, "Exeter") and Mr. O'Neill will own or control together 4,114,888
shares of Class A Common Stock. In addition, Mr. O'Neill will own or control
24,385 shares of Class B Common Stock. Such ownership will represent 100% of the
outstanding Class A Common Stock and an insignificant percent of the Class B
Common Stock. Nevertheless, following the offering, the voting power of such
Class A Common Stock will represent 88.5% of the combined voting power of both
classes of Common Stock, and such persons, acting together, will be able to
decide substantially all matters submitted to a stockholder vote, including the
election of members of the Company's Board of Directors, proxy contests, mergers
and tender offers, thereby ensuring that they will continue to direct the
business, policies and management of the Company.

In addition, the Company and certain stockholders have entered into a
Stockholders Agreement (as defined herein) pursuant to which SBIC Partners,
Exeter and Mr. O'Neill, have agreed to vote their shares of Common Stock for
each other's nominees to the Company's Board of Directors. The Stockholders
Agreement also provides, among other things, that the prior written consent of
SBIC Partners, which consent is subject to the sole discretion of SBIC Partners,
is required with respect to all material

13
<PAGE>
transactions relating to the Company. Such voting control by SBIC Partners,
Exeter and Mr. O'Neill may discourage certain transactions involving an actual
or potential change of control of the Company, including transactions in which
the holders of Class B Common Stock may receive a premium for their shares over
the then-prevailing market price, and may have a depressive effect on the market
price for Class B Common Stock. The Stockholders Agreement terminates upon the
consummation of an initial public offering of at least 20% of the Company's
Common Stock that results in gross proceeds to the Company of at least $35
million. See "Principal and Selling Stockholders", "Certain Transactions" and
"Description of Capital Stock".

Furthermore, following this offering, the Company's Second Amended and
Restated Certificate of Incorporation will authorize the issuance and sale of
5,000,000 shares of so-called "blank check" Preferred Stock with rights,
preferences and privileges to be fixed by the Board of Directors in its
discretion, without further approval of or action by the stockholders. The
rights of the holders of the 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, thereby delaying, deferring or preventing a change in control of the
Company. Furthermore, such Preferred Stock may have other rights, including
economic rights senior to the Common Stock, and, as a result, the issuance
thereof could have a material adverse affect on the market value of the Common
Stock. The Company has no present plans to issue shares of Preferred Stock.

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, the statue 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 the
business combination is approved by the Board of Directors and the holders of at
least 66 2/3% of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder). The application of Section 203 and
other provisions of the Company's Certificate of Incorporation, its Bylaws and
Delaware corporate law may have the effect of deterring hostile takeovers or
delaying or preventing changes in control or management of the Company,
including transactions in which stockholders might otherwise receive a premium
for their shares over then current market prices.

GOVERNMENT REGULATION

GSV is subject to a broad range of federal and state regulatory requirements
regarding its operations and practices. These regulations are subject to change
and conceivably could have a significant impact on operating practices, chemical
usage and other aspects of the Company's business. There can be no assurance
that new or revised regulations pertaining to the wine grape production industry
will not have a material adverse effect on the Company's business, financial
condition and results of operations.

Wine production and sales are subject to extensive regulation by the Federal
Bureau of Alcohol, Tobacco and Firearms, the California Department of Alcohol
Beverage Control and other state and federal governmental authorities that
regulate licensing, trade and pricing practices, labeling, advertising and other
activities. In recent years, federal and state authorities have required warning
labels on beverages containing alcohol. Restrictions imposed by government
authorities on the sale of wine could increase the retail price of wine, which
could have an adverse effect on demand for wine in general. There can be no
assurance that there will not be new or revised laws or regulations pertaining
to the wine industry which could have a negative impact on the Company's
business.

14
<PAGE>
DILUTION

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

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

Prior to this offering, there has been no public market for the Class B
Common Stock. Although the Company has applied to have the Class B Common Stock
accepted for quotation on the Nasdaq National Market, there can be no assurance
that an active trading market will develop, or if one does develop, that it will
be sustained. The initial public offering price of the Class B Common Stock will
be established by negotiation among the Company, the Selling Stockholders and
the Underwriters and may not be indicative of the market price of the Class B
Common Stock after this offering. See "Underwriting". In addition, stock markets
from time to time have 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 B Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Class B Common Stock in the public market
following this offering could adversely affect the market price of the Class B
Common Stock. Although only the 4,300,000 shares being sold in this offering
will be available for sale in the public market immediately after the offering,
substantially all of the remaining shares of Class B Common Stock and Class A
Common Stock, which are convertible into shares of Class B Common Stock at any
time on a share-for-share basis, will be eligible for sale in the public market
beginning 90 days from the date of this offering, subject to the volume and
manner of sale limitations imposed by Rule 144 under the Securities Act of 1933,
as amended (the "Securities Act"), and to certain contractual limitations. See
"Shares Eligible for Future Sale".

YEAR 2000 COMPLIANCE

A significant percentage of the software that runs most of the computers in
the United States relies on two digit date codes to perform a number of
computation and decision making functions. Commencing on January 1, 2000, these
computer programs may fail from an inability to interpret date codes properly,
misreading "00" for the year 1900 instead of the year 2000. The Company believes
that its operating systems and application software programs are Year 2000
compliant, though there can be no assurance in that regard. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements regarding the Company's
financial position, business strategy, prospects and other related matters.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Actual results could differ materially
from the Company's expectations as a result of a number of factors, including
without limitation, agricultural risks, the Company's ability or inability to
implement its growth strategy and the possibility of a significant shift in
consumer wine drinking preferences.

15
<PAGE>
THE COMPANY

The Company provides a broad range of high quality winemaking and processing
services, barrel fermentation and bottling and storage services to many of the
largest branded wineries in California and to a number of international
wineries. The Company supplies premium bulk wine pursuant to long-term supply
agreements with Sutter Home, Canandaigua, Sebastiani, Heublein, Vincor, Mildara
Blass and other wineries. The Company also delivers contract wine processing,
barrel fermentation and storage services under contracts with, among others, The
Wine Group, Mondavi and Beringer. The Company also sells wine grapes, primarily
to Gallo.

GSV produces private label case goods for a number of clients, such as ADM,
Boisset and Trader Joe's. The Company is the largest exporter of bulk wine from
California, according to Fredrikson, and, in fiscal 1997, the Company derived
approximately 12% of its revenues from the sale of bulk wine and case goods
outside of the United States. The Company also supplies brandy (a distilled
derivative of wine) to Heublein pursuant to a long-term agreement and is the
second largest brandy producer in the United States.

The combination of GSV's extensive vineyard holdings and five strategically
located facilities has enabled the Company to become one of California's
low-cost producers of premium bulk wine. The Company's 9,600 acres of vineyard
properties in California's San Joaquin Valley allow the Company to source high
quality wine grapes at a competitive cost. The Company's wine processing
facilities are generally modern, efficient and automated, and allow for large
scale, low-cost production of premium bulk wine and case goods and the delivery
of a full line of winemaking, processing and storage services. Over the last
four years, the Company has greatly expanded its presence in the California wine
industry by acquiring vineyards and wine and brandy processing facilities and
quickly integrating these acquisitions into GSV's winemaking operations.

The Company was incorporated in Delaware in 1995. The predecessor to the
Company's primary operating subsidiary, Golden State Vintners, a California
corporation ("Golden State Vintners"), was originally founded in 1936 as a
cooperative family winery by Arpaxat Setrakian, the grand-
father of Jeffrey B. O'Neill, the Company's Chief Executive Officer, and was
originally located in the town of Cutler in California's San Joaquin Valley. In
April 1995, Golden State Vintners was acquired by the Company, then known as
Golden State Acquisition Corp. ("GSAC"), in a transaction led by an investment
group that included Smith McDonnell Stone & Co. ("SMS"), SBIC Partners and
Exeter. In October 1996, SBIC Partners and Mr. O'Neill invested additional funds
in the Company, and the equity interests of SMS were repurchased by the Company.
See "Certain Relationship and Related Transactions". The Company changed its
name from GSAC to GSV on April 22,1998. The Company's principal executive
offices are located at 500 Drake's Landing Road, Greenbrae, California 94904,
and the Company's telephone number is (415) 461-4400.

16
<PAGE>
USE OF PROCEEDS

THE COMPANY

The net proceeds to the Company from the sale of the 2,150,000 shares of
Class B Common Stock offered by it hereby are estimated to be $33.4 million
($ if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $17.50 per share, after deducting
underwriting discounts and estimated offering expenses payable by the Company.

The Company intends to use approximately $18 million of the net proceeds
from the offering to repay certain long-term debt obligations, other than the
senior secured notes issued by the Company, and approximately $10 million of the
net proceeds to redeem all outstanding shares of its 12% Senior Redeemable
Exchangeable Preferred Stock (the "Senior Preferred Stock"). Initially, the
Company intends to use the balance of the net proceeds to pay down a portion of
GSV's revolving credit facility, which, as of December 31, 1997, had $18.6
million in outstanding balances thereunder. The remainder of the proceeds of
this offering, if any, and the Company's renewed borrowing capacity are expected
to be used for capital expenditures, working capital and other general corporate
purposes. Specifically, the Company recently authorized capital expenditures of
up to $20 million, primarily to upgrade, maintain and expand its existing
winemaking facilities in Fresno and Monterey. The cost, timing and amount of any
additional funds required by the Company cannot be precisely determined at this
time and will be based upon numerous factors. The Board of Directors has broad
discretion in determining how the proceeds of the offering will be applied.
Pending such uses, the Company intends to invest the net proceeds of the
offering in short-term, investment grade, interest-bearing obligations. The
Company will not receive any proceeds from the sale of shares of Class B Common
Stock by the Selling Stockholders.

THE SELLING STOCKHOLDERS

Each of SBIC Partners and Exeter intends to use a portion of the net
proceeds it receives from the offering, estimated to aggregate $28.5 million (or
$ million, assuming the over-allotment option is exercised in full),
assuming an initial public offering price of $17.50 per share, to redeem certain
outstanding participating securities issued to the U.S. Small Business
Administration ("SBA"). Such redemption will be made in accordance with all
applicable rules and regulations of the SBA.

DILUTION

The pro forma net tangible book value of the Company as of December 31, 1997
was approximately $17.1 million, or $2.44 per share of Common Stock based upon
an aggregate of 6,992,054 shares of Class A Common Stock and Class B Common
Stock outstanding. Net tangible book value per share represents the amount of
the Company's total tangible assets (total assets less deferral financing costs)
less total liabilities, divided by the number of shares of Common Stock
outstanding after giving effect to (i) the conversion of all outstanding shares
of the Company's previous Class B Common Stock into shares of Class A Common
Stock; (ii) the conversion of 178,105 shares of Junior Preferred Stock into
130,349 shares of the Company's newly created Class B Common Stock and (iii) the
conversion of all outstanding shares of the Company's Class E Common Stock and
Class K Common Stock in shares of GSV's newly-created Class B Common Stock.
After giving effect to the sale by the Company of 2,150,000 shares of Class B
Common Stock offered hereby (assuming that the Underwriters' over-allotment
option is not exercised) at an assumed initial public offering price of $17.50
per share, and the application of estimated net proceeds therefrom (after
deducting the Underwriters' discount and estimated offering expenses), the pro
forma net tangible book value of the Company as of December 31, 1997 would have
been approximately $5.32 per share of Common Stock based upon an aggregate of
9,142,054 shares of Class A Common Stock and Class B Common Stock outstanding.
This represents an immediate increase in pro forma net tangible book value of
$2.88 per share to existing stockholders and an immediate dilution in pro forma
net tangible book value of $12.18 per share to new investors

17
<PAGE>
purchasing shares of Class B Common Stock in the offering. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 17.50
Pro forma net tangible book value per share before
offering................................................ $ 2.44
Increase in pro forma net tangible book value per share
attributable to new investors in offering............... 2.88
---------
Pro forma net tangible book value per share after
offering.................................................. 5.32
---------
Dilution per share to new investors in offering (1)......... $ 12.18
---------
---------
</TABLE>

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

(1) Assumes no exercise of any outstanding stock options to purchase shares of
Class A Common Stock or Class B Common Stock. As of March 31, 1998, there
were 670,434 shares of Class A Common Stock and 933,547 shares of Class B
Common Stock reserved for issuance under the Company's option plans and
other outstanding stock options agreements at a weighted average exercise
price of approximately $8.39 per share. To the extent that these outstanding
options would have been exercised, the dilution in pro forma net tangible
book value after giving effect to the Offering would have been $11.72 per
share to new investors. See "Management--Stock Option Plans" and
"Description of Capital Stock".

The following table summarizes, on an as adjusted basis as of December 31,
1997, the differences between the number of shares of Common Stock purchased
from the Company, the total consideration paid (before deducting the
Underwriters' discount and estimated offering expenses), and the average price
per share paid by the existing stockholders and by the new investors purchasing
shares of Class B Common Stock in this offering (assuming an initial public
offering price of $17.50 per share and that the Underwriters' over-allotment
option is not exercised);

<TABLE>
<CAPTION>
SHARES PURCHASED (1) TOTAL CONSIDERATION AVERAGE
------------------------- ---------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ------------ -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............................. 6,992,054 76% $ 9,582,199 20% $ 1.37
New investors...................................... 2,150,000 24 37,625,000 80 $ 17.50
----------- --- -------------- ---
Total.......................................... 9,142,054 100% $ 47,207,199 100% $ 5.16
----------- --- -------------- --- -----------
----------- --- -------------- --- -----------
</TABLE>

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

(1) See Footnote 1 to the preceding table regarding certain assumptions.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its outstanding
shares of Common Stock. The Company currently intends to retain future earnings
to finance its operations, and therefore does not anticipate paying any cash
dividends on the shares of Class A Common Stock or of Class B Common Stock in
the foreseeable future. In addition, negative covenants contained in the
Company's senior credit facility currently prohibit the Company from paying cash
dividends on such shares without the prior approval of the lender. See Note 6 of
Notes to Consolidated Financial Statements.

18
<PAGE>
CAPITALIZATION

The following table sets forth the actual capitalization of the Company at
December 31, 1997 and the pro forma capitalization of the Company at such date,
after giving effect to (i) the conversion of all outstanding shares of Class B
Common Stock into shares of Class A Common Stock; (ii) the conversion of 178,105
shares of Junior Preferred Stock into 130,349 shares of the Company's
newly-created Class B Common Stock; and (iii) the conversion of all outstanding
shares of Class E Common Stock and Class K Common Stock into shares of the
Company's newly-created Class B Common Stock. The table also sets forth the
capitalization of the Company at December 31, 1997 as adjusted to reflect the
issuance and sale by the Company of 2,150,000 shares of Class B Common Stock
pursuant to the offering, the receipt by the Company of the estimated net
proceeds therefrom (assuming an initial public offering price of $17.50 per
share and that the Underwriters' over-allotment option is not exercised and
after deducting the Underwriters' discount and estimated offering expenses of
both the Company and the Selling Stockholders, all of which is payable by the
Company), and the application of the estimated net proceeds therefrom. This
table should be read in conjunction with the Consolidated Financial Statements
of the Company and Notes thereto. See also "Selected Consolidated Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations".

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Line of credit........................................................ $ 18,600 $ 18,600 $ 13,009
Long-term debt........................................................ 52,714 52,714 34,914
--------- ----------- -----------
Total debt.......................................................... 71,314 71,314 47,923
Redeemable preferred stock:
12% Senior Preferred Stock, $0.01 par value: 100,000 shares
authorized; 100,000 shares outstanding actual and pro forma; no
shares outstanding as adjusted.................................... 8,166 8,166 --
8% Junior Preferred Stock, $0.01 par value: 200,000 shares
authorized; 178,105 shares outstanding actual; no shares
outstanding pro forma and as adjusted............................. 714 -- --
--------- ----------- -----------
8,880 8,166 --
Stockholders' equity:
Class A Common Stock, $.0034 par value actual and $0.01 par value
pro forma and as adjusted: no shares authorized actual and
6,000,000 shares authorized pro forma and as adjusted; no shares
outstanding actual, 5,561,014 shares outstanding pro forma and
3,807,288 shares outstanding as adjusted (1)...................... -- 56 38
Class B Common Stock, $0.0034 par value actual and $0.01 par value
pro forma and as adjusted: 7,250,000 shares authorized actual and
54,000,000 shares authorized pro forma and as adjusted; 5,561,014
shares outstanding actual, 1,431,040 shares outstanding pro forma
and 5,334,766 shares outstanding as adjusted (1).................. 19 14 53
Class E Common Stock, $0.0034 par value: 2,900,000 shares
authorized; 1,200,829 shares outstanding actual, no shares
outstanding pro forma and as adjusted............................. 4 -- --
Class K Common Stock, $0.0034 par value: 1,450,000 shares
authorized; 99,862 shares outstanding actual, no shares
outstanding pro forma and as adjusted............................. -- -- --
Additional paid-in capital.......................................... 8,844 9,511 42,882
Retained earnings................................................... 7,968 7,968 6,133
--------- ----------- -----------
Total stockholders' equity........................................ 16,835 17,549 49,107
--------- ----------- -----------
Total capitalization............................................ $ 97,029 $ 97,029 $ 97,029
--------- ----------- -----------
--------- ----------- -----------
</TABLE>

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

(1) Excludes 670,434 shares of Class A Common Stock and 933,547 shares of Class
B Common Stock reserved for issuance under GSV's option plans and other
stock option agreements. See "Management--Stock Option Plans" and Notes 9
and 15 to the Consolidated Financial Statements of the Company included
elsewhere in this Prospectus.

19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The statement of operations data for the years ended June 30, 1993 and 1994
and the balance sheet data at June 30, 1993 and 1994 have been derived from
audited financial statements of Old GSV, which financial statements are not
included in this Prospectus. The balance sheet data at June 30, 1995 have been
derived from the audited financial statements of the Company, which financial
statements are not included in this Prospectus. The statement of operations data
for the period from July 1, 1994 to April 26, 1995 have been derived from the
audited financial statements of Old GSV, which have been audited by Deloitte &
Touche LLP and which are included elsewhere in this Prospectus. The statement of
operations data for the period from April 27, 1995 to June 30, 1995 and for the
years ended June 30, 1996 and 1997 and the balance sheet data at June 30, 1996
and 1997 have been derived from audited financial statements of the Company,
which have been audited by Deloitte & Touche LLP and which are included
elsewhere in this Prospectus. The statement of operations data for the six
months ended December 31, 1996 and 1997 and the balance sheet data at December
31, 1996 and 1997 have been derived from the Company's unaudited consolidated
financial statements for such periods, which are included elsewhere in this
Prospectus and which in the opinion of management, include all material
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the results of operations of the Company for such periods.
Results for the interim periods are not necessarily indicative of results for a
full year. The selected consolidated financial data set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
OLD GSV NEW GSV
--------------------------------- --------------------------------
YEAR ENDED JULY 1, APRIL 27, YEAR ENDED
JUNE 30, 1994 TO 1995 TO JUNE 30,
-------------------- APRIL 26, JUNE 30, --------------------
1993 1994 1995 1995 1996 1997
--------- --------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................. $ 47,048 $ 44,063 $ 42,851 $ 4,037 $ 71,755 $ 95,785
Cost of sales (1).................................... 38,713 34,241 34,772 3,949 58,468 71,662
Gross profit......................................... 8,335 9,822 8,079 88 13,287 24,123
Selling, general, and administrative expenses (2).... 1,676 2,768 3,364 951 5,042 7,408
Income (loss) from operations........................ 6,659 7,054 4,715 (863) 8,245 16,715
Interest expense..................................... 2,813 3,189 2,797 920 5,344 5,880
Other expense, net................................... -- 37 44 1 394 677
Income (loss) before income taxes.................... 3,846 3,828 1,874 (1,784) 2,507 10,158
Net income (loss).................................... 6,618 3,503 1,874 (1,784) 1,924 6,170
Earnings (loss) per common share (3):
Basic.............................................. $ (.26) $ .09 $ .71
---------- --------- ---------
---------- --------- ---------
Diluted............................................ $ (.26) $ .09 $ .71
---------- --------- ---------
---------- --------- ---------
Weighted average shares outstanding (3):
Basic.............................................. 6,856 6,856 6,860
---------- --------- ---------
---------- --------- ---------
Diluted............................................ 6,856 6,856 6,860
---------- --------- ---------
---------- --------- ---------
OTHER FINANCIAL DATA:
Depreciation and amortization...................... $ 1,946 $ 2,279 $ 1,926 $ 755 $ 3,319 $ 4,207
Capital expenditures............................... 1,007 3,639 3,222 8,967 3,536 4,778
EBITDA (4)......................................... 12,934 8,959 6,418 (342) 10,893 19,887

OTHER DATA:
Tons of grapes crushed (5)......................... 128,022 110,285 119,103 156,722 163,521
Vineyard property (in acres)....................... 7,850 7,850 9,600 9,600 9,600

SIX MONTHS ENDED

DECEMBER 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................. $ 76,073 $ 89,530
Cost of sales (1).................................... 57,285 66,033
Gross profit......................................... 18,788 23,497
Selling, general, and administrative expenses (2).... 3,781 11,550
Income (loss) from operations........................ 15,007 11,947
Interest expense..................................... 2,971 3,446
Other expense, net................................... 386 481
Income (loss) before income taxes.................... 11,650 8,020
Net income (loss).................................... 7,071 4,897
Earnings (loss) per common share (3):
Basic.............................................. $ .93 $ .62
--------- ---------
--------- ---------
Diluted............................................ $ .91 $ .59
--------- ---------
--------- ---------
Weighted average shares outstanding (3):
Basic.............................................. 6,859 6,862
--------- ---------
--------- ---------
Diluted............................................ 7,136 7,318
--------- ---------
--------- ---------
OTHER FINANCIAL DATA:
Depreciation and amortization...................... $ 3,316 $ 3,560
Capital expenditures............................... 2,118 2,248
EBITDA (4)......................................... 17,937 14,828
OTHER DATA:
Tons of grapes crushed (5)......................... 163,521 197,841
Vineyard property (in acres)....................... 9,600 9,600
</TABLE>

<TABLE>
<CAPTION>
OLD GSV NEW GSV
-------------------- -------------------------------------------------------------------------
JUNE 30, JUNE 30, DECEMBER 31, 1997
-------------------- ------------------------------- ----------------------------------------
1993 1994 1995 1996 1997 ACTUAL PRO FORMA(6) AS ADJUSTED(7)
--------- --------- --------- --------- --------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................... $ 5,755 $ 10,011 $ 8,735 $ 9,335 $ 9,386 $ 12,368 $ 12,368 $ 17,959
Total assets....................... 45,741 53,537 80,941 90,435 102,111 138,273 138,273 138,273
Total long-term debt............... 27,119 30,900 44,322 42,973 49,781 49,890 49,890 32,090
Redeemable preferred stock......... -- -- 9,978 10,034 8,813 8,880 8,166 --
Stockholders' equity............... 10,286 13,789 10,037 10,670 12,574 16,835 17,550 49,107
</TABLE>

- --------------------
(1) In accordance with purchase accounting rules applied to the Company's
acquisition of Old GSV, inventory was increased to fair market value. The
inventory step-up increased cost of sales for the period April 27, 1995 to
June 30, 1995 and the year ended June 30, 1996 by $471 and $1,563,
respectively.
(2) Management incentives relating to stock appreciation rights and bonuses
increased selling, general and administrative expenses by $33, $930, $2,141,
$1,157 and $8,800 for the period April 27, 1995 to June 30, 1995, the years
ended June 30, 1996 and 1997, and the six months ended December 31, 1996 and
1997, respectively.
(3) See Note 2 of the Notes to Consolidated Financial Statements for an
explanation of the basic and diluted earnings per share computations.
(4) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. EBITDA is not a measure of financial performance under
generally accepted accounting principles and should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity.
(5) It is industry custom to convert one ton of wine grapes to 170 gallons of
wine, and to convert gallons of wine to cases of twelve 750ml bottles at the
rate of 2.3775 gallons per case. All grapes crushed in the twelve month
period ended June 30, 1995 are shown under New GSV.
(6) Pro forma to give effect to the conversion of all shares of Junior Preferred
Stock into shares of Class B Common Stock as if it had occurred on December
31, 1997.
(7) Assumes that the issuance and sale of the 2,150,000 shares of Class B Common
Stock offered by the Company hereby at an assumed initial public offering
price of $17.50 per share and the application of the estimated net proceeds
therefrom occurred on December 31, 1997.

20
<PAGE>
SUPPLEMENTAL PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA
(IN THOUSANDS)

The Company's acquisition of all of the outstanding capital stock of Old GSV
on April 27, 1995 was accounted for as a purchase, resulting in new bases of
assets and liabilities effective April 27, 1995. Also effective December 31,
1997, the Company restructured certain management incentives. The restructured
incentives will not have a material impact on the Company's net income in
fututre periods but, as a result of vested stock options, will impact the
Company's future earnings per share. The supplemental consolidated financial
data set forth below are presented herein to reflect on a pro forma basis the
comparative consolidated financial data without (i) the inventory step-up
included in the actual results of the Company for the period April 27, 1995 to
June 30, 1995 and the year ended June 30, 1996; and (ii) the impact of certain
management incentives included in the audited results for the period July 1,
1994 to April 26, 1995, the period April 27, 1995 to June 30, 1995, the years
ended June 30, 1996 and 1997 and the six months ended December 31, 1996 and
1997. For comparative purposes, such pro forma data for the periods July 1, 1994
to April 26, 1995 (Old GSV) and April 27, 1995 to June 30, 1995 (New GSV) have
been combined and reflected below under "Year Ended June 30, 1995". This
information should be read in conjunction with "Selected Consolidated Financial
Data", "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the audited and unaudited Consolidated Financial Statements
and Notes thereto, each of which is included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues......................... $ 47,048 $ 44,063 $ 46,888 $ 71,755 $ 95,785 $ 76,073 $ 89,530
Cost of sales (1)................ 38,713 34,241 38,250 56,905 71,662 57,285 66,033
--------- --------- --------- --------- --------- --------- ---------
Gross profit (1)................. 8,335 9,822 8,638 14,850 24,123 18,788 23,497
Selling, general and
administrative expenses (2).... 1,676 2,768 3,119 4,113 5,267 2,624 2,750
--------- --------- --------- --------- --------- --------- ---------
Income from operations (1)(2).... 6,659 7,054 5,519 10,737 18,856 16,164 20,747
Interest expense................. 2,813 3,189 3,716 5,344 5,880 2,971 3,446
Other expense, net............... -- 37 47 394 677 386 481
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes
(1)(2)......................... 3,846 3,828 1,756 4,999 12,299 12,807 16,820
Income taxes (3)................. 1,557 325 467 1,583 4,847 5,043 6,655
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary
items.......................... 2,289 3,503 1,289 3,416 7,452 7,764 10,165
Extraordinary items (4).......... 4,329 -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income....................... $ 6,618 $ 3,503 $ 1,289 $ 3,416 $ 7,452 $ 7,764 $ 10,165
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>

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

(1) For the years ended June 30, 1995 and 1996, cost of sales was reduced and
gross profit, income from operations and income before income taxes were
effectively increased by $471 and $1,563, respectively, after adding back
the effects of the inventory step-up.

(4) For the year ended June 30, 1993, gain on debt restructuring of $2,172 and
the tax benefit of utilization of net operating loss carryforwards of $2,157
were recorded.

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

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED CONSOLIDATED FINANCIAL DATA", "SUPPLEMENTAL PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS DATA" AND THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO, EACH OF WHICH IS INCLUDED ELSEWHERE IN THIS
PROSPECTUS. FOR COMPARATIVE PURPOSES ONLY, DATA FOR THE PERIODS JULY 1, 1994 TO
APRIL 26, 1995 AND APRIL 27, 1995 TO JUNE 30, 1995 HAVE BEEN COMBINED AND
REFLECTED BELOW IN ALL REFERENCES TO THE COMPANY'S 1995 FISCAL YEAR.

OVERVIEW

The Company's operations can be distinguished among the following: bulk wine
and related services, grape sales, case goods and related services and brandy.
Bulk wine and related services includes the production and sale of bulk wine,
the provision of custom crushing services, the storage of bulk wine in tanks and
barrels and the delivery of bulk wine barreling services, such as racking and
topping. Grape sales consist of the sale of grapes grown at the Company's
vineyards as well as grapes purchased by the Company from third party growers.
Case goods and related services includes the production of proprietary and
private label bottled wine and wine-based beverages and the provision of custom
bottling and storage services. The Company's brandy business includes the
production of brandy and grape spirits and the provision of brandy barrel
storage and related barreling services. See "Business--Company Operations".

SUPPLEMENTAL STATEMENT OF OPERATIONS ADJUSTMENTS

The Company's net income has been reduced by certain charges resulting from
a number of financial transactions, as described below. On April 27, 1995,
Golden State Vintners was acquired by the Company (the "Golden State Vintners
Purchase") in a transaction that was accounted for as a purchase, for an amount
in excess of the book value of assets. This resulted in a step-up of $2.0
million in the basis of acquired inventory (the "Inventory Step-Up"), which
impacted cost of sales by $0.5 million and $1.6 million in the fiscal years
ended June 30, 1995 and 1996, respectively.

In connection with the Golden State Vintners Purchase, Golden State Vintners
entered into a five-year Employment Agreement (the "Old Agreement") with Jeffrey
B. O'Neill, the Company's President and Chief Executive Officer. Terms of the
Old Agreement provided for, among other things, the granting to Mr. O'Neill of
504,348 and 145,000 stock appreciation rights (the "O'Neill SARs") at exercise
prices of $1.72 and $0.003 per right, respectively. Additionally, the Old
Agreement provided for a performance-based bonus calculated as a percentage of
operating income, as set forth therein (the "O'Neill Bonus"). An additional
145,000 stock appreciation rights were issued to Brian R. Thompson, GSV's Chief
Financial Officer, in connection with his employment in November 1995 at an
exercise price of $2.59 per right (the "Thompson SARs"). The O'Neill SARs, the
Thompson SARs and the O'Neill Bonus are sometimes collectively referred to as
the "Management Incentives".

In the fiscal years ended June 30, 1995, 1996 and 1997, Management
Incentives of $1.2 million, $0.9 million and $2.1 million, respectively, were
included in the selling, general and administrative expenses reported for such
periods. For the six months ended December 31, 1996 and 1997, such Management
Incentives accounted for $1.2 million and $8.8 million, respectively, of
selling, general and administrative expenses. With respect to the six months
ended December 31, 1997, $1.5 million of such $8.8 million of Management
Incentives arose as a result of the acceleration of certain estimated bonus
amounts due under the Old Agreement. As of December 31, 1997, (a) the Old
Agreement was terminated, eliminating the O'Neill Bonus, and (b) each of the
O'Neill SARs and the Thompson SARs were replaced with a combination of
compensation paid partly in cash and partly with promissory notes and fully
vested non-qualified stock options having an exercise price of $12.07 per share
(the "Replacement

22
<PAGE>
Incentives"). Such Replacement Incentives will not have a material impact on the
Company's net income in future periods, but, as a result of the fully vested
nature of the options granted to Messrs. O'Neill and Thompson, will impact GSV's
future earnings per share. None of the Replacement Incentives contains a formula
based bonus. Additionally, the Company does not anticipate that bonuses paid to
Mr. O'Neill will be material under the terms of his current employment
agreement.

In connection with the Replacement Incentives, effective January 1, 1998,
(1) the Company made cash payments of $4.7 million and $0.7 million to Messrs.
O'Neill and Thompson, respectively (the "Executive Cash Payments"), and (2) the
Company issued promissory notes in the amount of $4.7 million and $0.7 million
to Messrs. O'Neill and Thompson, respectively (the "Executive Promissory
Notes"). Messrs. O'Neill and Thompson used their respective Executive Cash
Payments to exercise stock options and to pay certain income taxes due. See
"Certain Relationships and Related Transactions" and Note 15 of Notes to
Consolidated Financial Statements.

The table below sets forth summary statement of operations data for the
three fiscal years ended June 30, 1997 and for the six months ended December 31,
1996 and 1997, with and without the Inventory Step-Up and the Management
Incentives.

SUMMARY AS REPORTED AND PRO FORMA STATEMENT OF OPERATIONS DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 AS REPORTED PRO FORMA
AS REPORTED COMBINED ------------------------------------------ ---------
------------------------ PRO FORMA(1)
JULY 1, APRIL 27, ------------- SIX MONTHS ENDED YEAR
1994 1995 YEAR YEAR ENDED JUNE 30, ENDED
TO TO ENDED DECEMBER 31, JUNE 30,
APRIL 26, JUNE 30, JUNE 30, -------------------- -------------------- ---------
1995 1995 1995 1996 1997 1996 1997 1995
----------- ----------- ------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... $ 42,851 $ 4,037 $ 46,888 $ 71,755 $ 95,785 $ 76,073 $ 89,530 $ 46,888
Cost of sales (2)............. 34,772 3,949 38,721 58,468 71,662 57,285 66,033 38,250
----------- ----------- ------------- --------- --------- --------- --------- ---------
Gross profit (2).............. 8,079 88 8,167 13,287 24,123 18,788 23,497 8,638
Selling, general and
administrative expenses
(3)......................... 3,364 951 4,314 5,042 7,408 3,781 11,550 3,119
----------- ----------- ------------- --------- --------- --------- --------- ---------
Income (loss) from operations
(2)(3)...................... 4,715 (863) 3,853 8,245 16,715 15,007 11,947 5,519
Interest expense.............. 2,797 920 3,716 5,34 5,880 2,971 3,446 3,716
Other expense, net............ 44 1 47 394 677 386 481 47
----------- ----------- ------------- --------- --------- --------- --------- ---------
Income before income taxes
(2)(3)...................... 1,874 (1,784) 90 2,507 10,158 11,650 8,020 1,756
Income taxes (4).............. -- -- -- 583 3,988 4,579 3,123 467
----------- ----------- ------------- --------- --------- --------- --------- ---------
Net income.................... $ 1,874 $ (1,784) $ 90 $ 1,924 $ 6,170 $ 7,071 $ 4,897 $ 1,289
----------- ----------- ------------- --------- --------- --------- --------- ---------
----------- ----------- ------------- --------- --------- --------- --------- ---------

<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
--------------------
1996 1997 1996 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues...................... $ 71,755 $ 95,785 $ 76,073 $ 89,530
Cost of sales (2)............. 56,905 71,662 57,285 66,033
--------- --------- --------- ---------
Gross profit (2).............. 14,850 24,123 18,788 23,497
Selling, general and
administrative expenses
(3)......................... 4,113 5,267 2,624 2,750
--------- --------- --------- ---------
Income (loss) from operations
(2)(3)...................... 10,737 18,856 16,164 20,747
Interest expense.............. 5,344 5,880 2,971 3,446
Other expense, net............ 394 677 386 481
--------- --------- --------- ---------
Income before income taxes
(2)(3)...................... 4,999 12,299 12,807 16,820
Income taxes (4).............. 1,583 4,847 5,043 6,655
--------- --------- --------- ---------
Net income.................... $ 3,416 $ 7,452 $ 7,764 $ 10,165
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

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

The following footnotes explain the variations in the above presentation of the
summary pro forma statement of operations data, as compared to the as reported
statement of operations data:

(1) Represents the summation of the "As Reported" amounts for the periods ended
April 26, 1995 and June 30, 1995.

(2) Cost of sales was reduced and gross profit, income from operations and
income before income taxes were effectively increased by $471 and $1,563 for
the years ended June 30, 1995 and 1996, respectively, as a result of the
elimination of the Inventory Step-up.

(3) Selling, general and administrative expenses were reduced and income from
operations and income before income taxes were effectively increased by
$1,195, $930 and $2,141 for the years ended June 30, 1995, 1996 and 1997,
respectively, and $1,157 and $8,800 for the six months ended December 31,
1996 and 1997, respectively, as a result of the elimination of the impact of
the Management Incentives, which were restructured as of December 31, 1997.

(4) For the years ended June 30, 1995, 1996 and 1997 and the six months ended
December 31, 1996 and 1997, income taxes have been computed on income before
income taxes after giving effect to the adjustments described in (2) and (3)
above.

23
<PAGE>
The following table reflects summary statement of operations data shown
above, expressed as a percentage of revenues:

PERCENTAGE OF REVENUES
<TABLE>
<CAPTION>
1995 AS REPORTED PRO FORMA
AS REPORTED COMBINED ------------------------------------------ ---------
------------------------ PRO FORMA(1)
JULY 1, APRIL 27, ------------- SIX MONTHS ENDED YEAR
1994 1995 YEAR YEAR ENDED JUNE 30, ENDED
TO TO ENDED DECEMBER 31, JUNE 30,
APRIL 26, JUNE 30, JUNE 30, -------------------- -------------------- ---------
1995 1995 1995 1996 1997 1996 1997 1995
----------- ----------- ------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................... 81.1 97.8 82.6 81.5 74.8 75.3 73.8 81.6
----------- ----------- ------------- --------- --------- --------- --------- ---------
Gross profit..................... 18.9 2.2 17.4 18.5 25.2 24.7 26.2 18.4
Selling, general and
administrative expenses........ 7.9 23.6 9.2 7.0 7.7 5.0 12.9 6.7
----------- ----------- ------------- --------- --------- --------- --------- ---------
Income (loss) from operations.... 11.0 (21.4) 8.2 11.5 17.5 19.7 13.3 11.7
Interest expense................. 6.5 22.8 7.9 7.4 6.15 3.9 3.8 7.9
Other expense, net............... 0.1 -- 0.1 0.6 0.8 0.6 .5 0.1
----------- ----------- ------------- --------- --------- --------- --------- ---------
Income before income taxes....... 4.4 (44.2) 0.2 3.5 10.6 15.3 9.0 3.7
Income taxes (benefit)........... -- -- -- 0.8 4.2 6.0 3.5 1.0
----------- ----------- ------------- --------- --------- --------- --------- ---------
Net income....................... 4.4 (44.2) 0.2 2.7 6.4 9.3 5.5 2.7
----------- ----------- ------------- --------- --------- --------- --------- ---------
----------- ----------- ------------- --------- --------- --------- --------- ---------

<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
--------------------
1996 1997 1996 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues......................... 100.0% 100.0% 100.0% 100.0%
Cost of sales.................... 79.3 74.8 75.3 73.8
--------- --------- --------- ---------
Gross profit..................... 20.7 25.2 24.7 26.2
Selling, general and
administrative expenses........ 5.7 5.5 3.5 3.1
--------- --------- --------- ---------
Income (loss) from operations.... 15.0 19.7 21.2 23.1
Interest expense................. 7.4 6.1 3.9 3.8
Other expense, net............... 0.6 0.8 0.5 .5
--------- --------- --------- ---------
Income before income taxes....... 7.0 12.8 16.8 18.8
Income taxes (benefit)........... 2.2 5.0 6.6 7.4
--------- --------- --------- ---------
Net income....................... 4.8 7.8 10.2 11.4
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

SEASONALITY AND QUARTERLY RESULTS

The Company has experienced and expects to continue to experience seasonal
and quarterly fluctuations in its revenues. Because of the inherent seasonality
of its operations, the Company has reported its highest revenues and net income
in its first and second fiscal quarters, as the Company sells most of its grapes
in the first quarter, immediately after harvest, sells most of its bulk wine in
the second quarter, immediately after crush, and performs many of its wine
processing services in the first and second quarters. As a result, the Company
typically reports lower revenues and net income (loss) in the third and fourth
fiscal quarters.

The following table illustrates the seasonality of the Company's revenues
and net income (loss) for each of the four fiscal quarters of the Company's 1997
fiscal year:

QUARTERLY REVENUES AND NET INCOME (LOSS)

<TABLE>
<CAPTION>
FISCAL 1997 QUARTER ENDED
------------------------------------------
SEPT. 30 DEC. 31 MAR. 31 JUNE 30
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues......................................................... $ 42,211 $ 33,862 $ 12,663 $ 7,049
Percent of revenues.............................................. 44.1% 35.3% 13.2% 7.4%
Net income (loss)................................................ $ 5,072 $ 1,999 $ 423 $ (1,324)
Percentage of net income (loss).................................. 82.2% 32.4% 6.9% (21.5)%
</TABLE>

24
<PAGE>
RESULTS OF OPERATIONS

The following table illustrates the Company's revenues by source for the
periods indicated:

REVENUES BY SOURCE
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, SIX MONTHS ENDED
------------------------------------ DECEMBER 31,
COMBINED PRO --------------------
FORMA 1995 1996 1997 1996 1997
-------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Bulk wine and related services.................. $ 26,082 $ 33,816 $ 50,228 $ 38,390 $ 46,404
Grape sales..................................... 12,875 15,183 18,585 18,605 22,820
Case goods and related services................. 6,288 11,335 15,829 7,830 10,642
Brandy.......................................... 1,643 11,421 11,143 11,248 9,664
-------------- --------- --------- --------- ---------
Total revenues................................ $ 46,888 $ 71,755 $ 95,785 $ 76,073 $ 89,530
-------------- --------- --------- --------- ---------
-------------- --------- --------- --------- ---------
</TABLE>

The following table illustrates the Company's revenues by source for the
periods indicated, expressed as a percentage of revenues:

PERCENTAGE OF REVENUES BY SOURCE

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
JUNE 30,
------------------------------------- DECEMBER 31,
COMBINED PRO --------------------
FORMA 1995 1996 1997 1996 1997
--------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Bulk wine and related services............................. 55.6% 47.1% 52.5% 50.4% 51.8%
Grape sales................................................ 27.5 21.2 19.4 24.5 25.5
Case goods and related services............................ 13.4 15.8 16.5 10.3 11.9
Brandy..................................................... 3.5 15.9 11.6 14.8 10.8
----- --------- --------- --------- ---------
Total revenues........................................... 100% 100% 100% 100% 100%
----- --------- --------- --------- ---------
----- --------- --------- --------- ---------
</TABLE>

SIX MONTHS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996

REVENUES

Revenues for the first six months of fiscal 1998 were $89.5 million, an
increase of $13.4 million or 17.7%, as compared to revenues of $76.1 million in
the first six months of fiscal 1997. As a result of the restructuring of the
Company's grape supply relationship with Gallo, grape sales revenues will
decline significantly in the Company's 1999 fiscal year and may result in an
overall decline in revenues in such fiscal year.

BULK WINE AND RELATED SERVICES. For the first six months of the Company's
1998 fiscal year, revenues from bulk wine and related services were $46.4
million, an increase of $8.0 million or 20.9%, as compared to revenues of $38.4
million in the first six months of fiscal 1997. This increase in revenues is
primarily due to higher customer demands for contracted bulk wines and the
initiation of bulk wine production and processing and storage service operations
at the Company's Monterey facility, along with increases in wine processing
revenues from the Company's Fresno facility and barrel fermentation and storage
fees at the Company's recently purchased Napa warehouse.

25
<PAGE>
GRAPE SALES. In the first six months of fiscal 1998, revenues from grape
sales were $22.8 million, an increase of $4.2 million or 22.7%, as compared to
revenues of $18.6 million in the first six months of fiscal 1997. The increase
in revenues for grape sales is primarily due to the significant increase in
grapes harvested at the Company's vineyards, which exceeded historical averages
by more than 20%. Due to the reallocation of a significant portion of GSV's wine
grapes to the internal production of bulk wine, the Company expects revenues
from grape sales to decline significantly in fiscal 1999.

CASE GOODS AND RELATED SERVICES. For the first six months of fiscal 1998,
revenues from case goods and related services were $10.6 million, an increase of
$2.8 million or 35.9%, as compared to revenues of $7.8 million the first six
months of fiscal 1997. This increase in case goods and related services revenues
is evidence of the Company's strategy to generate significant case goods sales
and reflects an increase in the sale of private label case goods and an
expansion in GSV's proprietary labels (which tend to have higher margins) in the
popular premium and superpremium segments of the premium wine market.

BRANDY. For the first six months of fiscal 1998, revenues from the sale of
brandy and grape spirits were $9.7 million, a decline of $1.5 million or 13.4%,
as compared to $11.2 million in revenues from the previous period. This decline
primarily resulted from the reduction in the contracted demand for brandy from
period to period.

COST OF SALES

Cost of sales includes all direct and indirect costs to produce the
Company's marketed products. Bulk wine, case goods and brandy cost of sales
generally include wine grape costs, direct and indirect plant production costs
and certain allocated overhead items such as depreciation and insurance.
Vineyard costs include farming expenses and direct and allocated indirect costs.
For the first six months of fiscal 1998, total cost of sales was $66.0 million,
an increase of $8.7 million or 15.2%, from $57.3 million in the first six months
of fiscal 1997. As a percentage of revenues, for the first six months of fiscal
1998, cost of sales was 73.8%, a decrease from 75.3% for the first six months of
fiscal 1997. Factors contributing to this dollar increase in cost of sales
included an increase in the overall level of Company operations, the impact of
the cost of certain premium varietal grapes used in the production of bulk wine,
start-up costs related to the initiation of operations at the Company's Monterey
facility and the expansion of the Company's case goods sales. In addition, cost
of sales was impacted by amounts reserved by the Company in connection with
disputes with two customers concerning the quality of wine products delivered by
the Company. The increase in cost of sales was partially offset by a reduction
in farming costs per acre, which was largely due to the optimal wine grape
growing and harvesting conditions during calendar 1997.

GROSS PROFIT

Gross profit generally represents revenues less cost of sales. In the first
six months of fiscal 1998, the Company realized gross profit of $23.5 million,
an increase of $4.7 million or 25.0%, as compared to gross profit of $18.8
million for the first six months of fiscal 1997. As a percentage of revenues, in
the first six months of fiscal 1998 gross margin improved to 26.2%, from 24.7%
in the first six months of fiscal 1997. Factors contributing to the improvement
in gross profit and gross margin included increased yields at the Company's
vineyards and operational efficiencies at certain of the Company's facilities.
Margin growth was adversely affected by declining market prices for certain
premium varietal wine that were not entirely offset by lower grape prices, a
number of operational start up costs associated with the initiation of wine
processing services at the Monterey facility and an increase in certain lower
margin case goods revenues from the sale of wine-related beverages.

26
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include general administrative
items, corporate overhead and expenses relating to the Management Incentives.
For the first six-months of fiscal 1998, selling, general and administrative
expenses were $11.6 million, an increase of $7.8 million or 205.4%, from $3.8
million for the first six months of fiscal 1997. As a percentage of revenues,
for the first six months of fiscal 1998 selling, general and administrative
expenses increased to 12.9%, from 5.0% for the first six months of fiscal 1997.
The Management Incentives represented $1.2 million and $8.8 million of selling,
general and administrative expenses for the first six-months of fiscal 1997 and
1998, respectively. With the issuance of the Replacement Incentives, the Company
anticipates eliminating substantial selling, general and administrative expenses
associated with the Management Incentives in future years. On a pro forma basis
after the elimination of the impact of the Management Incentives, for the first
six months of fiscal 1998, selling, general and administrative expenses were
$2.8 million, an increase of $0.2 million or 7.7%, from $2.6 million during the
first six months of fiscal 1997. On a pro forma basis, as a percentage of
revenues, for the first six months of fiscal 1998, selling, general and
administrative expenses decreased to 3.1%, from 3.5% for the first six months of
fiscal 1997.

INTEREST EXPENSE

For the first six months of fiscal 1998, interest expense was $3.4 million,
an increase of $0.4 million or 13.3%, as compared to interest expense of $3.0
million in the first six months of fiscal 1997. Interest expense increased
primarily due to an increase in long term borrowings used to acquire the
Company's Monterey facility and its Napa warehouse, and, to a lesser extent, by
an increase in working capital borrowings consistent with the Company's
increased level of revenues.

NET INCOME

For the first six months of fiscal 1998 net income was $4.9 million, a
decrease of $2.2 million or 31.0%, as compared to net income of $7.1 million for
the first six months of fiscal 1997. As a percentage of revenues, for the first
six months of fiscal 1998, net income was 5.5%, as compared to 9.3% for the
first six months of fiscal 1997. This decrease in net income is attributable to
a substantial increase in expenses relating to the Management Incentives. Such
Management Incentive expenses were partially offset by the growth of profit in
the Company's bulk wine and related services, grape sales and case goods and
related services businesses. On a pro forma basis after the elimination of the
impact of the Management Incentives, for the first six months of fiscal 1998,
net income was $10.2 million, an increase of $2.4 million or 30.8%, from net
income of $7.8 million for the first six months of fiscal 1997. On a pro forma
basis, as a percentage of revenues, for the first six months of fiscal 1998, net
income was 11.4%, as compared to 10.2% for the first six months of fiscal 1997.

THREE FISCAL YEARS ENDED JUNE 30, 1997

REVENUES

For the Company's 1997 fiscal year, revenues were $95.8 million, an increase
of $24.0 million or 33.5%, as compared to revenues of $71.8 million in the 1996
fiscal year, which increased by $24.9 million or 53%, over revenues of $46.9
million in fiscal 1995.

BULK WINE AND RELATED SERVICES. For the Company's 1997 fiscal year,
revenues from bulk wine and related services were $50.2 million, an increase of
$16.4 million or 48.5%, as compared to revenues of $33.8 million in fiscal 1996.
Revenues from bulk wine and related services in fiscal 1996 increased by $7.7
million or 29.7%, from revenues of $26.1 million in fiscal 1995. These increases
in bulk wine and related services revenues are primarily due to a significant
increase in the demand for bulk wine which resulted from the execution of bulk
wine supply contracts with a number of customers, and the increase

27
<PAGE>
in wine processing and storage fees, which resulted from an increase in custom
crushing contracts executed by the Company.

GRAPE SALES. In fiscal 1997, grape sales revenues were $18.6 million, an
increase of $3.4 million or 22.4%, over revenues of $15.2 million in fiscal
1996. Grape sales revenues in fiscal 1996 increased by $2.3 million or 17.9%,
from revenues of $12.9 million in fiscal 1995. These increases in grape sales
revenues are primarily due to an increase in the average sales price per ton of
grapes sold and, in fiscal 1997, an increase in grapes harvested at the
Company's vineyards and the maturation of certain grafted acreage.

CASE GOODS AND RELATED SERVICES. For fiscal 1997, revenues from case goods
and related services were $15.8 million, an increase of $4.5 million or 39.6%,
over case goods and related services revenues of $11.3 million in fiscal 1996.
Case goods and related services revenues in fiscal 1996 increased $5.0 million
or 80.3%, from revenues of $6.3 million in fiscal 1995. These increases in case
goods and related services revenues are evidence of the Company's strategy to
generate additional case goods sales and reflects a significant increase in the
sale of private label case goods and an expansion in GSV's proprietary labels in
the popular premium and superpremium segments of the wine market.

BRANDY. For fiscal 1997, revenues from the sale of brandy were $11.1
million, a decrease of $0.3 million or 2.4%, from revenues of $11.4 million in
fiscal 1996, primarily as a result of a decrease in contracted brandy sales. In
the last quarter of fiscal 1995, the Company acquired its Reedley facility from
Heublein and entered into a long term brandy processing and production contract
with Heublein. Prior to such acquisition, brandy sales constituted approximately
3.5% of the Company's fiscal 1995 revenues.

COST OF SALES

Total cost of sales in fiscal 1997 were $71.7 million, an increase of $13.2
million or 22.6%, over cost of sales of $58.5 million in fiscal 1996. Total cost
of sales in fiscal 1996 increased by $19.8 million or 51.0%, from $38.7 million
in fiscal 1995. As a percentage of revenues, in fiscal 1997, cost of sales was
74.8%, as compared to 81.5% in fiscal 1996 and 82.6% in fiscal 1995. From 1996
to 1997, cost of sales grew primarily due to the growth in the Company's
revenues, principally in bulk wine sales. From 1995 to 1996, cost of sales also
grew due to increased revenues, primarily arising from the Company's newly
acquired Reedley brandy processing facility, and due to the Inventory Step-Up.

On a pro forma basis after the elimination of the Inventory Step-Up, in
fiscal 1997, cost of sales was $71.7 million, an increase of $14.8 million or
25.9%, over cost of sales of $56.9 million in fiscal 1996, which showed an
increase of $18.6 million or 48.8%, over cost of sales of $38.3 million in
fiscal 1995. On a pro forma basis, as a percentage of revenues, in fiscal 1997
cost of sales was 74.8%, as compared to 79.3% in fiscal 1996 and 81.6% in fiscal
1995.

GROSS PROFIT

In fiscal 1997, the Company realized gross profit of $24.1 million, an
increase of $10.8 million or 81.6%, over gross profit of $13.3 million in fiscal
1996, which saw an increase in gross profit of $5.1 million or 62.7%, over gross
profit of $8.2 million in fiscal 1995. As a percentage of revenues, in 1997
gross margin improved to 25.2%, as compared to 18.5% in fiscal 1996 and 17.4% in
fiscal 1995. Gross profit and margin increased from 1996 to 1997 primarily due
to the growth in bulk wine sales, as both bulk wine prices and volumes increased
year-to-year. The increase in gross profit from 1995 to 1996 resulted primarily
from a higher volume of grape sales and from brandy sales that resulted from the
acquisition of the Company's Reedley facility.

28
<PAGE>
On a pro forma basis after the elimination of the Inventory Step-Up, in
fiscal 1997, the Company realized gross profit of $24.1 million, an increase of
$9.2 million or 62.4%, over gross profit of $14.9 million in fiscal 1996, which
saw an increase in gross profit of $6.3 million or 71.9%, over gross profit of
$8.6 million in fiscal 1995. On a pro forma basis, as a percentage of revenues
in fiscal 1997 gross margin was 25.2%, as compared to 20.7% in fiscal 1996 and
18.4% in fiscal 1995.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

In fiscal 1997, selling, general and administrative expenses were $7.4
million, an increase of $2.4 million or 46.9%, over selling, general and
administrative expenses of $5.0 million in fiscal 1996, which increased by $0.7
million or 16.9% over $4.3 million in fiscal 1995. As a percentage of revenues,
in fiscal 1997, selling, general and administrative expenses were 7.7%, as
compared to 7.0% in fiscal 1996 and 9.2% in fiscal 1995. Charges related to the
Management Incentives were $2.1 million, $0.9 million and $0 for the 1997, 1996
and 1995 fiscal years, respectively. The period to period increase in selling,
general and administrative expenses are primarily due to accruals made with
respect to such Management Incentives.

On a pro forma basis after elimination of the Inventory Step-Up and the
Management Incentives, in fiscal 1997, selling, general and administration
expenses were $5.3 million, an increase of $1.2 million or 28.1%, over selling,
general and administration expenses of $4.1 million in fiscal 1996, which saw an
increase of $1.0 million or 31.9%, over selling, general and administration
expenses of $3.1 million in fiscal 1995. On a pro forma basis, as a percentage
of revenues, in fiscal 1997, selling, general and administrative expenses were
5.5%, as compared to 5.7% in fiscal 1996 and 6.7% in fiscal 1995.

INTEREST EXPENSE

In fiscal 1997 interest expense was $5.9 million, an increase of $0.6
million or 10.0%, as compared to an interest expense of $5.3 million in fiscal
1996, which saw an interest expense increase of $1.6 million or 43.8% over
interest expense of $3.7 million in fiscal 1995. The growth in interest expense
from fiscal 1995 to fiscal 1996 primarily reflects the expense of increased
borrowings made in connection with the Golden State Vintners Purchase.

NET INCOME

In fiscal 1997, net income was $6.2 million, an increase of $4.3 million or
221.0%, from net income of $1.9 million in fiscal 1996. In fiscal 1996, net
income was $1.9 million, an increase of $1.8 million over net income of $0.1
million in fiscal 1995. As a percentage of revenues, in fiscal 1997 net income
was 6.4%, as compared to 2.7% in fiscal 1996. On a pro forma basis after
elimination of the Inventory Step-Up and the Management Incentives, in fiscal
1997, net income was $7.5 million, an increase of $4.1 million or 118.0% over
net income of $3.4 million in fiscal 1996, which increased by $2.1 million or
165.9% over net income of $1.3 million in fiscal 1995. As a percentage of
revenues, on a pro forma basis, in fiscal 1997, net income was 7.8%, as compared
to 4.8% in fiscal 1996 and 2.7% in fiscal 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital position at December 31, 1997 was $12.4
million, as compared to $10.6 million at December 31, 1996. The increase in
working capital reflects higher accounts receivable and inventory levels
consistent with the Company's seasonal revenue generation cycle, with
approximately 75% of sales recorded during the first two quarters of GSV's
fiscal year and an overall increase in sales. The Company maintains a revolving
line of credit for working capital purposes which is secured by inventory,
accounts receivable, the current year's wine grape crop and other collateral.
Collateral balances are adequate for the Company's working capital line of
credit. Borrowings under the line typically peak in November, during the
Company's second fiscal quarter. Revolving line of credit

29
<PAGE>
balances were $16.4 million and $18.6 million at December 31, 1996 and 1997,
respectively. Unused availability under the line of credit was $3.9 million at
December 31, 1997.

Operating cash flow for the six months ended December 31, 1997 was a
negative $2.4 million, as compared to cash flow from operations of $2.6 million
for the six months ended December 31, 1996. The decrease in operating cash flow
for the six months ended December 31, 1997 reflects an increase in accounts
receivable balances reflective of substantial sales in December 1997 with
corresponding receivables collected in January 1998. The Company anticipates a
substantial increase in operating cash flow during the third quarter of fiscal
year 1998 over the third quarter of fiscal 1997, as outstanding receivables from
the previous quarter are collected.

The Company recently authorized capital expenditures of up to $20 million,
primarily to upgrade, maintain and expand its existing winemaking facilities
over the next two years. The Company intends to finance these expenditures
through cash generated from this offering, cash generated from operations and
various other financing sources. On or before November 30, 1998, the Company is
obligated to pay to Messrs. O'Neill and Thompson an aggregate of $5.4 million,
plus interest, pursuant to the Executive Promissory Notes. See Note 15 of Notes
to Consolidated Financial Statements.

The Company currently has reserved amounts that it deems appropriate in
connection with disputes with two customers concerning the quality of wine
products delivered by the Company. The Company believes such reserves are
adequate in the context of such disputes, though there can be no assurances in
that regard.

Management expects that GSV's working capital requirements will grow as the
business expands and that peak borrowing needs will continue to occur in the
second quarter of the Company's fiscal year. Adequate levels of collateral are
expected to cover any increase in line of credit borrowings needed with respect
to increasing working capital requirements. Management believes that cash from
operations, the net proceeds of this offering and funds available under the
Company's lines of credit will be sufficient to fund operations during the
Company's 1999 fiscal year.

YEAR 2000 COMPLIANCE

The Company has addressed potential Year 2000 difficulties by initiating a
comprehensive evaluation, redesign and upgrade of its information, technology,
manufacturing, accounting and facilities computer software. Many of the
Company's systems include new hardware and packaged software recently purchased
from large vendors who have represented that these systems are Year 2000
compliant. The Company is in the process of obtaining assurances from vendors
that timely updates will be made available to ensure additional purchased
software is Year 2000 compliant. Additionally, GSV has utilized both internal
and external resources to reprogram, replace and test all of its software for
Year 2000 compliance. The estimated cost for this project was approximately
$250,000.

30
<PAGE>
BUSINESS

INTRODUCTION

The Company provides a broad range of high quality winemaking and processing
services, barrel fermentation and bottling and storage services to many of the
largest branded wineries in California and to a number of international
wineries. The Company supplies premium bulk wine pursuant to long-term supply
agreements with Sutter Home, Canandaigua, Sebastiani, Heublein, Vincor, Mildara
Blass and other wineries. The Company also delivers contract wine processing,
barrel fermentation and storage services under contracts with, among others, The
Wine Group, Mondavi and Beringer. The Company also sells wine grapes, primarily
to Gallo.

31
<PAGE>
The Company's recent financial performance has also benefited from the
increasing trend by a number of California's leading branded wineries to
outsource various steps in the winemaking process. With the growth in demand for
premium wines, these wineries have focused on the marketing of their brands and
have invested significant financial resources in building brand awareness and
loyalty through marketing and distribution. Additionally, the growing demand for
premium wine has strained the winemaking capacity of a number of leading branded
wineries. These wineries have demonstrated a strategic preference towards
focusing their resources on brand building as opposed to facility expansion.
These and other factors in the wine industry have resulted in an increasing need
for California's large, branded wineries to outsource the production of premium
wine. As a quality-oriented, low-cost provider of contract winemaking and
processing services, the Company is well positioned to continue to capitalize on
these wine industry trends.

BUSINESS STRENGTHS

GSV's key business strengths include:

LOW-COST PROVIDER. To position the Company advantageously among its bulk
wine processing competitors, GSV seeks to be the low-cost provider of bulk wine
and contract winemaking and processing services. The economies of scale of the
Company's large, efficient vineyards and facilities and GSV's expertise in
managing its winemaking facilities translate into low production costs, which
allow the Company to price its winemaking products and services flexibly and
competitively. As a result, the Company believes that it can provide high
quality premium bulk wine, wine processing and storage services and case goods
to its customers at prices that may be lower than the marginal production costs
of these products and services to such customers.

FOCUS ON QUALITY. The Company has a consistent record of producing high
quality wine products. For example, three of the top 13 "Best-Value" Chardonnays
(under $10 per 750ml bottle), as ranked in 1997 by WINE SPECTATOR magazine, were
made exclusively from the Company's wine. The Company applies rigorous attention
to quality in all aspects of its grape growing, winemaking and storage
processes. The Company works closely with each customer (who often has its
winemaker on site at the Company's winemaking facilities) to ensure that
finished wines meet applicable quality standards.

FULL RANGE OF PRODUCTS AND SERVICES. The Company offers customers an array
of wine products in most of the California appellations and provides a full
complement of wine-related services, from grape growing to the shipment of case
goods. Consequently, the Company's customers can use GSV's products and services
in any step of the winemaking process, while focusing the use of their resources
to leverage their particular strengths.

STRATEGICALLY LOCATED FACILITIES. The location of the Company's five
wineries in or adjacent to most of California's primary wine growing regions
allows the Company to offer its customers winemaking, processing and storage
services at several conveniently located facilities. In addition, the size of
the Company's facilities enables GSV to aggregate the winemaking needs of
several customers, producing wine at a lower marginal cost than each customer
could at their own facilities while reliably delivering large quantities of
quality wine. Management periodically upgrades GSV's facilities with many of the

32
<PAGE>
latest technological advances in winemaking, allowing the Company to maintain
high quality and efficiency in its operations.

GROWTH STRATEGY

UPGRADE AND EXPAND WINEMAKING OPERATIONS. The Company recently authorized
capital expenditures of up to $20 million, primarily to upgrade, maintain and
expand its existing winemaking facilities over the next two years. The Company
intends to increase the annual processing capacity at its Fresno facility by
approximately 20,000 tons of grapes and to expand Fresno wine cooperage capacity
by approximately four million gallons. GSV will also increase its Monterey wine
processing facility's annual capacity by approximately 15,000 tons of grapes and
increase barrel fermentation capacity by approximately 18,000 barrels. In
addition, the Company will continue to evaluate opportunities to make strategic
greenfield investments in selected wine regions of California.

PURSUE STRATEGIC ACQUISITIONS. Over the past four years, GSV has grown
through a series of strategic acquisitions and has greatly expanded its
operations through the purchase of vineyards and of winemaking and processing
facilities. The following table sets forth the vineyard and facility
acquisitions made by the Company since 1994:

<TABLE>
<CAPTION>
ACQUISITION DATE GENERAL DESCRIPTION
- ----------------------- ------------------- ------------------------------
<S> <C> <C>
Napa Valley Winery May 1994 Winery and bottling line
Lost Hills Vineyards May 1995 Premium varietal vineyard
Reedley Facility May 1995 Brandy production facility
Monterey Winery December 1996 Wine processing facility
Napa Warehouse June 1997 Barrel storage warehouse
</TABLE>

The Company continually seeks to build on its successful acquisition track
record. The Company's acquisition of vineyards, wineries and facilities has
enabled it to expand the range of premium winemaking and processing services
that it offers to its branded winery customers. Additionally, the Company has
often been able to improve the financial performance of acquired properties
through cost reductions and productivity increases. While the Company has found
it increasingly difficult to identify attractive acquisition opportunities, GSV
will continue to examine acquisition opportunities that make sense financially
and can be integrated efficiently with the Company's existing operations.

33
<PAGE>
international wineries. The Company also plans to further leverage its
relationships with leading international winemakers to internationally source
bulk wine for the Company's customers in North America. Finally, the Company
believes there are significant growth opportunities in a variety of
international winemaking regions, including Australia, South America and
Southern Europe, and that the premium bulk wine processor and contract service
provider models that the Company has successfully implemented in California can
be applied internationally.

THE WINE INDUSTRY

California table wines are categorized by price; wines that retail for less
than $3.00 per equivalent 750ml bottle are generally considered to be "jug" or
"generic" wines and wines that retail for $3.00 or more per equivalent 750ml
bottle are generally considered to be "premium" wines. Fredrikson further
divides the premium wine category into three major segments consisting of
"popular premium" wines, which retail for $3.00 up to $7.00 per equivalent 750ml
bottle; "superpremium" wines, which retail for $7.00 up to $14.00 per equivalent
750ml bottle; and "ultrapremium" wines, which retail for $14.00 or more per
750ml bottle. California produces the vast majority of the premium wine made in
the United States.

GROWTH IN PREMIUM WINE INDUSTRY. Over the past ten years there has been a
shift in consumer preferences in the U.S. from generic wines to high quality,
premium varietal wines sold in 750ml bottles. Since 1987, sales of premium
California wines have increased at a 15% compounded annual rate, from
approximately $932 million in 1987 to approximately $3.8 billion in 1997,
according to Fredrikson. In 1997, premium table wines accounted for 78% of the
$4.8 billion California table wine market (expressed in winery sales revenues),
compared to 52% of the $1.8 billion California wine market in 1987.

TREND TOWARDS OUTSOURCING. The wine industry in the U.S. includes thousands
of wine labels from hundreds of wineries, the vast majority of which are very
small and have limited wine production and finished goods distribution. Despite
the many labels, the industry has become increasingly concentrated, and only
seven wineries accounted for approximately 76% of total California wine
shipments in 1997 by volume. Many of the branded wineries in California do not
own sufficient wine grape vineyards to meet their own needs, have only limited
production or bottling facilities or are operating their current facilities at
or near full capacity.

As the market for California premium wines has grown, the leading branded
California wineries have concentrated on distinguishing their branded wines from
those produced by other wineries by focusing their resources on the marketing
and distribution of their particular brands rather than investing in winemaking
facilities. This allocation of resources away from the expansion of capital
intensive winemaking facilities has resulted, among other things, in an increase
in the need for the outsourcing of wine production in order to satisfy
increasing consumer demand for premium wine. The Company believes that its
business strengths have allowed GSV to capitalize on this trend and to become a
contract supplier of choice for many of the leading branded wineries in
California.

34
<PAGE>
FISCAL 1997 REVENUES
(dollars in millions)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
BULK WINE AND RELATED SERVICES - $50.2 (52%)
<S> <C>
Grape Sales - $18.6 (19%)
Case Goods and Related Services - $15.8 (17%)
Brandy - $11.1 (12%)
</TABLE>

COMPANY OPERATIONS

The Company's operations include the following: bulk wine and related
services, grape sales, case goods and related services and brandy. Bulk wine and
related services includes the production and sale of bulk wine, the provision of
custom crushing services, the storage of bulk wine in tanks and barrels and the
delivery of bulk wine barreling services, such as racking and topping. The
Company's grape sales consist of the sale of grapes grown at the Company's
vineyards as well as grapes purchased by the Company from third party growers.
Case goods and related services includes the production of proprietary and
private label bottled wine and wine-related beverages and the provision of
custom bottling and storage services. The Company's brandy business includes the
production of brandy and grape spirits and the provision of brandy barrel
storage and related barreling services.

BULK WINE AND RELATED SERVICES

The Company generates a majority of its revenues from the sale of premium
bulk wine and the delivery of a broad range of wine processing, barrel
fermentation and storage services to its branded winery customers.

The Company sells premium bulk wine to a number of the largest branded
wineries in California, including Sutter Home, Canandaigua, Sebastiani and
Heublein, and to a number of international wineries, including Vincor and
Mildara Blass. In response to recent wine industry trends towards an increase in
the outsourcing of premium wine production, GSV has increased its production of
premium bulk wines significantly, from approximately 11.8 million gallons in
fiscal 1995 to approximately 14.0 million gallons in fiscal 1997.

GSV's branded winery customers blend and mix the Company's high quality bulk
wine in the production of their premium varietal wines. For example, wine
produced from the French Colombard grape is often included in Chardonnay wine
and wine produced from the Ruby Cabernet grape is often used in the production
of Cabernet Sauvignon and Merlot. Some of GSV's branded winery customers also
buy GSV's high quality bulk wine to sell under their own brands, which allows
these customers to focus on the marketing of their brands rather than wine
production.

35
<PAGE>
The Company's standard bulk wine supply contract establishes the variety of
wine, source of grapes and vintage and generally calls for the delivery of a set
number of gallons of wine or processed grape juice at an agreed upon price per
ton of grapes. Industry practice calls for the delivery of 170 gallons of wine
per ton of grapes crushed. The Company supplies, crushes and processes the
grapes and typically stores the wine for six months or more following
production. Winemaking standards are usually agreed to by the parties in
advance. GSV generally guarantees the quality of the wine produced. Delivery of
bulk wine is usually F.O.B. the particular GSV winery.

Historically, approximately 10% of the grapes grown at the Company's
vineyards have been available for the production of premium bulk wine. The
Company has therefore purchased grapes in the marketplace in order to meet the
needs of its bulk wine customers. The Company typically buys grapes from
numerous growers pursuant to a variety of long-term, evergreen grape purchase
contracts and short-term grape purchase contracts entered into prior to grape
harvest. Additionally, after analyzing anticipated grape yields and grape prices
following a harvest, the Company often elects to purchase needed grape supplies
on the spot market. The Company believes it has expertise in matching the grape
needs for its bulk wine contracts with available grape supplies and carefully
monitors grape quality and prices. As a result of the restructuring of the
Company's relationship with Gallo, beginning in the Company's 1999 fiscal year,
at least a majority of the Company's grape crop will be available for the
production of GSV's premium bulk wine. The Company believes that this use of its
grapes will be a more profitable utilization of the Company's resources.
Additionally, the availability of the Company's grapes will lessen the Company's
exposure to unexpected price variations in the California grape market.

The Company produces more than half of its bulk wine at its most modern and
efficient wine processing facility in Fresno, which has the capacity to handle
100,000 tons of grapes annually (the equivalent of 7.2 million cases), and is
used primarily for the production of premium white wine. At the Company's Cutler
facility approximately 40,000 tons of red wine grapes (the equivalent of 2.9
million cases) are processed annually for the production of bulk red wine. GSV
also processes smaller quantities of premium bulk wine at its St. Helena,
Monterey and Reedley facilities. As is customary in the industry, the Company
engages the services of wine brokers to place bulk wine, at a pre-determined
commission.

As a full service provider, the Company also delivers an array of contract
wine processing, barrel fermentation and storage services under long-term
contracts with, among others, Mondavi and Beringer. GSV is flexible with respect
to providing these services and customizes its products and services to meet the
unique needs of its customers. Wine processing and storage services are
available for all steps of the winemaking process, including crushing grapes,
wine production, fermentation in oak barrels and storage in stainless steel
tanks and oak barrels. Under a typical wine processing and storage contract, a
wine processing customer will deliver grapes for crushing, fermentation and
storage in separately labeled tanks or barrels. Customers often have a winemaker
on site to monitor every step of the winemaking process.

Historically, the Company conducted most of its wine processing and storage
services at its Fresno facility. In December 1996, the Company acquired its
Monterey winery, and, following the 1997 summer harvest, initiated wine
processing and storage operations at Monterey, running the facility at
approximately 50% of its capacity. With GSV's Monterey winery fully operational
in fiscal 1999, the Company anticipates that it will deliver a significant
portion of its wine processing and storage services from Monterey.

GRAPE SALES

For the last twelve years the Company has sold most of its grapes to Gallo
pursuant to long-term grape purchase contracts. In August 1996, GSV began
restructuring its relationship with Gallo, though the Company was still required
to deliver approximately 87% and 86%, respectively, of its grapes to Gallo for
the contract years 1996 and 1997.

36
<PAGE>
In May 1995, the Company entered into new long-term grape supply contracts
with Gallo covering certain Chardonnay and Zinfandel grapes. The terms of these
contracts extend six years to May 2001. These contracts require the Company to
deliver grapes meeting specified sugar levels and other quality measurements.
Substantially all of the contracts call for payment in full within 30 days of
delivery of the crop to Gallo.

Due to the Company's restructuring of its relationship with Gallo, at least
a majority of the Company's grapes from the 1998 harvest will be retained by the
Company for internal use in the production of bulk wine. Thus, revenues from
grape sales will decline significantly in GSV's 1999 fiscal year. Nevertheless,
the Company believes that this use of grapes is a potentially more profitable
allocation of the Company's resources.

Certain of the Company's grape purchase contracts require GSV to purchase
the entire grape production of a number of small vineyards. Thus, the Company
must purchase varieties of grapes that it does not use in its production of bulk
wine. The Company generally sells these grapes into the market at a small margin
over cost.

CASE GOODS AND RELATED SERVICES

The Company produces proprietary and private label products and provides
custom bottling and storage services for its customers and for the Company's own
proprietary brands. These case goods sales are comprised of wine bottled and
sold in a case containing twelve 750ml bottles, or the volume equivalent. The
Company sold more than 935,000 cases of wine and wine related products in its
1997 fiscal year. In fiscal 1997, the sale of case goods produced and bottled
for third parties, or "private" case goods, accounted for more than 66% of total
case goods revenues, while case goods products sold under the Company's
proprietary labels accounted for the remainder of such revenues.

PRIVATE LABEL CASE GOODS. The sale of private label case goods is a
vertically integrated process that includes the purchase and processing of
grapes, aging and storage of wine and the bottling and labeling of the finished
product. The majority of the Company's private label case goods revenues in 1997
were derived from two customers based on short-term arrangements that may
terminate at any time. The Company has made a concerted effort to expand private
label case goods sales into higher margin premium varietal wines. Private label
case goods are produced and bottled primarily at the Company's Cutler facility,
although products for the Company's largest private label case goods customer in
its 1997 fiscal year were produced at GSV's St. Helena winery in the Napa
Valley.

PROPRIETARY AND CONTROL BRANDS. The Company sells proprietary wine products
under a variety of brands in the generic and premium wine categories. Generally,
the Company's BOUNTY and LEBLANC labels sell in the generic category, the
Company's GOLDEN STATE VINTNERS, J. WILE, MUIRFIELD, SUMMERFIELD and WESTON
brands sell in the popular premium category, the Company's MONTHAVEN and
SUMMERFIELD RESERVE labels compete in the superpremium category and the
Company's EDGEWOOD ESTATE label is sold in the ultrapremium category. The
Company's proprietary wines include a number of different types of premium
varietal wines, including vintage Cabernet Sauvignon, Chardonnay, Merlot and
Zinfandel. Many of the Company's proprietary wines are produced, processed
and/or bottled at the Company's St. Helena winery. The Company's proprietary
products are sold primarily through third party distributors and directly to
specific wine and general merchandise retailers such as Trader Joe's.

The Company also offers its proprietary brands to retailers, such as large
supermarket chains, for sale on an exclusive basis in certain defined geographic
regions. The terms of the exclusive arrangements for the Company's "control
brands" vary from customer to customer and are negotiated directly with
retailers, rather than through wine wholesalers. The Company intends to expand
the production and sale of proprietary and control brands case goods in its 1999
fiscal year.

37
<PAGE>
BRANDY

Brandy is produced by processing wine grapes into wine, distilling the wine
into brandy and aging the brandy in oak barrels for a minimum of two years. The
Company is the second largest brandy processor in the United States and has a
long-term brandy production agreement with Heublein to produce brandy for sale
under Heublein's CHRISTIAN BROTHERS label. Under the terms of the Company's
relationship with Heublein, GSV is paid for all aspects of the brandy
distillation process, including the purchase of grapes and barrels for brandy
storage and various processing charges. The Company also produces limited
quantities of brandy for other customers.

INTERNATIONAL

Approximately 12% of the Company's revenues in its 1997 fiscal year were
derived from the sale of wine and wine products internationally. The Company
exports bulk wine and case goods to a number of foreign locations, including
Canada, Europe and Asia. Sales to customers in Asia were approximately 7.8% and
4.3% of the Company's revenues from bulk wine and case goods sales in fiscal
1997 and for the first six months of fiscal 1998, respectively. According to
Fredrikson, in 1997 the Company was the largest exporter of bulk wine from
California. The Company also imports bulk wine from South America and Europe for
its customers in North America. The Company also seeks to strengthen its
position as the leading bulk wine exporter from California and will continue to
market its winemaking and processing services to leading international
winemakers. Management believes that the premium bulk wine processor and
contract service provider models that the Company successfully implemented in
California can be expanded internationally.

WINEMAKING FACILITIES

The Company's five winemaking and processing facilities are strategically
located in Fresno, Monterey, Napa and Tulare counties to provide winemaking and
processing services in or adjacent to most of the primary grape growing and
winemaking centers in California. Based on industry data, in 1997, the Company
was among the five largest California wineries in terms of wine cooperage
capacity.

The table below sets forth the name of each of the Company's facilities and
the approximate tonnage of grapes crushed and processed into wine, the number of
gallons of wine or brandy produced and the related case equivalent, and the
number of gallons of wine or brandy cooperage capacity at each facility. The
information presented below relates to activities at the Company's winemaking
facilities following the 1997 harvest, which will be reflected in the Company's
1998 fiscal year.

PRODUCTION AT THE COMPANY'S WINEMAKING FACILITIES

<TABLE>
<CAPTION>
GALLONS OF
TONS OF GRAPES COOPERAGE
FACILITY NAME CRUSHED IN 1997 CASE EQUIVALENT(1) CAPACITY
- ------------------------------------------------------------ ---------------- --------------------- -------------
<S> <C> <C> <C>
(IN MILLIONS)
Fresno...................................................... 99,600 7.1 18.3
Cutler...................................................... 40,500 2.9 10.4
Reedley..................................................... 35,400 2.5(2) 17.4
Monterey.................................................... 16,800 1.2 7.7
Napa Valley................................................. 5,500 0.4 1.7
-------- --- -----
Total................................................... 197,800 14.1 55.5
-------- --- -----
-------- --- -----
</TABLE>

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

(1) It is industry custom to convert one ton of wine grapes into 170 gallons of
wine, and to convert gallons of wine into cases of twelve 750ml bottles at
the rate of 2.3775 gallons per case.

(2) Includes 1.6 million proof gallons of brandy and grape spirits.

38
<PAGE>
FRESNO. The Company's Fresno winery is situated on six acres amidst the
Company's 4,400 acre Fresno vineyard and is located approximately 10 miles
southwest of the City of Fresno. The Fresno winery is an extremely efficient
wine processing facility and serves as the Company's bulk wine processing center
for premium varietal white wines, including Chardonnay, White Zinfandel and
other premium white wines. The Fresno facility contains 75 stainless steel
storage tanks ranging in size from approximately 8,500 gallons to 350,000
gallons.

CUTLER. The Company's Cutler facility is the original and oldest GSV winery
and is located on approximately 120 acres in Tulare County north of the town of
Visalia. In the 1997 fiscal year many of the Company's private label case goods
were processed and produced at Cutler, primarily for varietal bulk red and white
wine customers. The Cutler facility also has bottling lines with a combined
bottling capacity of two million cases and more than 70 stainless steel storage
tanks ranging in size from approximately 2,600 gallons to 350,000 gallons.

REEDLEY. The Company's Reedley facility is located on a 246-acre parcel in
southern Fresno County, northwest of the town of Parlier. The Company uses the
Reedley facility primarily for the production and storage of brandy and the
production of dry and sweet white wines, as well as fortified wines such as
sherry and port. The facility has more than 186 stainless steel storage tanks
ranging in size from approximately 600 gallons to 350,000 gallons.

MONTEREY. The Monterey winery is GSV's most recently acquired winemaking
facility. Located on 21 acres in the town of Soledad, the Monterey facility is
strategically situated near California's growing central coast wine region. The
Company acquired the Monterey facility in the third quarter of fiscal 1997 but
did not commence operations at the winery until the first quarter of fiscal
1998. The Company uses the winery primarily for custom processing of small lots
of popular premium, superpremium and ultrapremium white and red wines for GSV's
wine processing customers. The Company anticipates that, during fiscal 1998, the
facility will crush and process approximately 17,000 tons of grapes. Monterey
contains more than 370 small stainless steel tanks ranging in size from
approximately 500 gallons to 50,000 gallons, which allow for a higher level of
quality control and facilitate the production of a large number of small lots of
high quality premium varietal wine.

NAPA VALLEY WINERY. The Company's Napa Valley winery in St. Helena occupies
approximately 3 acres and is located in the town of St. Helena fronting Highway
29, in the center of the Napa Valley. The Napa Valley winery produces primarily
superpremium and ultrapremium white and red wines for a number of the leading
branded wineries in California. A significant portion of the Company's
proprietary and control label case goods are produced and bottled at the Napa
Valley winery. The facility also has a bottling line with an annual bottling
capacity of up to 1,100,000 cases and has 85 stainless steel storage tanks
ranging in size from approximately 1,160 gallons to 19,500 gallons.

NAPA VALLEY WAREHOUSE. The Company uses the Napa Valley warehouse for wine
fermentation and storage in oak barrels. The Napa Valley warehouse has a
24,000-barrel storage capacity, which was virtually full in 1997.

FACILITY EXPANSION. The Company recently authorized capital expenditures of
up to $20 million primarily to upgrade, maintain and expand its facilities over
the next two years. See "--Strategy".

VINEYARD OPERATIONS

The Company owns more than 9,600 acres of vineyard properties, of which more
than 8,500 acres are permanently planted. The table below sets forth the name of
each of the Company's vineyards and the acres of wine grapes at each vineyard.

39
<PAGE>
THE COMPANY'S VINEYARD PROPERTIES

<TABLE>
<CAPTION>
APPROXIMATE
VINEYARD NAME COUNTY LOCATION ACRES PLANTED
- ------------------------------------------------------------------- ---------------- ---------------
<S> <C> <C>
Fresno Vineyard.................................................... Fresno 3,713
Gravelly Ford Vineyard............................................. Madera 2,136
Lost Hills Vineyard................................................ Kern 1,410
Cawelo Vineyard.................................................... Kern 661
Mazzie Vineyard.................................................... Kern 619
-----
Total.......................................................... 8,539(1)
-----
-----
</TABLE>

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

(1) Includes 159 vineyard acres under development.

GRAPE PRODUCTION. The tonnage per acre and the overall yields of premium
varietal grapes from GSV's vineyards have increased in recent years due to,
among other factors, changes in product mix through vine grafting and
replanting. Generally, newly planted or replanted vines do not produce
significant amounts of fruit for three to four years after planting, while vines
grafted with a different variety of grape may bear a viable grape crop within 18
months of grafting. Replanting, however, allows the Company to plant new
varieties of rootstock, including disease-resistant varieties.

The following table shows GSV's net vine production by grape variety from
the 1994 to 1997 harvest years and the total grape tonnage produced by GSV
following each summer grape harvest.

NET PRODUCTION ACRES OWNED BY GSV AND TONS PRODUCED

<TABLE>
<CAPTION>
NET PRODUCTION ACRES
------------------------------------------
GRAPE VARIETY 1994 1995 1996 1997
- ------------------------------------------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
French Colombard........................................................ 3,162 3,114 3,114 2,965
Zinfandel (1)........................................................... 135 1,211 1,211 1,211
Chardonnay (2).......................................................... 0 875 875 1,124
Ruby Cabernet........................................................... 941 941 941 941
Merlot (1).............................................................. 125 537 687 687
Barbera................................................................. 379 379 379 379
Carnelian............................................................... 344 344 344 344
Chenin Blanc............................................................ 861 418 418 313
Other................................................................... 1,110 371 416 416
--------- --------- --------- ---------
Total Net Production Acres.......................................... 7,057 8,190 8,385 8,380
Total Tons Produced................................................. 68,311 59,183 72,896 88,209
</TABLE>

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

(1) Grafted in 1995.

(2) Grafted in 1995 and 1996.

Typically, the Company's vineyards yield approximately 8.8 tons per acre.
Due to a bountiful harvest in the summer of 1997, the Company picked a record
harvest of 88,000 tons of grapes, an average of approximately 10.4 tons of
grapes per acre. The Company expects its harvest in the summer of 1998 to return
to lower, more typical levels.

In May 1995, the Company began a major improvement and refurbishment program
and took approximately 2,750 acres, including all of its Lost Hills Vineyard,
temporarily out of production, in order to graft or replant new premium varietal
grape rootstock. This planned decline in grape production resulted in a
significant decline in tonnage produced in 1995 and 1996. The Company's grafted
premium varietal acreage started to mature in the 1997 harvest and the
production of premium varietal grapes

40
<PAGE>
increased. Presently, the Company's vineyards are planted with 35% French
Colombard, 14% Zinfandel, 13% Chardonnay, 13% Ruby Cabernet, and 8% Merlot, with
the remaining 17% of the Company's vineyards planted with a number of other
grape varieties.

In the Company's 1997 fiscal year, approximately $0.5 million was spent on
vineyard capital improvements, which included primarily Ruby Cabernet vineyard
development costs on approximately 160 acres at the Company's Gravelly Ford
vineyard. In the Company's current fiscal year, approximately $1.7 million will
be spent on the Company's vineyards, primarily on vineyard development costs. In
the future, the Company intends to replant approximately 300 acres each year.
While the Company histori-
cally grafted its vineyards to respond to the changing demands for varietal
grapes, the Company believes that replanting is a preferable alternative, due to
an overall increase in long-term yields of replanted vineyards.

VITICULTURAL PRACTICES. The Company's vineyards and vineyard operations
benefit from above average soil and the availability of an economical and
dependable supply of high quality water. The large, contiguous vineyards are
almost entirely machine harvested, creating significant economies of scale,
especially during periods of larger than normal grape crops, as occurred in the
summer of 1997. Management believes that the Company's farming and harvesting
costs per acre of vineyard are below the average per acre farming cost of a
typical California vineyard.

The Company follows a progressive vineyard management philosophy. Short-term
needs such as pruning, fertilizing, pesticide spraying and harvesting are
competitively contracted to multiple service providers, reducing the Company's
capital equipment and labor costs and expenses. Pest control is managed in an
integrated manner, with the selective application of approved pesticides and the
introduction of beneficial predatory insects to vines.

WATER SUPPLY. The Company's Fresno, Gravelly Ford, Mazzie and Cawelo
Vineyards benefit from deep aquifers that provide a reliable and relatively
inexpensive water source. The Company irrigates these vineyards from wells
located on or near its vineyards. The quality of the water obtained from the
wells is good, and the wells have proven to be a plentiful and reliable source
of water for the Company's operations, even during the drought years of the late
1980s. The Company's Lost Hills Vineyard relies upon area water
district-supplied water, which is allocated among surrounding properties and
uses. The Company believes its sources of water will be available for the
foreseeable future, but various factors such as drought or contamination could
impair the Company's water supply.

AGRICULTURAL HAZARDS. 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 during the growing season. These weather conditions can materially and
adversely affect the quality and quantity of grapes produced by the Company. In
January 1997, severe flooding in the San Joaquin River Basin destroyed a number
of protective levees, damaging a portion of the Company's Gravelly Ford
vineyards, which damage was not entirely insured.

Vineyards are also susceptible to certain diseases, insects and pests, which
can increase farming expenses, reduce yields or kill vines. In the last ten
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. As a result of this widespread problem, thousands
of vineyard acres throughout the State of California have been replanted with
phylloxera-resistant rootstock or, in some cases, taken out of production
completely.

In 1997, GSV discovered a phylloxera infestation in certain acres of the
Company's vineyards. The Company believes that the sandy, porous soil in its
Fresno, Madera and Kern County vineyards, as

41
<PAGE>
compared to the clay-like soil in more northern regions such as Napa and Sonoma
Counties, hinders the growth and spread of phylloxera. Additionally, high soil
temperatures and vine vigor in the Central and Southern San Joaquin Valley
mitigate root damage that can be caused by phylloxera. Further, the Company has
attacked the infestation with improved irrigation management and soil
fertilization. The grape production from the Company's phylloxera-infested acres
in the 1997 harvest did not evidence lower yields than in other, unaffected
acres. Thus, the Company does not believe that phylloxera will have a material
adverse effect on vineyard operations and production, though there can be no
assurances in that regard.

Other pests that may infest vineyards include leafhoppers, thrips,
nematodes, mites, insects, orange tortrix 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 and
birds can also pose a problem for vineyards, and wine grapevines are also
susceptible to certain virus infections which may cause reduction of yields. The
presence of potentially harmful nematodes in relatively high numbers has been
detected in certain acres of the Company's vineyards. The Company has countered
the infestation with improved irrigation management and soil fertilization. None
of these infestations or infections currently poses a major threat to the
Company's vineyards, although they could do so in the future.

ENVIRONMENTAL MATTERS. The Company's vineyard 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.

COMPETITION

The markets in which the Company operates are highly competitive and are
dominated by companies with substantially greater financial, production,
personnel and other resources than the Company. In the area of bulk wine
production and processing, the Company competes primarily with JFJ Bronco and
Delicato Winery, as well as a number of smaller companies. The Company's
proprietary label case goods compete with the products of branded wineries and
with other alcoholic and, to a lesser degree, nonalcoholic beverages in the
retail stores where the Company's case goods products are sold and in the
beverage market place in general.

The Company also experiences competition from its current and potential
customers. There are an estimated 800 commercial wineries that produce and
market California wine, although, according to Fredrickson, seven wineries
account for approximately 76% of California wine sales, based on total volume of
California wine shipments in 1997. Certain major wineries, including many of the
Company's customers, grow a significant amount of the grapes they need to make
wine and produce wine for their own branded labels. The Company's position as a
low-cost high quality supplier of premium bulk wines and wine processing
services provides incentives to its customers to outsource their grape and wine
production needs to GSV.

Numerous wine producers in Europe, South America, South Africa and Australia
also compete with GSV by exporting their wine into the United States. California
grape and wine supply shortages in 1995, especially in red wines, 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. According to Fredrikson,
bulk table wine imports into the United States for these purposes increased from
approximately 605,000 gallons in 1995 to approximately 20.3 million gallons in
1997.

The Company does not believe that it faces a significant competitive threat
from new entrants into the wine grape growing and wine production markets due to
the substantial capital investments and lengthy start-up periods involved in the
development of productive vineyards and winemaking facilities and the
establishment of customer relationships. Rather, the expansion of the Company's
current

42
<PAGE>
competitors and the entry of the Company's customers into the bulk wine business
pose a more significant long-term competitive concern for the Company.

CUSTOMERS

The Company's customers are among the leading branded wineries in
California, many of whom have developed lasting business relationships with the
Company. The Company provides premium bulk wine pursuant to long-term supply
agreements to wineries such as Sutter Home, Canandaigua, Sebastiani, Heublein,
Vincor and Mildara Blass and sells wine grapes to Gallo pursuant to long-term
grape purchase contracts. ADM, Boisset and Trader Joe's are among the Company's
private label case goods customers. The Company also provides various wine
processing services for Mondavi, Beringer and The Wine Group, among other
wineries, and brandy distillation and production for Heublein. The Company
exports bulk wine internationally to Vincor International Inc., Calona Wines
Limited and Vin & Sprit AB.

GOVERNMENT REGULATION

The wine industry is subject to extensive regulation by the Federal Bureau
of Alcohol, Tobacco and Firearms, various foreign agencies and state liquor and
local authorities. These regulations and laws dictate such matters as licensing
requirements, trade and pricing practices, permitted distribution channels,
permitted and required labeling, advertising restrictions and relations with
wholesalers and retailers. Expansion of the Company's existing facilities and
development of new vineyards and wineries may be limited by present and future
zoning ordinances, environmental restrictions and other legal requirements. In
addition, new regulations or requirements or increases in excise taxes, sales
taxes or international tariffs, could materially adversely affect the financial
results of the Company.

TRADEMARKS

EMPLOYEES

The Company has approximately 172 full-time equivalent employees. The
Company believes that its relations with its employees are good. GSV also
periodically employs seasonal and contract labor through independent sources as
needed for vineyard development, pruning, harvesting as well as all wine
processing services and other related tasks, primarily during the late summer
and early fall months.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings, though two of
the Company's customers have recently disputed the quality of wine products
delivered by the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".

PROPERTIES

CORPORATE HEADQUARTERS. The Company leases approximately 5,130 square feet
for its executive corporate office in Greenbrae, California under a sublease
expiring in May 2000. The Company believes that its existing executive office
facility will be adequate to meet the Company's needs for the foreseeable future
and that additional space will be available as needed at commercially reasonable
rates.

OTHER PROPERTIES. The Company owns all of the vineyards and winemaking
facilities described above under "Vineyard Operations" and "Winemaking
Facilities".

43
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The executive officers, directors and key employees of the Company are as
follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Jeffrey B. O'Neill (2).............. 41 President, Chief Executive Officer and Director
Brian R. Thompson................... 47 Chief Financial Officer and Secretary
Jeffrey J. Brown (1)(2)............. 37 Chairman of the Board of Directors and Assistant Secretary
Nicholas B. Binkley (1)............. 52 Director
Douglas R. Wolter................... 31 Director
Keith R. Fox (2).................... 44 Director
W. Scott Hedrick.................... 52 Director
Peter W. Mullin..................... 57 Director
Lawrence E. Brink................... 51 Vice President, Production Operations
Michael B. Drobnick................. 41 Vice President, Bulk Sales
Jeffrey L. Dye...................... 44 Vice President, Case Goods
Peter M. Byck....................... 35 Vice President, Strategy and Business Development
Donald L. Stanley................... 61 General Manager, Reedley and Director of Wine Grape Procurement
Robert Darby........................ 56 Plant Manager, Fresno
</TABLE>

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

(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

JEFFREY B. O'NEILL has been a director of the Company since April 1995 and
has served as the Company's President and Chief Executive Officer since October
1996. From July to October of 1996, Mr. O'Neill served as Executive Vice
President of the Company. Mr. O'Neill joined the predecessor to the Company in
1981 as a grape buyer and has held a number of executive positions with the
Company's predecessor entities, most recently serving as the President and Chief
Executive Officer of Golden State Vintners since 1986. He currently serves on
the Board of Directors of several leading agricultural concerns, including Fresh
International Corp.

BRIAN R. THOMPSON joined the Company in November 1995 as Chief Financial
Officer and Secretary. From 1988 to November 1995, Mr. Thompson served in a
number of executive positions, including Executive Vice President and Chief
Financial Officer, of Sun World International, Inc., a proprietary produce
company, which filed a petition under Federal bankruptcy laws in October 1994.

JEFFREY J. BROWN has been a director of the Company since April 1995 and
became Chairman of the Board and Assistant Secretary in October 1996. Since June
1993, Mr. Brown has been an executive officer and director of Forrest Binkley &
Brown Venture Co. ("Venture Co."), the general partner of Forrest Binkley &
Brown L.P. ("FBB"), the managing partner of SBIC Partners. Prior to the
formation of FBB in June 1993, Mr. Brown was a Senior Vice President of
BankAmerica Venture Capital, a position he held from April 1992 to May 1993. He
currently serves on the Board of Directors of a number of private companies.

NICHOLAS B. BINKLEY joined the Company's Board of Directors in October 1996.
Since June 1993, Mr. Binkley has been an executive officer and director of
Venture Co. Prior to the formation of FBB, Mr. Binkley was Vice Chairman of the
Board of Directors of BankAmerica Corporation, a position he held from April
1992 through May 1993. He currently serves on the Board of Directors of Vista
Medical Company, a medical device company, as well as a number of private
companies.

DOUGLAS R. WOLTER joined the Company's Board of Directors in October 1996.
He currently is a senior analyst at Forrest Binkley & Brown Venture Advisor Co.
("Advisor Co."), an affiliate of FBB, a position he has held since August 1994.
Prior to joining Advisor Co., Mr. Wolter attended Stanford Business School,
graduating with a Masters in Business Administration in June 1994.

KEITH R. FOX joined the Company's Board of Directors in April 1995. Since
February 1994, Mr. Fox has been an executive officer of Exeter Venture Advisors,
Inc., Exeter Equity Advisors, Inc. and Exeter

44
<PAGE>
Venture Management Corporation. Mr. Fox serves on the Boards of Directors of a
number of private companies and is an independent trustee of more than 20
Scudder Kemper mutual funds.

W. SCOTT HEDRICK joined the Company's Board of Directors in April 1998.
Since 1979, Mr. Hedrick has served as a general partner of InterWest Partners, a
venture capital firm that he co-founded. Mr. Hedrick also serves on the Board of
Directors of Il Fornaio (America) Corporation and Office Depot, Inc., as well as
a number of private companies.

PETER W. MULLIN joined the Company's Board of Directors in April 1998. Since
1969, Mr. Mullin has served as Chief Executive Officer and Chairman of the Board
of Directors of Mullin Consulting, Inc., a consulting firm specializing in
executive compensation and benefit issues. Mr. Mullin serves on the Board of
Directors of Avery Dennison Corporation, as well as several private companies
and foundations.

LAWRENCE E. BRINK joined GSV in April 1994 as Vice President, Production
Operations. Prior to that time, Mr. Brink served as Executive Vice President,
Winemaking of Joseph E. Seagram & Sons.

MICHAEL B. DROBNICK joined the Company in 1985 and has served as Vice
President, Bulk Sales since January 1996. Prior to joining the Company, Mr.
Drobnick held various sales management positions with different wine
distributors.

JEFFREY L. DYE has served as Vice President, Case Goods of GSV since
November 1992. Prior to joining the Company, Mr. Dye served in various executive
positions for several wineries and wine distributors.

PETER M. BYCK joined GSV in November 1997 as Vice President, Strategy and
Business Development. From 1992 to 1996, Mr. Byck served as Chief Executive
Officer of Applied Scanning Technology, Inc., a proprietary software and
scanning company. From 1990 to 1992, Mr. Byck was a Senior Consultant at the LEK
Partnership.

DONALD L. STANLEY joined the Company in 1989 and is currently the General
Manager at the Company's Reedley facility and Director of Wine Grape
Procurement. Prior to joining the Company, Mr. Stanley served in various
positions at Christian Brothers Winery.

ROBERT DARBY has been with the Company serving in various plant and
operating positions since 1987. Prior to that time, Mr. Darby was the Chief
Winemaker and Plant Manager for the JFJ Bronco Wine Company.

The Board of Directors currently has seven directors. Pursuant to the terms
of the Amended and Restated Stockholders Agreement dated as of October 10, 1996
by and among the Company and the stockholders of the Company (the "Stockholders
Agreement"), the Board currently includes three nominees of SBIC Partners
(Messrs. Brown, Binkley and Wolter), one nominee of Exeter (Mr. Fox), and one
nominee of Mr. O'Neill. The Stockholders Agreement terminates upon the
consummation of an initial public offering of at least 20% of the Company's
Common Stock that results in gross proceeds to the Company of at least $35
million.

Each member of the Board is elected to hold office until the next annual
meeting of stockholders and until his respective successor is elected and
qualified. Officers serve at the discretion of the Board of Directors. There are
no family relationships among any of the directors or executive officers of the
Company.

BOARD COMMITTEES, COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee reviews the results and scope of the annual audit
and the services provided by the Company's independent accountants. The
Compensation Committee makes recommendations to the Board of Directors with
respect to the Company's general and specific compensation policies and
administers the Company's stock option plan.

45
<PAGE>
The Company's Compensation Committee consists of Messrs. Brown, O'Neill and
Fox. During the Company's last completed fiscal year, Mr. O'Neill was an
executive officer of the Company and of Golden State Vintners and Mr. Brown was
an executive officer of the Company. See "Certain Relationships and Related
Transactions" for information regarding the interests of Messrs. O'Neill, Brown
and Fox in certain transactions and arrangements involving the Company.

No executive officer of the Company serves as a member of the Board of
Directors or Compensation Committee of any other entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.

COMPENSATION OF DIRECTORS

The Company currently pays its directors, other than Mr. O'Neill, $12,500
per year, plus full reimbursement for certain out-of-pocket expenses incurred in
connection with attendance at board and committee meetings. In October 1996, an
affiliate of Messrs. Brown, Binkley and Wolter entered into a management
agreement with the Company, which calls for the payment of $125,000 to such
affiliate for management services rendered to the Company. In April 1998, the
Company adopted the Director Plan. Under the Director Plan, in April 1998,
options to purchase an aggregate of 59,972 shares of Class B Common Stock at an
exercise price of $12.08 were granted to all members of the Board of Directors,
other than Mr. O'Neill. See "Certain Relationships and Related Transactions".

EXECUTIVE COMPENSATION

The following table summarizes all compensation paid to the Company's Chief
Executive Officer and to the Company's most highly compensated officers other
than the Chief Executive Officer whose total annual salary and bonus exceeded
$100,000, for services rendered in all capacities to the Company and to Golden
State Vintners during the fiscal year ended June 30, 1997 (collectively, the
"Named Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS(1)
------------------
COMPENSATION OPTIONS TO
------------------------ PURCHASE ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMMON STOCK(3) COMPENSATION
- --------------------------------------------------- ----------- ----------- ------------------ --------------
<S> <C> <C> <C> <C>
Jeffrey B. O'Neill (2) ............................ $ 309,331 $ 802,040 670,434 $ 14,947(4)
President and Chief Executive Officer
Brian R. Thompson ................................. 165,000 40,000 -- --
Chief Financial Officer and Secretary
Lawrence E. Brink ................................. 125,000 20,000 17,400 9,600(5)
Vice President, Production Operations
Jeffrey L. Dye .................................... 75,000 65,000 17,400 --
Vice President, Case Goods
Michael B. Drobnick ............................... 75,000 65,000 17,400 --
Vice President, Bulk Sales
</TABLE>

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

(1) For the period set forth in the table above, no Named Officer received
aggregate Other Annual Compensation in excess of the lesser of $50,000 or
10% of the total of such officer's salary and bonus, nor did any such Named
Officer receive any restricted stock award, stock appreciation right or
payment under any long-term incentive plan.

(2) This table sets forth all compensation awarded to, earned by or paid to Mr.
O'Neill for services rendered as an officer of the Company and as an officer
of Golden State Vintners during the fiscal year ended June 30,1997, which
compensation was paid by the Company.

(3) These options were granted pursuant to the Company's 1996 Option Plan.

(4) Consists of disability insurance premiums and car expenses paid by the
Company.

(5) Consists of a car allowance paid by the Company.

46
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning stock options granted
to the Named Officers of the Company during fiscal 1997. No stock appreciation
rights were granted to such persons during such period.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH)(1) DATE 5% 10%
- ------------------------------------- ------------ ------------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey B. O'Neill................... 167,608 20.9 3.62 12/3/06 $ 76,624 $ 481,474
167,609 20.9 4.31 12/3/06 -- 365,884
167,608 20.9 5.17 12/3/06 -- 221,392
167,609 20.9 6.03 12/3/06 -- 76,902
Brian R. Thompson.................... -- -- -- -- -- --
Lawrence E. Brink.................... 17,400 2.0 4.79 1/1/07 -- 29,703
Jeffrey L. Dye....................... 17,400 2.0 4.79 1/1/07 -- 29,703
Michael B. Drobnick.................. 17,400 2.0 4.79 1/1/07 -- 29,703
</TABLE>

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

(1) The exercise price per share of these options was equal to or greater than
the fair market value of the Common Stock on the date of grant.

(2) The potential realizable value is calculated based on the term of the option
at its time of grant. It is calculated assuming that the stock price on the
date of grant appreciates at the indicated annual rate compounded annually
for the entire term of the option, and that the option is exercised and sold
on the last day of its term for the appreciated stock price. No gain to the
optionee is possible unless the stock price increases over the option term,
which will benefit all stockholders.

AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

No options or stock appreciation rights were exercised by the Named Officers
for the fiscal year ended June 30, 1997.

STOCK OPTION PLANS

1996 STOCK PLAN. The Company's 1996 Option Plan became effective in
December 1996 upon adoption by the Board of Directors. The 1996 Option Plan
provides for the grant of options in the form of incentive stock options and
nonstatutory stock options to officers, key employees and consultants of the
Company or its subsidiaries and members of the Board of Directors of the
Company. A total of 223,491 shares of Class B Common Stock and 362,834 shares of
Class A Common Stock have been reserved for issuance under the 1996 Option Plan.

Upon consummation of the offering, the 1996 Option Plan will be administered
by a committee (the "Committee") constituted so as to permit the 1996 Option
Plan to comply with Rule 16b-3 of the Exchange Act. The Board of Directors may
amend the 1996 Option Plan and, with the consent of each participant adversely
affected, the Committee may make such changes in the terms and conditions of
granted options as it shall deem advisable.

The purchase price per share of the shares of Common Stock underlying each
option granted under the 1996 Option Plan will be established by the Committee
but shall not be less than 100% of the fair market value of the Common Stock on
the date of grant, provided that if the optionee is a 10% stockholder of the
Company (as defined in Section 422(b)(6) of the Internal Revenue Code of 1986,
as

47
<PAGE>
amended) at the time such optionee is granted an incentive stock option, the
purchase price per share of the shares of Common Stock shall be not less than
110% of said fair market value.

The 1996 Option Plan provides that, in the event of the dissolution,
liquidation or sale of the Company, any merger or reorganization of the Company,
or acquisition by any person or group of beneficial ownership of more than 50%
of the Company's then outstanding shares of capital stock, the 1996 Option Plan
and each outstanding option granted thereunder shall terminate. Upon the
happening of such event, each participant under the 1996 Option Plan who is not
tendered a substitute option by the entity surviving such event or who does not
accept any such substituted option, shall have the right to exercise, in whole
or in part, any vested and exercisable options which have not then expired.

As of April 30, 1998, options to purchase a total of 362,834 shares of Class
A Common Stock and 139,200 shares of Class B Common Stock have been granted
under the 1996 Option Plan. Such options have per share exercise prices ranging
from $3.62 to $6.03, or a weighted average per share exercise price of $4.79.

DIRECTOR PLAN. The Company's Director Plan became effective in April 1988
upon adoption by the Board of Directors and approval by the stockholders. The
Director Plan provides for the grant of options in the form of nonstatutory
stock options to the non-employee members of the Board of Directors of the
Company. A total of 348,000 shares of Class B Common Stock have been reserved
for issuance under the Director Plan.

The purchase price per share of the shares of Common Stock underlying each
option granted under the Director Plan shall be the closing sale price of such
shares on the date of grant if the Common Stock is listed on any established
stock exchange or national market system or the price established by the
committee administering the Director Plan, which shall not be less than 100% of
the fair market value of the Common Stock on the date of grant.

The Director Plan provides that, in the event of the dissolution or
liquidation of the Company, the merger or sale of all or substantially all
assets of the Company requiring shareholder approval, or acquisition by any
person or group of beneficial ownership of the securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding shares, any options outstanding under the Director Plan that are not
yet exercisable and vested shall become fully exercisable and vested.

As of April 30, 1998, options to purchase a total of 59,972 shares of Class
B Common Stock have been granted under the Director Plan. Such options have per
share exercise prices of $12.08. None of such options have been exercised.

KEY MAN LIFE INSURANCE

The Company, through Golden State Vintners, currently maintains a life
insurance policy in the amount of $10 million on the life of Mr. O'Neill. The
Company has agreed to assign a $2 million portion of this policy to Mr.
O'Neill's family trust.

EMPLOYMENT AGREEMENT

From April 27, 1995 until December 31, 1997, Mr. O'Neill served as President
and Chief Executive Officer of Golden State Vintners pursuant to the Old
Agreement, which provided him with an annual salary of at least $300,000,
subject to annual increases, and an annual bonus based on a sliding scale of
EBITDA (as defined in the Old Agreement). Effective as of January 1, 1998, the
Company and Mr. O'Neill entered into a new employment agreement (the "New
Employment Agreement"), which provides for Mr. O'Neill to serve as President and
Chief Executive Officer of the Company on the terms and subject to the
conditions set forth therein. Under the New Employment Agreement, Mr. O'Neill
will receive annual compensation of $350,000, a bonus to be paid in the
discretion of the Board and the reimbursement of

48
<PAGE>
certain expenses. The New Employment Agreement also provides for the payment of
severance to Mr. O'Neill equal to two years of his base compensation and for the
acceleration of any unvested options then held by Mr. O'Neill if his employment
is terminated for certain reasons, including any termination of his employment
within six months of a "Change in Control". The New Employment Agreement defines
a Change in Control to include the sale by the Company of all or substantially
all of its capital stock or assets or the consummation of any transaction or
series of related transactions, including any merger, reorganization or
recapitalization, in which any person or group acquires beneficial ownership of
more than 50% of the outstanding capital stock of the Company. The term of the
New Employment Agreement expires June 30, 2001.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Section 145 of the Delaware General Corporation Law ("Delaware Law"),
the Company can indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act.
The Company's Certificate of Incorporation provides that the Company will
indemnify its directors, officers, employees and other agents to the fullest
extent permitted by law.

Prior to the consummation of the offering, the Company intends to enter into
agreements to indemnify its directors and officers in addition to the
indemnification provided for in the Company's Certificate of Incorporation.
These agreements will, among other things, indemnify the Company's directors and
certain of its officers for certain expenses (including attorneys' fees),
judgments, fines and settlement amounts incurred by such person in any action or
proceeding, including but not limited to any action by or in the right of the
Company, on account of services as a director or officer of the Company, or as a
director or officer of any other company or enterprise to which the person
provides services at the request of the Company. The Company has also purchased
liability insurance covering its directors and officers.

In addition, the Company's Certificate of Incorporation provides that the
Company's directors shall not be liable for monetary damages for breach of such
directors' fiduciary duty of care to the Company and its stockholders except for
liability for breach of the director's duty of loyalty to the Company or its
stockholders, for acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware Law. This
provision in the Certificate of Incorporation does not eliminate the duty of
care, and in appropriate circumstances equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware Law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal or state securities or environmental laws.

There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the Company as to which indemnification is being
sought, nor is the Company aware of any pending or threatened litigation that
may result in claims for indemnification by any director, officer, employee or
other agent.

49
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

INCORPORATION OF THE COMPANY

In connection with the formation and initial capitalization of the Company
in April 1995, the Company issued an aggregate of 1,885,000 shares of its
previously outstanding Class A Common Stock (the "Old Class A Stock") and
3,770,000 shares of its previously outstanding Class B Common Stock (the "Old
Class B Stock"), in each case at $1.72 per share, for an aggregate purchase
price of $9.75 million. Certain of these shares of Old Class B Stock were issued
to the following holders of record of more than five percent of the outstanding
stock of the Company (each, a "5% Stockholder") associated with Jeffrey J.
Brown, an officer and director of the Company, and Nicholas B. Binkley and
Douglas R. Wolter, directors of the Company, and to the following 5%
Stockholders associated with Keith R. Fox, a director of the Company:

<TABLE>
<CAPTION>
NAME SHARES OF OLD CLASS B STOCK
- ---------------------------------------------------------------- ----------------------------
<S> <C>
SBIC Partners................................................... 1,885,000
EE Partners..................................................... 1,566,000
EV Lenders...................................................... 319,000
</TABLE>

GOLDEN STATE VINTNERS PURCHASE

Pursuant to a Stock Purchase Agreement dated April 27, 1995 (the "Stock
Purchase Agreement"), the Company purchased all of the outstanding capital stock
of Golden State Vintners (the "Golden State Vintners Purchase") from certain
shareholders of Golden State Vintners. Pursuant to the terms of the Stock
Purchase Agreement, the Company paid the purchase price for the Golden State
Vintners Purchase by delivering $20.9 million in cash and 523,980 shares of 6%
Junior Exchangeable Preferred Stock of the Company in the aggregate face amount
of $2.6 million. Certain of the shares of Golden State Vintners were sold to the
Company by Mr. O'Neill and an affiliated entity.

The execution of the Stock Purchase Agreement occurred substantially
contemporaneously with the closing of the refinancing of Golden State Vintners'
then-existing indebtedness. Pursuant to a Securities Purchase Agreement dated
April 21, 1995 (the "Hancock SPA"), the John Hancock Mutual Life Insurance
Company ("John Hancock") purchased for an aggregate consideration of $45 million
(1) senior secured first mortgage notes of Golden State Vintners with an
aggregate principal face amount of $35.0 million and (2) 100,000 shares of the
Company's 12% Senior Redeemable Exchangeable Preferred Stock ("Senior Preferred
Stock") and 1,200,829 shares of the Company's previously outstanding Class E
Common Stock for an aggregate consideration of $10.0 million. The Company
guaranteed the obligations of Golden State Vintners to John Hancock under the
Hancock SPA.

GRAPE GROUP TRANSACTION

In May 1995, the Company acquired the Lost Hills Vineyard, 1,750 acres of
wine grape vineyards located in Kern County, from the Grape Group, Inc. (the
"Grape Group") for a purchase price of approximately $4.6 million, payable via
the assumption of approximately $2.9 million of debt and the delivery of a
non-interest bearing promissory note in the principal amount of $1.7 million.
Mr. O'Neill owned 100% of the Grape Group at the time of the transaction. The
Company believes that the purchase of the Lost Hills Vineyard from the Grape
Group was negotiated at arms' length and that the Company paid a price equal to
the fair market value of such property.

SE VINEYARDS

The Company historically purchased grapes from SE Vineyards, a 300 acre
vineyard located in Kern County. Mr. O'Neill owned 33.33% of SE Vineyards until
October 1996. For the Company's 1995, 1996 and 1997 fiscal years, the Company
purchased approximately $275,000, $400,000 and $1.4 million of such grapes,
respectively. The Company believes such grape purchases were at competitive
market prices negotiated at arms' length.

50
<PAGE>
GSAC RECAPITALIZATION

In October 1996, the Company entered into a series of transactions to effect
the recapitalization of its capital structure (the "Recapitalization"). Pursuant
to a Securities Purchase Agreement dated as of August 22, 1996, the Company
acquired from certain stockholders 1,885,000 shares of Old Class A Stock and
985,156 shares of Old Class B Stock, at a price of $2.50 per share, for an
aggregate purchase price of approximately $7.2 million. Of the entities selling
stock to the Company, the following 5% Stockholders are associated with Mr. Fox:

<TABLE>
<CAPTION>
NAME SHARES OF OLD CLASS B STOCK SOLD
- ----------------------------------------------------------- ---------------------------------
<S> <C>
EE Partners................................................ 818,438
EV Lenders................................................. 166,718
</TABLE>

As part of the Recapitalization, the Company redeemed 1,003,038 shares of
Junior Preferred Stock for an aggregate purchase price of approximately $1.7
million. Certain of these shares were held by Mr. O'Neill and by the following
entity associated with Mr. O'Neill and with a member of Mr. O'Neill's immediate
family:

<TABLE>
<CAPTION>
NAME SHARES OF JUNIOR PREFERRED STOCK SOLD
- ------------------------------------------------------- -------------------------------------
<S> <C>
Jeffrey B. O'Neill..................................... 42,793
Mid-State Horticultural Company........................ 70,892
</TABLE>

Pursuant to a Stock Purchase Agreement dated October 10, 1996, the Company
sold an aggregate of 2,776,170 shares of Old Class B Stock at $2.50 per share,
for an aggregate purchase price of approximately $6.9 million. These shares were
sold to Mr. O'Neill and to the following 5% Stockholder associated with Messrs.
Brown, Binkley and Wolter:

<TABLE>
<CAPTION>
NAME SHARES OF OLD CLASS B STOCK
- ---------------------------------------------------------------- ----------------------------
<S> <C>
Jeffrey B. O'Neill.............................................. 599,172
SBIC Partners................................................... 2,176,998
</TABLE>

OTHER TRANSACTIONS WITH EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS

As compensation for certain investment banking services provided with
respect to the Recapitalization and certain related credit matters, the Company
paid approximately $400,000 in fees to Exeter Venture Management Corporation
("EV Management"), which is an affiliate of a 5% Stockholder and associated with
Mr. Fox. The Company paid EV Management $375,000 in fees in February 1997 as
consideration for certain investment banking services.

In December 1996, the Compensation Committee of the Board of Directors
granted to Mr. O'Neill options to purchase an aggregate of 670,434 shares of Old
Class B Stock. The options are exercisable for up to 167,608 shares at a price
of $3.62 per share up to an additional 167,609 shares at a price of $4.31 per
share, up to an additional 167,608 shares at a price of $5.17 per share, and up
to an additional 167,609 shares at a price of $6.03 per share. The options vest
in four equal annual installments commencing October 10, 1997.

In October 1996, the Company agreed to pay an annual fee of $125,000 to
Forrest Binkley & Brown Partners L.P., an affiliate of SBIC Partners, a 5%
Stockholder, and of Messrs. Brown, Binkley and Wolter, as compensation for
management services to be provided with respect to the Company's operations.

In connection with the Golden State Vintners Acquisition, the Board of
Directors granted to Mr. O'Neill stock appreciation rights with respect to
145,000 shares of Old Class B Stock at a base price of $.003 per stock
appreciation right and 504,348 shares of Old Class B Stock, at a base price of
$1.72 per stock appreciation right. In November 1995, the Board of Directors
granted Mr. Thompson stock appreciation rights with respect to 145,000 shares of
Old Class B Stock at a base price of $2.59 per stock

51
<PAGE>
appreciation right. Effective as of December 31, 1997, the Company and Messrs.
O'Neill and Thompson agreed to terminate such stock appreciation rights in
exchange for certain compensation and the grant of non-qualified stock options.
Pursuant to such agreement, Messrs. O'Neill and Thompson were entitled to
receive $6.97 million and $1.38 million, respectively. In connection with the
issuance of the Replacement Incentives, Messrs. O'Neill and Thompson received
their respective portions of the Executive Cash Payments, as well as their
respective Executive Promissory Notes. Messrs. O'Neill and Thompson also
received options to purchase 649,348 and 145,000 shares of Class B Common Stock,
respectively. The stock options were fully-vested on the date of grant and are
exercisable at $12.07 per share of Common Stock. Further, in connection with the
issuance of the Replacement Incentives, (1) the Company accelerated the vesting
of 139,992 options to purchase shares of Class A Common Stock held by Mr.
O'Neill, (2) Mr. O'Neill used his Executive Cash Payment to immediately exercise
options with respect to an aggregate of 307,600 shares of Class A Common Stock
and to pay certain income tax amounts arising from such exercises and (3) Mr.
Thompson used his Executive Cash Payment to exercise options with respect 29,619
shares of Class B Common Stock.

In April 1998, SBIC Partners and Exeter agreed to certain co-sale rights and
rights of first refusal and Mr. O'Neill agreed not to seek to participate in the
next registered sale of Class B Common Stock by SBIC Partners and Exeter, if
any.

Prior to the consummation of the offering, the Company anticipates filing
its Second Amended and Restated Certificate of Incorporation which, among other
things, will result in the conversion of all outstanding shares of Old Class B
Stock into shares of Class A Common Stock and the conversion of all outstanding
shares of Class K Common Stock and Class E Common Stock into shares of the
Company's newly-created Class B Common Stock.

The following table sets forth, with respect to each holder of common stock
of the Company who is an officer, director or 5% Stockholder, the aggregate
price paid by such holder for the shares of Common Stock of the Company
currently held by such holder, and the aggregate value of such Common Stock
(based upon an assumed initial public offering price of $17.50 per share for the
Common Stock):

<TABLE>
<CAPTION>
AGGREGATE
CONSIDERATION AGGREGATE VALUE OF
NAME OF HOLDER PAID FOR STOCK COMMON STOCK
- --------------------------------------------------------- -------------- -------------------
<S> <C> <C>
SBIC Partners............................................ $ 8,700,728 $ 71,084,996
EE Partners.............................................. 1,288,900 13,082,335
EV Lenders............................................... 262,555 2,664,935
John Hancock............................................. 2,070,395 21,014,507
Jeffrey B. O'Neill....................................... 1,499,996 13,839,630
</TABLE>

Prior to the consummation of the offering, the Company will enter into
indemnification agreements with each of its directors and executive officers.
The agreements will require the Company to indemnify such individuals for
certain liability to which they may be subject as a result of their affiliation
with the Company, to the fullest extent permitted by Delaware Law.

Additionally, in April 1998, in connection with its participation in the
offering, John Hancock agreed to waive all prepayment penalties due with respect
to the Company's repurchase of the shares of Senior Preferred Stock held by John
Hancock.

The Company believes that the foregoing transactions were in its best
interests and on terms no less favorable to the Company than could be obtained
from unaffiliated third parties.

52
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Class A and Class B Common Stock as of April 30,
1998, and as adjusted to reflect the sale by the Company and the Selling
Stockholders of the shares of Class B Common Stock offered hereby, by: (1) each
person who is known by the Company to beneficially own more than 5% of the
Company's Class A and Class B Common Stock, (2) each of the Company's directors,
(3) each of the Named Officers and (4) all directors and Named Officers of the
Company, as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING CLASS B OWNED AFTER OFFERING
------------------------------------- SHARES -------------------------------------
NUMBER OF NUMBER OF PERCENT OF OFFERED IN NUMBER OF NUMBER OF PERCENT OF
CLASS A CLASS B TOTAL VOTING THE CLASS A CLASS B TOTAL VOTING
BENEFICIAL OWNERS SHARES SHARES POWER(1) OFFERING SHARES SHARES POWER(1)
- -------------------------------- ---------- ---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
SBIC Partners, L.P. ........... 4,061,998 -- 67.5% 1,435,600 2,626,398 -- 56.5%
201 Main Street, Suite 2302
Fort Worth, TX 76102
Jeffrey B. O'Neill(2) ......... 906,772 673,733 16.2% -- 906,772 673,733 20.9%
500 Drake's Landing Road
Greenbrae, CA 94904
John Hancock Mutual Life
Insurance Company ............ -- 1,200,829 2.0% 396,274 -- 804,555 1.7%
John Hancock Place
200 Clarendon Street
Boston, MA 02117
Exeter (3) ..................... 899,844 -- 15.0% 318,126 581,718 -- 12.5%
10 East 53rd Street
New York, NY 10022
Jeffrey J. Brown (4) ........... 4,061,998 -- 67.5% -- 2,626,388 -- 56.5%
Nicholas B. Binkley (4) ........ 4,061,998 -- 67.5% -- 2,626,388 -- 56.5%
Douglas R. Wolter (4) .......... 4,061,998 -- 67.5% -- 2,626,388 -- 56.5%
Keith R. Fox (3) ............... 899,844 -- 15.0% -- 581,718 -- 12.5%
W. Scott Hedrick ............... -- -- -- -- -- -- --
Peter W. Mullin ................ -- 19,972 * -- -- 19,972 *
Brian R. Thompson (5) .......... -- 145,000 * -- -- 145,000 *
Lawrence E. Brink (6) .......... -- 4,350 * -- -- 4,350 *
Jeffrey L. Dye (6) ............. -- 4,350 * -- -- 4,350 *
Michael B. Drobnick (6) ........ -- 4,350 * -- -- 4,350 *
All Directors and Named Officers
as a group (11 persons)
(7) .......................... 5,868,614 851,755 99.0% 4,114,888 851,755 90.3%
</TABLE>

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

* Represents beneficial ownership of less than 1% of the outstanding voting
power of all shares of Common Stock.

(1) Percent ownership is based on (i) before the offering, 7,329,273 shares of
Common Stock outstanding plus any shares issuable pursuant to options held
by the person in question which may be exercised within 60 days after April
30, 1998; and (ii) after the offering, an additional 2,150,000 shares of
Class B Common Stock issued by the Company in the offering. In calculating
the percent of total voting power, the voting power of shares of Class A
Common Stock (ten votes per share) and Class B Common Stock (one vote per
share) have been aggregated.

(2) Includes 906,772 shares of Class A Common Stock owned by Mr. O'Neill,
649,348 shares of Class B Common Stock issuable under presently exercisable
stock options and 24,385 shares of Class B Common Stock issuable on
conversion of shares of the Company's Junior Preferred Stock held by Mr.
O'Neill.

53
<PAGE>
(3) Represents 747,562 and 152,282 shares of Class A Common Stock held by EE
Partners and EV Lenders, respectively. Keith R. Fox, a director of the
Company, is an executive officer of Exeter Equity Advisors, Inc., which is
the general partner of Exeter Equity Advisors, L.P., the general partner of
EE Partners. Mr. Fox is also an executive officer of Exeter Venture
Advisors, Inc., which is the general partner of EV Lenders, and an executive
officer of Exeter Venture Management Corporation, which is an affiliate of
EV Partners and EV Lenders. Mr. Fox disclaims beneficial ownership of the
shares held by EV Partners and EV Lenders, except to the extent of his
pecuniary interest therein.

(4) Represents 4,061,998 shares of Class A Common Stock held by SBIC Partners.
Gregory J. Forrest, Nicholas B. Binkley, a director of the Company, and
Jeffrey J. Brown, an officer and director of the Company, are each executive
officers, directors and shareholders of Venture Co. Messrs. Forrest, Binkley
and Brown collectively hold all of the outstanding limited partnership
interests in FBB. Mr. Wolter is employed by Advisor Co., an affiliate of
SBIC Partners, FBB and Venture Co. Each of Messrs. Forrest, Binkley, Brown
and Wolter disclaims beneficial ownership of the shares held by SBIC
Partners, except to the extent of his pecuniary interest therein, if any.

(5) Includes 29,619 shares of Class B Common Stock held by Mr. Thompson and
115,381 shares of Class B Common Stock issuable under presently exercisable
stock options.

(6) Includes 4,350 shares issuable upon the exercise of stock options
exercisable within sixty days of April 30, 1998.

(7) Includes shares held by SBIC Partners and Exeter, and 961,956 shares
issuable under stock options exercisable within 60 days of April 30, 1998.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the offering, the Company will have outstanding 4,114,888
shares of Class A Common Stock and 5,364,385 shares of Class B Common Stock (or
and shares, respectively, if the Underwriters' over-allotment option
is exercised in full), assuming no exercise of outstanding options under the
Company's option plans or other stock option agreements.

The shares of Class B Common Stock sold in the offering will be freely
tradeable without restriction or limitation under the Securities Act, except for
any such shares held by "affiliates" of the Company, as such term is defined
under Rule 144 of the Securities Act, which shares will be subject to the resale
limitations under Rule 144. The remaining shares of Common Stock are "restricted
securities" within the meaning of Rule 144 and were issued and sold by the
Company in private transactions and may be publicly sold only if registered
under the Securities Act or sold in accordance with an applicable exemption from
registration, such as Rule 144.

In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted securities"
for at least one year, including an affiliate of the Company, would be entitled
to sell, within any three-month period, that number of shares that does not
exceed the greater of 1% of the then outstanding shares of Class B Common Stock
(approximately 53,643 shares) and the average weekly trading volume in the Class
B Common Stock during the four calendar weeks immediately preceding the date on
which the notice of sale is filed with the Commission, provided certain manner
of sale and notice requirements and requirements as to the availability of
current public information about the Company are satisfied. Under Rule 144(k), a
holder of "restricted securities" who is not deemed an affiliate of the issuer
and who has beneficially owned shares for at least two years would be entitled
to sell shares under 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. Substantially
all of the shares of Class A Common Stock are eligible for sale under Rule 144,
subject to lock-up arrangements with the Underwriters described below.

The Company, the Selling Stockholders, the Company's executive officers and
directors and certain other stockholders of the Company have agreed that, during
the period beginning from the date of this

54
<PAGE>
Prospectus and continuing to and including the date 180 days after the date of
this Prospectus, they will not offer, sell, contract to sell or otherwise
dispose of any securities of the Company (other than pursuant to employee stock
option plans existing, or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of this Prospectus) that are
substantially similar to the shares of Class B Common Stock or which are
convertible or exchangeable into securities which are substantially similar to
the shares of Class B Common Stock, without the prior written consent of the
Representatives of the Underwriters, except for the shares of Class B Common
Stock offered hereby and certain gift transactions.

The Company intends to file a registration statement under the Securities
Act following the date of this Prospectus to register the future issuance of up
to approximately 1.7 million shares of Class B Common Stock under the option
plans and options issued to employees, directors or consultants outside of the
option plans. Shares issued pursuant to such options after the effective date of
such registration statement will be freely tradable in the open market, subject
to the lock-up agreements with the Representatives described above and, in the
case of sales by affiliates, to certain requirements of Rule 144.

The Company is unable to estimate the number of shares that may be sold in
the future by its existing stockholders or the effect, if any, that sales of
shares by such stockholders will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Class B Common
Stock, or the prospect of such sales, could adversely affect the market price of
the Class B Common Stock.

55
<PAGE>
DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

Upon consummation of this offering, the authorized capital stock of the
Company will consist of 6,000,000 shares of Class A Common Stock, par value $.01
per share, 54,000,000 shares of Class B Common Stock, par value $.01 per share,
and 5,000,000 shares of undesignated Preferred Stock, par value $.01 per share
(the "Preferred Stock"). Of the 54,000,000 shares of Class B Common Stock
authorized, 6,000,000 shares have been reserved for issuance upon conversion of
outstanding Class A Common Stock.

The following summary description of the capital stock of the Company does
not purport to be complete and is qualified in its entirety by reference to
Delaware Law and to the Company's Second Amended and Restated Certificate of
Incorporation to be filed prior to the consummation of the offering, the
Certificate of Designations of 12% Senior Redeemable Exchangeable Preferred
Stock (the "Senior Preferred Certificate of Designations"), and the Certificate
of Powers, Designations, Preferences and Relative, Participating, Optional and
Other Special Rights of Junior Exchangeable Preferred Stock and Qualifications,
Limitations and Restrictions Thereof (the "Junior Preferred Certificate of
Designations"), copies of which are filed as exhibits to the Registration
Statement of which this Prospectus is a part.

COMMON STOCK

Each share of Class A Common Stock is entitled to ten votes and each share
of Class B Common Stock is entitled to one vote on all matters submitted to a
vote of the stockholders of the Company. Generally, all matters to be voted upon
by stockholders must be approved by a majority of the votes cast or entitled to
be cast by all shares of Class A Common Stock and Class B Common Stock, voting
together as a single class. Class A Common Stock is convertible at any time into
Class B Common Stock on a one-for-one basis. Subject to preferences that may be
applicable to any then outstanding Preferred Stock, holders of Class A Common
Stock and Class B Common Stock are entitled to receive ratably such dividends,
if any, as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy". Dividends payable in shares of Common
Stock or in options or similar rights to acquire shares of Common Stock or in
securities convertible into or exchangeable for shares of Common Stock may be
paid only in shares of or in options or similar rights to the Company's Class B
Common Stock. In the event of a liquidation, dissolution or winding up of the
Company, holders of the Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference of any
then outstanding Preferred Stock or any class or series of stock ranking prior
to the Common Stock. There are no redemption or sinking fund provisions
applicable to the shares of Common Stock. All outstanding shares of Common Stock
are, and the Class B Common Stock to be outstanding upon completion of this
Offering will be, fully paid and nonassessable.

The Class A Common Stock is convertible at any time at the option of the
holder, on a one-for-one basis, into shares of Class B Common Stock.
Additionally, shares of Class A Common Stock will automatically convert into
Class B Common Stock, on a one-for-one basis, (a) upon the transfer of record or
beneficial ownership of such shares of Class A Common Stock to an entity or
person other than (i) Jeffrey B. O'Neill, SBIC Partners or Exeter (the "Original
Holders"), or (ii) an affiliate, beneficiary, family member or trust related to
the Original Holders, or (b) immediately following the date that the Original
Holders directly own an aggregate of less than 15% of the outstanding equity
interest of GSV.

56
<PAGE>
PREFERRED STOCK

SENIOR PREFERRED STOCK

Following the consummation of this offering, pursuant to discussions between
the Company and the holder of the Senior Preferred Stock, the Company intends to
use a portion of the proceeds generated from the offering to repurchase all
outstanding shares of the Senior Preferred Stock. See Note 8 of Notes to
Consolidated Financial Statements for a description of the Senior Preferred
Stock.

JUNIOR PREFERRED STOCK

The Company anticipates that prior to the offering, it will redeem all
outstanding shares of its Junior Preferred Stock or that all holders of Junior
Preferred Stock will convert their shares of such stock into shares of the
Company's Class B Common Stock. See Note 8 of Notes to Consolidated Financial
Statements for a description of the Junior Preferred Stock.

UNDESIGNATED PREFERRED STOCK

The Company's Second Amended and Restated Certificate of Incorporation
authorizes 5,000,000 shares of undesignated Preferred Stock. The Board of
Directors will have the authority, without further action by the stockholders,
to issue from time to time the Preferred Stock in one or more series and to fix
the number of shares, designations, preferences, powers, and relative
participating, optional or other special rights and the qualifications or
restrictions thereof. The preferences, powers, rights and restrictions of
different series of Preferred Stock may differ with respect to dividend rates,
amounts payable on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions and other matters. The issuance of Preferred
Stock could decrease the amount of earnings and assets available for
distribution to holders of Common Stock or affect adversely the rights and
powers, including voting rights, of the holders of Common Stock, 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 shares of Preferred Stock.

STOCKHOLDERS AGREEMENT

Pursuant to the terms of the Stockholders Agreement by and among the Company
and several stockholders (each, a "Stockholder"), SBIC Partners is entitled to
nominate three members of the Company's Board of Directors, and each of (i) Mr.
O'Neill and (ii) Exeter is entitled to nominate one member of the Company's
Board of Directors. Under certain circumstances more fully described in the
Senior Preferred Certificate of Designations, John Hancock is entitled to
nominate up to three members of the Company's Board of Directors, in which case
the size of the Board of Directors will be increased to provide for such
additional members. All committees of the Board of Directors and each board of
directors of each of the Company's subsidiaries must contain at least a majority
of members designated by SBIC Partners. The prior written consent of SBIC
Partners, which consent shall be subject to the sole discretion of SBIC
Partners, is required with respect to the following actions by the Company or
any of its subsidiaries:(i) any merger, consolidation, sale of assets or stock,
dissolution or liquidation; (ii) any amendment to the Certificate of
Incorporation or Bylaws; (iii) the acquisition or investment in any business
entity; (iv) any material change in the business presently conducted by the
Company or any subsidiary; (v) any loan, guaranty or material increase in
indebtedness; and (vi) certain transactions with Affiliates (as defined in the
Stockholders Agreement). The rights of each of SBIC Partners, Mr. O'Neill,
Exeter and John Hancock with respect to elections to the Board of Directors and
SBIC Partners' approval rights with respect to certain transactions terminate
with respect to a Stockholder once such Stockholder and its permitted
transferees hold in the aggregate less than 10% of the shares of Common Stock or
Junior Preferred Stock, as the case may be, initially held by such Stockholder
on October 10, 1996.

57
<PAGE>
Subject to certain exceptions, if the Company authorizes the issuance or
sale of any equity securities of the Company or any securities containing
options or rights to acquire any equity securities of the Company, the Company
must first offer to sell to each Stockholder, at the same price and on the same
terms, a certain amount of such securities, options or rights corresponding to
each Stockholder's ownership of Class A Common Stock and Junior Preferred Stock.
The Stockholders Agreement also contains certain restrictions on the
Stockholders' ability to transfer their shares of Common Stock and Junior
Preferred Stock, as well as a provision pursuant to which SBIC Partners may
require the Stockholders and their Affiliates to sell all of the shares of
Common Stock and/or Junior Preferred Stock owned by them to any person or entity
to whom SBIC Partners proposes to transfer all of the Common Stock held by it.

The Stockholders Agreement provides that at the request of SBIC Partners,
the Company will solicit interests in and initiate discussions with potential
purchasers of the assets or capital stock of the Company and/or Golden State
Vintners or reorganize, recapitalize or refinance the senior or subordinated
debt or the equity of the Company in a manner reasonably acceptable to SBIC
Partners. In connection with such an event, the Stockholders agree to take all
necessary actions requested by SBIC Partners subject to certain conditions.

The Stockholders Agreement terminates upon the consummation of an initial
public offering of at least 20% of the Company's Common Stock that results in
gross proceeds to the Company of at least $35 million.

REGISTRATION RIGHTS

In connection with the Company's incorporation in April 1995, the holders of
2,784,844 shares of Class A Common Stock and the holder of 1,200,829 shares of
Class B Common Stock received certain rights with respect to the registration
under the Securities Act of shares of GSV's capital stock (the "April
Registrable Securities"). If the Company proposes to register any of its
securities under the Securities Act, holders of April Registrable Securities are
entitled to notice of such registration and are entitled to include, at the
Company's expense, such shares therein, provided among other conditions, that
any underwriters involved in the registration have the right to limit the number
of April Registrable Securities included in such registration. In addition,
commencing April 27, 2000, subject to certain conditions and limitations, the
holders of at least 15% of the April Registrable Securities have the right on
six occasions to require the Company to file a registration statement under the
Securities Act to register all or part of their April Registrable Securities.

Pursuant to a Registration Rights Agreement dated October 10, 1996, the
holders of approximately 2,776,170 shares of Class A Common Stock and 99,862
shares of Class B Common Stock are entitled to certain rights with respect to
the registration under the Securities Act of shares of GSV's capital stock (the
"October Registrable Securities"). If the Company proposes to register any
October Registrable Securities (or securities convertible into or exchangeable
or exercisable for shares of such series and class) under the Securities Act,
either for its own account or for the account of other security holders, holders
of the October Registrable Securities are entitled to notice of such
registration and are entitled to include, at the Company's expense, such shares
therein. Such "piggyback rights" take priority over any similar rights held by
any other stockholder of the Company, including those stockholders holding April
Registrable Securities, provided among other conditions, that the underwriters
have the right to limit the number of October Registrable Securities included in
such registration to 25% of the aggregate number of shares registered thereby.
Additionally, commencing 180 days after the closing of this Offering, and
subject to certain conditions and limitations, holders of the October
Registrable Securities have the right to require on two occasions the Company to
file a registration statement under the Securities Act to register at least 15%
of the October Registrable Securities. Further, the holders of October
Registrable Securities may require the Company to register all or any portion of
such shares on Form S-3, when such form becomes available to the Company,
subject to certain conditions and limitations. SBIC Partners

58
<PAGE>
may, at any time, require the Company to engage a reputable,
nationally-recognized underwriter reasonably acceptable to the Board of
Directors to register shares of the Company's Common Stock under the Securities
Act and to include in such registration that number of shares of Common Stock
that equal up to 20% of the aggregate number of shares of the capital stock of
the Company held by SBIC Partners and its affiliates.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

The Company is subject to the provisions of Section 203 of the Delaware Law,
an anti-takeover law. In general, the statue 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 the business
combination is approved by the Board of Directors and the holders of at least
66 2/3% of the outstanding voting stock of the corporation (excluding shares
held by the interested stockholder). A "business combination" includes a merger,
asset sale or other transaction resulting in financial benefit to the
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within the three prior years, did own) 15%
or more of the corporation's voting stock. This statutory prohibition does not
apply if, upon consummation of the transaction in which any person becomes an
interested stockholder, the interested stockholder owns at least 85% of the
outstanding voting stock of the corporation (excluding shares held by persons
who are both directors and officers or by certain stock option plans).

TRANSFER AGENT AND REGISTRAR

The Company is in the process of engaging U.S. Stock Transfer Corporation as
the transfer agent and registrar for the Class B Common Stock.

LISTING

Application has been made for the quotation of the Class B Common Stock on
the Nasdaq National Market under the symbol "VINT". The Company has not applied
to list its shares of Class B Common Stock on any other exchange or quotation
system.

LEGAL MATTERS

Certain legal matters with respect to the Class B Common Stock offered
hereby will be passed upon for the Company by Riordan & McKinzie, a Professional
Corporation, Los Angeles, California. Certain principals of Riordan & McKinzie
own an aggregate of 59,917 shares of Class B Common Stock. The validity of the
Class B Common Stock offered hereby will be passed upon for the Underwriters by
Sullivan & Cromwell, Los Angeles, California.

EXPERTS

The financial statements of Golden State Vintners, Inc. as of June 30, 1996
and 1997 and for the period April 27, 1995 to June 30, 1995 and for the years
ended June 30, 1996 and 1997 and the financial statements of Golden State
Vintners ("Predecessor") for the period July 1, 1994 to April 26, 1995 included
in this prospectus and the related financial statement schedule included
elsewhere in the registration statement have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports appearing herein and
elsewhere in the registration statement, and have been so included in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.

The statements in this Prospectus on page three in the second sentence of
the fourth paragraph, on page four in the third and fourth sentences of the
first paragraph, on page thirty-one in the third and fourth sentences of the
fifth paragraph, on page thirty-four in the first and second sentences of the
first paragraph, the second and third sentences of the second paragraph and the
second sentence of the

59
<PAGE>
third paragraph, on page thirty-eight in the fourth sentence of the second
paragraph, and on page forty-two in the second sentence of the fourth paragraph
and the fourth sentence of the fifth paragraph have been reviewed and approved
by Gomberg, Fredrikson & Associates, a wine industry consulting firm.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement under the
Securities Act with respect to the Class B Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Class B Common Stock offered hereby, reference is
hereby made to such Registration Statement, exhibits and schedules. Statements
contained in this Prospectus regarding the contents of any contract or other
document are not necessarily complete; with respect to each such contract or
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference. A
copy of the Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549; the New York
Regional Office located at 7 World Trade Center, 13th Floor, New York, New York
10048; and the Chicago Regional Office located at Citicorp Center, Chicago,
Illinois 60661. 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, upon payment of the fees prescribed by the Commission. In addition, the
Commission maintains a World Wide Web site on the Internet at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.

The Company intends to furnish to its stockholders annual reports containing
audited financial statements and quarterly reports containing unaudited interim
financial information for the first three fiscal quarters of each fiscal year of
the Company.

60
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditor's Report.......................................................... F-2

Consolidated Balance Sheets as of June 30, 1996 and 1997 and December 31, 1997
(Unaudited)......................................................................... F-3

Consolidated Statements of Operations for the Period July 1, 1994 to April 26, 1995
(Predecessor), for the Period April 27, 1995 to June 30, 1995 (Successor), for the
Years Ended June 30, 1996 and 1997, and for the Six Months Ended December 31, 1996
and 1997 (Unaudited)................................................................ F-4

Consolidated Statements of Stockholders' Equity for the Period July 1, 1994 to April
26, 1995 (Predecessor), for the Period April 27, 1995 to June 30, 1995 (Successor),
for the Years Ended June 30, 1996 and 1997, and for the Six Months Ended December
31, 1997 (Unaudited)................................................................ F-5

Consolidated Statements of Cash Flows for the Period July 1, 1994 to April 26, 1995
(Predecessor), for the Period April 27, 1995 to June 30, 1995 (Successor), for the
Years Ended June 30, 1996 and 1997, and for the Six Months Ended December 31, 1996
and 1997 (Unaudited)................................................................ F-6

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

F-1
<PAGE>
The accompanying consolidated financial statements have been adjusted to give
retroactive effect to the split of the Company's common stock which will result
in each share of common stock being split into 2.9 shares of common stock as
described in Note 15 to the consolidated financial statements. The May 1998
stock split is expected to be completed prior to the commencement of the public
offering. The following report is in the form that will be furnished by Deloitte
& Touche LLP upon the effectiveness of the May 1998 stock split assuming that
from September 15, 1997 to the effective date of such stock split, no other
events shall have occurred that would materially affect the accompanying
consolidated financial statements or notes thereto.

"INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors
of Golden State Vintners, Inc.

We have audited the accompanying consolidated balance sheets of Golden State
Vintners, Inc. and subsidiaries (the "Company") as of June 30, 1996 and 1997,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the period from April 27, 1995 to June 30, 1995 and for the years
ended June 30, 1996 and 1997. We also audited the consolidated statements of
operations, stockholders' equity and cash flows of Golden State Vintners
("Predecessor") for the period from July 1, 1994 to April 26, 1995. These
financial statements are the responsibility of the Predecessor's and 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 consolidated financial statements present fairly, in
all material respects, the financial position of the Company at June 30, 1996
and 1997, and the results of its operations and its cash flows for the period
from April 27, 1995 to June 30, 1995 and for the years ended June 30, 1996 and
1997 in conformity with generally accepted accounting principles. Further, in
our opinion, the Golden State Vintners financial statements present fairly, in
all material respects, the results of its operations and its cash flows for the
period from July 1, 1994 to April 26, 1995 in conformity with generally accepted
accounting principles.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for certain inventories in 1996 and in 1997.

Fresno, California
September 15, 1997
(November 21, 1997 as to Note 6 and
May , 1998 as to Note 15)"

DELOITTE & TOUCHE LLP

Fresno, California
April 29, 1998

F-2
<PAGE>
GOLDEN STATE VINTNERS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30,
-----------------------------
1996 1997
------------- -------------- DECEMBER 31,
--------------
1997
--------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents.......................................... $ 1,212,161 $ 1,218,525 $ 850,865
Trade receivables............................................. 7,486,944 5,640,252 28,928,395
Inventories................................................... 18,318,978 23,424,008 31,832,146
Deferred income taxes......................................... 151,744 219,154 3,991,157
Refundable deposits and prepaid expenses...................... 1,380,410 869,996 142,201
------------- -------------- --------------
Total current assets........................................ 28,550,237 31,371,935 65,744,764
PROPERTY, PLANT AND EQUIPMENT -- Net.............................. 61,280,738 70,193,214 72,052,842
DEFERRED FINANCING COSTS.......................................... 603,758 546,186 475,126
------------- -------------- --------------
TOTAL ASSETS...................................................... $ 90,434,733 $ 102,111,335 $ 138,272,732
------------- -------------- --------------
------------- -------------- --------------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank line of credit............................................. $ 9,000,000 $ 12,800,000 $ 18,600,000
Cash overdraft.................................................. -- -- 1,129,268
Accounts payable................................................ 5,566,840 2,526,870 2,745,512
Payable to growers.............................................. 936,107 1,063,049 12,165,765
Payroll and related liabilities................................. 758,280 1,391,004 3,072,874
Deferred compensation........................................... -- -- 8,289,110
Other accrued liabilities....................................... 284,638 282,869 2,420,833
Income taxes payable............................................ -- 547,612 1,430,974
Current portion of long-term debt............................... 2,036,976 2,773,984 2,824,015
Accrued interest................................................ 632,648 600,486 698,653
------------- -------------- --------------
Total current liabilities..................................... 19,215,489 21,985,874 53,377,004
LONG-TERM DEBT.................................................... 42,973,404 49,780,591 49,890,011
DEFERRED INCOME TAXES............................................. 6,891,009 6,968,737 9,290,379
DEFERRED COMPENSATION............................................. 650,606 1,989,112 --
REDEEMABLE PREFERRED STOCK........................................ 10,033,987 8,813,415 8,879,928
COMMITMENTS AND CONTINGENCIES (Notes 11 and 12)...................
STOCKHOLDERS' EQUITY:.............................................
Common stock:
Class A common stock; 1,885,000 shares issued and outstanding
at June 30, 1996............................................ 6,500 -- --
Class B common stock; 5,770,000 shares issued and outstanding
at June 30, 1996 and 5,561,014 at June 30, 1997 and December
31, 1997.................................................... 13,000 19,176 19,176
Class E common stock; 1,200,829 shares issued and
outstanding................................................. 4,141 4,141 4,141
Class K common stock; 99,862 shares issued and outstanding at
June 30, 1997 and December 31, 1997......................... -- 344 344
Additional paid-in capital...................................... 11,796,754 8,844,136 8,844,136
Retained earnings (deficit)..................................... (1,150,157) 3,705,809 7,967,613
------------- -------------- --------------
Total stockholders' equity.................................. 10,670,238 12,573,606 16,835,410
------------- -------------- --------------
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS'
EQUITY.......................................................... $ 90,434,733 $ 102,111,335 $ 138,272,732
------------- -------------- --------------
------------- -------------- --------------
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>
GOLDEN STATE VINTNERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SUCCESSOR
---------------------------------------------------------------------------------
PREDECESSOR SIX MONTHS ENDED DECEMBER 31,
-------------- YEAR ENDED JUNE 30,
JULY 1,1994 TO APRIL 27, 1995 TO ------------------------------ ------------------------------
APRIL 26, 1995 JUNE 30, 1995 1996 1997 1996 1997
-------------- ----------------- -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUES, net:
Bulk wine.................. $ 23,741,308 $ 2,340,399 $ 33,816,249 $ 50,227,982 $ 38,389,889 $ 46,404,120
Wine grapes................ 12,874,703 -- 15,183,028 18,585,126 18,604,830 22,820,380
Case goods................. 4,591,784 1,696,304 11,335,407 15,829,183 7,830,499 10,641,686
Brandy and spirits......... 1,642,710 334 11,420,661 11,142,534 11,248,159 9,664,295
-------------- ----------------- -------------- -------------- -------------- --------------
Total revenues........... 42,850,505 4,037,037 71,755,345 95,784,825 76,073,377 89,530,481
COST OF SALES................ 34,771,874 3,948,872 58,468,362 71,661,816 57,285,049 66,033,690
-------------- ----------------- -------------- -------------- -------------- --------------
GROSS PROFIT................. 8,078,631 88,165 13,286,983 24,123,009 18,788,328 23,496,791
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES.... 3,363,255 950,808 5,042,425 7,408,179 3,781,668 11,549,780
-------------- ----------------- -------------- -------------- -------------- --------------
INCOME (LOSS) FROM
OPERATIONS................. 4,715,376 (862,643) 8,244,558 16,714,830 15,006,660 11,947,011
INTEREST EXPENSE............. (2,796,664) (919,590) (5,343,637) (5,879,945) (2,970,597) (3,445,711)
OTHER EXPENSE, net........... (45,020) (1,512) (394,370) (676,701) (386,297) (480,875)
-------------- ----------------- -------------- -------------- -------------- --------------
INCOME (LOSS) BEFORE INCOME
TAXES...................... 1,873,692 (1,783,745) 2,506,551 10,158,184 11,649,766 8,020,425
INCOME TAXES................. -- -- 583,000 3,988,000 4,578,358 3,123,000
-------------- ----------------- -------------- -------------- -------------- --------------
NET INCOME (LOSS)............ $ 1,873,692 $ (1,783,745) $ 1,923,551 $ 6,170,184 $ 7,071,408 $ 4,897,425
-------------- ----------------- -------------- -------------- -------------- --------------
-------------- ----------------- -------------- -------------- -------------- --------------
EARNINGS (LOSS) PER SHARE:
BASIC $ (.26) $ .09 $ .71 $ .93 $ .62
----------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- --------------
DILUTED $ (.26) $ .09 $ .71 $ .91 $ .59
----------------- -------------- -------------- -------------- --------------
----------------- -------------- -------------- -------------- --------------
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>
GOLDEN STATE VINTNERS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------------------------- -------------------------------------------------
SERIES A SERIES B SERIES C CLASS A CLASS B CLASS E CLASS K
--------- ----------- --------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR:
BALANCE, JULY 1, 1994.............. $ 122,951 $ 77,049 $ -- $ -- $ -- $ -- $8,882,572
Conversion of warrants to
preferred stock................ -- -- $ 363,258 -- -- -- --
Capital stock redemptions........ -- -- (80,097) -- -- -- (11,404)
Net income....................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- ----------- ----------- ----------
BALANCE, APRIL 26, 1995............ $ 122,951 $ 77,049 $ 283,161 $ -- $ -- $ -- $8,871,168
--------- ----------- --------- ----------- ----------- ----------- ----------
--------- ----------- --------- ----------- ----------- ----------- ----------
- -------------------------------------------------------------------------------------------------------------------------
SUCCESSOR:
BALANCE, APRIL 27, 1995............ $ -- $ -- $ -- $ 6,500 $ 13,000 $ 4,141 $ --
Net loss......................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- ----------- ----------- ----------
BALANCE, JUNE 30, 1995............. -- -- -- 6,500 13,000 4,141 --
Dividends paid................... -- -- -- -- -- -- --
Net income....................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- ----------- ----------- ----------
BALANCE, JUNE 30, 1996............. -- -- -- 6,500 13,000 4,141 --
Repurchase of common stock....... -- -- -- (6,500) (3,397) -- --
Issuance of common stock......... -- -- -- -- 9,573 -- 344
Redemption of Junior Preferred
Stock.......................... -- -- -- -- -- -- --
Dividends paid................... -- -- -- -- -- -- --
Net income....................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- ----------- ----------- ----------
BALANCE, JUNE 30, 1997............. -- -- -- -- 19,176 4,141 344
Dividends paid (unaudited)....... -- -- -- -- -- -- --
Net income (unaudited)........... -- -- -- -- -- -- --
--------- ----------- --------- ----------- ----------- ----------- ----------
BALANCE, DECEMBER 31, 1997
(UNAUDITED)....................... $ -- $ -- $ -- $ -- $ 19,176 $ 4,141 $ 344
--------- ----------- --------- ----------- ----------- ----------- ----------
--------- ----------- --------- ----------- ----------- ----------- ----------

<CAPTION>
ADDITIONAL RETAINED
PAID-IN EARNINGS
CAPITAL (DEFICIT) TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
PREDECESSOR:
BALANCE, JULY 1, 1994.............. $ -- $ 4,706,406 $13,788,978
Conversion of warrants to
preferred stock................ -- (363,258) --
Capital stock redemptions........ -- -- (91,501)
Net income....................... -- 1,873,692 1,873,692
----------- ----------- -----------
BALANCE, APRIL 26, 1995............ $ -- $ 6,216,840 $15,571,169
----------- ----------- -----------
----------- ----------- -----------
- -----------------------------------
SUCCESSOR:
BALANCE, APRIL 27, 1995............ $11,796,754 $ -- $11,820,395
Net loss......................... -- (1,783,745) (1,783,745)
----------- ----------- -----------
BALANCE, JUNE 30, 1995............. 11,796,754 (1,783,745) 10,036,650
Dividends paid................... -- (1,289,963) (1,289,963)
Net income....................... -- 1,923,551 1,923,551
----------- ----------- -----------
BALANCE, JUNE 30, 1996............. 11,796,754 (1,150,157) 10,670,238
Repurchase of common stock....... (9,738,013) -- (9,747,910)
Issuance of common stock......... 7,190,077 -- 7,199,994
Redemption of Junior Preferred
Stock.......................... (404,682) -- (404,682)
Dividends paid................... -- (1,314,218) (1,314,218)
Net income....................... -- 6,170,184 6,170,184
----------- ----------- -----------
BALANCE, JUNE 30, 1997............. 8,844,136 3,705,809 12,573,606
Dividends paid (unaudited)....... -- (635,621) (635,621)
Net income (unaudited)........... -- 4,897,425 4,897,425
----------- ----------- -----------
BALANCE, DECEMBER 31, 1997
(UNAUDITED)....................... $ 8,844,136 $ 7,967,613 $16,835,410
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>
GOLDEN STATE VINTNERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
(SUCCESSOR)
(PREDECESSOR) --------------------------------------------------------------------
-------------- SIX MONTHS ENDED
JULY 1, 1994 APRIL 27, YEAR ENDED JUNE 30, DECEMBER 31,
TO APRIL 26, 1995 TO JUNE -------------------------- --------------------------
1995 30, 1995 1996 1997 1996 1997
-------------- ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................. $ 1,873,692 $ (1,783,745) $ 1,923,551 $ 6,170,184 $ 7,071,408 $ 4,897,425
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 1,926,064 754,557 3,319,119 4,206,932 3,488,690 3,559,572
Loss on disposal of assets...... -- -- 583,885 25,629 2,237 --
Accrual for deferred
compensation.................. -- -- 650,606 1,338,506 593,172 6,299,998
Deferred income taxes........... -- -- 172,476 10,319 -- (1,450,361)
Changes in assets and
liabilities, net of effects of
acquisition of GSV:
Trade receivables............. (3,058,165) 3,421,309 (4,405,082) 1,846,692 (12,523,795) (23,288,143)
Inventories................... 2,402,322 (1,738,448) (3,892,132) (5,198,884) (6,619,376) (9,675,618)
Prepaid expenses.............. (114,304) 107,336 (150,065) (216,586) (97,905) 6,241
Cash overdraft................ 18,403 392,154 (410,557) -- -- 1,129,268
Accounts payable.............. (540,652) (987,514) 2,868,362 (3,039,970) (1,649,406) 218,642
Payable to growers............ (324,446) -- 693,674 126,942 8,559,047 11,102,717
Accrued interest.............. (53,806) 510,771 204,232 (32,162) 344,614 98,167
Payroll and related
liabilities................. (41,792) (30,546) 519,755 632,724 421,614 1,681,870
Other accrued liabilities..... 106,926 (79,494) 185,632 (1,769) (20,165) 2,137,964
Income taxes payable.......... -- -- -- 547,612 3,038,359 883,362
-------------- ------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
operating activities........ 2,194,242 566,380 2,263,456 6,416,169 2,608,494 (2,398,896)
-------------- ------------ ------------ ------------ ------------ ------------
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment....................... (3,221,612) (8,967,237) (3,535,887) (4,777,797) (2,117,991) (2,247,571)
Acquisition of GSV................ -- (20,852,119) -- -- -- --
Refund (payment) of deposits...... -- (210,000) (117,000) 727,000 -- 142,000
-------------- ------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities.................... (3,221,612) (30,029,356) (3,652,887) (4,050,797) (2,117,991) (2,105,571)
-------------- ------------ ------------ ------------ ------------ ------------
FINANCING ACTIVITIES:
Borrowings on line of credit...... 21,404,853 700,000 25,102,910 24,708,097 16,613,097 35,900,000
Payments on line of credit........ (20,054,853) (950,000) (19,602,910) (20,908,097) (9,250,000) (30,100,000)
Borrowings on long-term debt...... 345,147 40,975,000 -- 2,568,922 1,508,913 --
Payments on long-term debt........ (526,909) (30,078,898) (1,765,407) (3,022,213) (2,012,363) (1,017,572)
Payment of financing costs........ (869,637) (735,880) (40,284) (114,208) (106,572) (10,000)
Payment of dividends.............. -- -- (1,289,963) (1,314,218) (678,597) (635,621)
Issuance of capital stock......... -- 19,750,000 -- 7,199,994 7,199,994 --
Repurchase of common stock........ (11,404) -- -- (9,747,910) (9,744,595) --
Redemption of preferred stock..... (80,097) -- -- (1,729,375) (1,729,375) --
-------------- ------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities.......... 207,100 29,660,222 2,404,346 (2,359,008) 1,800,502 4,136,807
-------------- ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................... (820,270) 197,246 1,014,915 6,364 2,291,005 (367,660)
CASH AND EQUIVALENTS, BEGINNING OF
PERIOD............................ 820,270 -- 197,246 1,212,161 1,212,161 1,218,525
-------------- ------------ ------------ ------------ ------------ ------------
CASH AND EQUIVALENTS, END OF
PERIOD............................ $ -- $ 197,246 $ 1,212,161 $ 1,218,525 $ 3,503,166 $ 850,865
-------------- ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTHS

ENDED DECEMBER 31, 1996 AND 1997 IS UNAUDITED)

1. ORGANIZATION AND OPERATIONS

Golden State Vintners, Inc. (the "Company"), formerly Golden State
Acquisition Corp., a Delaware corporation, was formed on April 26, 1995 for the
purpose of acquiring and holding for investment all of the outstanding capital
stock of Golden State Vintners ("GSV"), a California corporation. Such
acquisition occurred on April 27, 1995 (see Note 3). The Company constitutes the
successor company (Successor). The historical results of operations for the
period July 1, 1994 to April 26, 1995 are the results of GSV (Predecessor).

The Company processes and bottles wine, brandy and juice for sale, primarily
in bulk, to other wineries and processors located principally in California. The
Company experiences seasonal fluctuations in its revenues. Due to the inherent
seasonality of its grape harvesting and crushing operations, the Company
generally reports its highest revenues and net income in its first and second
fiscal quarters.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the Company, its wholly owned
subsidiary, GSV, and an 80% owned partnership, GSV International Trading
Company. All significant intercompany transactions and accounts have been
eliminated.

INTERIM FINANCIAL INFORMATION

The financial information as of December 31, 1997 and for the six months
ended December 31, 1996 and 1997 is unaudited but includes all adjustments
(consisting only of normal recurring accruals) that the Company considers
necessary for a fair presentation of the financial position at such date and the
operating results and cash flows for those periods. Operating results for the
six months ended December 31, 1997 are not necessarily indicative of the results
that may be expected for the entire year.

ACCOUNTING 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
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of certain financial instruments, including cash,
receivables, accounts payable, and other accrued liabilities, approximate the
amounts recorded in the balance sheet because of the relatively short-term
maturities of these financial instruments. The fair value of bank, insurance
company and other long-term financing at June 30, 1997 approximate the amounts
recorded in the balance sheet based on information available to the Company with
respect to current interest rates and terms for similar debt instruments. It is
not practicable to estimate the fair value of the redeemable preferred stock
because it is not traded in the open market and hence its value is not readily
determinable.

F-7
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTHS

ENDED DECEMBER 31, 1996 AND 1997 IS UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS

For purposes of reporting cash flows, the Company considers cash equivalents
to include all short-term investments with an original maturity of three months
or less.

RECEIVABLES

Substantially all accounts receivable are due from major wineries and wine
distributors located principally in California. The Company performs periodic
credit evaluations of its customers' financial condition and generally does not
require collateral. Trade and other receivables at June 30, 1996 and 1997 and
December 31, 1997 are net of an allowance for doubtful accounts of $180,000,
$100,000 and $151,000, respectively.

INVENTORIES

The Company changed its method of costing wine inventories effective July 1,
1995 from the first-in, first-out ("FIFO") method, to the last-in, first-out
("LIFO") method. The Company also changed to the LIFO method for brandy
inventory effective July 1, 1996. Management believes that the LIFO method
matches current costs with current revenues and more clearly reflects the
Company's results of operations. Inventories at June 30, 1996 and 1997 and
December 31, 1997 would have been higher by $135,525, $1,694,299 (including
$519,997 for brandy inventories) and $2,002,320 (including $747,115 for brandy
inventories), respectively, had the Company used FIFO cost rather than LIFO cost
for valuation of its inventories. The cumulative effect of these changes to the
LIFO method on the operating results as of the beginning of 1996 and 1997 and
the pro forma effects on the operating results of prior years have not been
presented as the effects are not readily determinable. Juice is stated at the
lower of average cost or net realizable value. Inventories of supplies are
stated at the lower of FIFO cost or market. Costs associated with the current
year's unharvested grape crop are deferred and recognized in the subsequent year
when the grapes are harvested. Wine inventories are classified as current assets
in accordance with recognized trade practice although some products will not be
sold in the following year.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation and
amortization are computed using the straight-line method over the estimated
lives of the related assets, as follows:

<TABLE>
<S> <C>
Land Improvements................................... 30 years
Vineyards........................................... 20 years
Buildings........................................... 7 to 48 years
Cooperage........................................... 10 to 30 years
Equipment........................................... 7 to 20 years
</TABLE>

Costs incurred in developing vineyards are capitalized until the vineyards
become commercially productive. Maintenance and repairs are charged to operating
costs as incurred. The cost of betterments is capitalized. Gains or losses on
the disposition of assets are included in income. Amortization of assets held
under capital leases is included in depreciation expense.

F-8
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTHS

ENDED DECEMBER 31, 1996 AND 1997 IS UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In the year ended June 30, 1997, the Company adopted Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." The standard requires impairment losses to
be recorded on long-lived assets and certain intangible assets when the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. Adoption of this standard had no impact on the
Company's financial statements.

DEFERRED FINANCING COSTS

Financing costs incurred to obtain new financing are deferred and amortized
over the term of the related loan. At June 30, 1996 and 1997 and December 31,
1997, such costs were $603,758, $546,186 and $475,126, respectively, which were
net of accumulated amortization of $171,704, $316,138 and $403,499,
respectively.

REVENUE RECOGNITION

Sales of bulk wine and juice are recognized at the time the wine or juice
specifications of the purchase contract are met and the product has been
accepted by the buyer. In certain cases the contract requirements may specify
that the Company store such wine or juice after it has been sold and may require
the buyer to pay a storage fee. Sales of wine grapes and cased goods are
recognized at the time of delivery to the customer. Wine processing and storage
fees are recognized as those services are provided.

MAJOR CUSTOMERS

Wine grape sales are primarily to one customer that accounted for
approximately 24% of revenues in the period July 1, 1994 to April 26, 1995
(Predecessor), approximately 15% and 17% of revenues in the years ended June 30,
1996 and 1997, respectively, and approximately 21% of revenues in each of the
six months ended December 31, 1996 and 1997, respectively. A significant portion
of the Company's wine grape sales contracts with this customer expires in 1998
such that revenues from sales of wine grapes to such customer after 1998 will
not be significant. The Company plans to use the remaining wine grape tonnage
for the production of bulk wine or cased goods.

The Company's brandy sales are primarily to one customer. Such sales,
together with bulk wine and case goods sales to such customer, accounted for
approximately 19% and 16% of revenues in the years ended June 30, 1996 and 1997,
respectively, and approximately 16% of revenues in each of the six months ended
December 31, 1996 and 1997, respectively.

INCOME TAXES

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes ("FAS 109"),
and provides deferred income taxes for the differences between the tax bases of
assets and liabilities and their related financial statement amounts using
current income tax rates.

F-9
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTHS

ENDED DECEMBER 31, 1996 AND 1997 IS UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION

The Company accounts for stock-based awards using the intrinsic value method
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"), and recognizes compensation expense for certain
stock-based awards granted to employees as required by APB 25. Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), became effective in fiscal year 1997 and requires
disclosure of certain pro forma information as if the Company adopted the fair
value method of accounting for stock-based compensation prescribed by FAS 123
(see Note 9).

EARNINGS (LOSS) PER SHARE

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS 128").
This Statement simplifies the standards for computing earnings per share ("EPS")
and makes them comparable to international EPS standards. FAS 128 replaces the
presentation of primary EPS with a presentation of basic EPS. In addition,
entities with complex capital structures are required to provide disclosure of
diluted EPS. Basic earnings (loss) per share is computed by dividing income
(loss) available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted earnings (loss) per share is
computed by dividing income (loss) available to common stockholders adjusted for
the effects of preferred stock dividends, interest on convertible debt, and
other changes in income or loss resulting from the presumed conversion of
potential common shares, if any, by the weighted average common shares
outstanding during the period plus potential common shares outstanding. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
Company.

F-10
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTHS

ENDED DECEMBER 31, 1996 AND 1997 IS UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic and fully diluted earnings per share ("EPS") are determined as
follows:

<TABLE>
<CAPTION>
SUCCESSOR
--------------------------------------------------------------
APRIL 27, SIX MONTHS ENDED
1995 TO YEAR ENDED JUNE 30, DECEMBER 31,
JUNE 30, ------------------------ ----------------------
1995 1996 1997 1996 1997
------------ ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BASIC EPS COMPUTATION
Numerator:
Net income (loss)............................ $(1,783,745) $ 1,923,551 $ 6,170,184 $7,071,408 $4,897,425
Less Redeemable preferred stock dividends.... -- (1,289,962) (1,314,218) (678,597) (635,621)
------------ ----------- ----------- ---------- ----------
Income (loss) available to common
stockholders............................... $(1,783,745) $ 633,589 $ 4,855,966 $6,392,811 $4,261,804
------------ ----------- ----------- ---------- ----------
------------ ----------- ----------- ---------- ----------
Denominator:
Weighted average common shares............... 6,855,829 6,855,829 6,860,237 6,858,767 6,861,705
------------ ----------- ----------- ---------- ----------
------------ ----------- ----------- ---------- ----------
Basic EPS...................................... $ (.26) $ .09 $ .71 $ .93 $ .62
------------ ----------- ----------- ---------- ----------
------------ ----------- ----------- ---------- ----------
DILUTED EPS COMPUTATION
Numerator:
Income available to common stockholders...... $(1,783,745) $ 633,589 $ 4,855,966 $6,392,811 $4,261,804
Add: Junior Preferred Stock dividends........ -- -- -- 78,597 35,621
------------ ----------- ----------- ---------- ----------
Income available to common stockholders and
assumed conversions........................ $(1,783,745) $ 633,589 $ 4,855,966 $6,471,408 $4,297,425
------------ ----------- ----------- ---------- ----------
------------ ----------- ----------- ---------- ----------
Denominator:
Weighted average common shares outstanding... 6,855,829 6,855,829 6,860,237 6,858,767 6,861,705
Junior Preferred Stock....................... -- -- -- 277,330 130,349
Stock options................................ -- -- -- -- 326,227
------------ ----------- ----------- ---------- ----------
Adjusted weighted average common shares...... 6,855,829 6,855,829 6,860,237 7,136,097 7,318,281
------------ ----------- ----------- ---------- ----------
------------ ----------- ----------- ---------- ----------
Diluted EPS.................................... $ (.26) $ .09 $ .71 $ .91 $ .59
------------ ----------- ----------- ---------- ----------
------------ ----------- ----------- ---------- ----------
</TABLE>

Options to purchase 800,934 shares of common stock at various prices per
share were outstanding at June 30, 1997, but were not included in diluted EPS
computations because the exercise prices were greater than the estimated fair
values of the common shares for the period then ended.

EPS for the period July 1, 1994 to April 26, 1995 (Predecessor) has not been
presented as it is not considered meaningful in light of the significant changes
in capital structure resulting from the Company's acquisition of GSV. All share
and per share amounts related to the EPS computations have been adjusted
retroactively to give the effect of the stock split described in Note 15.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board (the "Board') adopted
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," which requires that an enterprise report, by major components and as a
single total, the change in its net assets during the period from nonowner
sources. In June 1997, the Board also adopted Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise or Related
Information," which

F-11
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTHS

ENDED DECEMBER 31, 1996 AND 1997 IS UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
requires that a public business enterprise report financial and descriptive
information about its reportable operating segments. Adoption of these
statements will not impact the Company's consolidated financial position,
results of operations or cash flows; however, the Company is assessing the
impact of such statements on the disclosures made in the notes to its
consolidated financial statements. These statements are effective for the
Company's fiscal year beginning July 1, 1998.

3. ACQUISITION

On April 27, 1995, pursuant to a stock purchase agreement, the Company
purchased substantially all of the outstanding common and preferred stock of GSV
for cash consideration of $20,852,119. In addition, 523,980 shares of junior
exchangeable preferred stock (value of $2,024,502) were issued in connection
with this acquisition. The total value of the purchase transaction, including
transaction costs of $1,763,258, was $24,639,879.

The Company financed the purchase of GSV stock by issuing a combination of
debt and equity securities as follows:

- 100,000 shares of Senior Redeemable Exchangeable Preferred Stock (value,
$7,929,605)

- 1,200,829 shares of Class E common stock (value, $2,070,395)

- 1,885,000 shares of Class A common stock (value, $3,250,000)

- 3,770,000 shares of Class B common stock (value, $6,500,000)

- 523,980 shares of 6% Junior Exchangeable Preferred Stock (value,
$2,024,502)

- $35,000,000 Senior Secured First Mortgage Notes

- $8,000,000 revolving bank line of credit

Proceeds from the Senior Secured First Mortgage Notes and the revolving bank
line of credit were used to pay off existing GSV debt and certain transaction
costs.

The acquisition of GSV has been accounted for under the purchase accounting
method whereby the purchase price has been allocated to the assets acquired and
liabilities assumed based on their fair values at the date of acquisition. The
excess of estimated fair value of the net assets acquired over the purchase
price (approximately $11,517,000) was used to reduce the valuation assigned to
property, plant and equipment. Application of purchase accounting resulted in a
net increase in the recorded amount of net assets acquired of approximately
$7,826,000 at the acquisition date.

F-12
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTHS

ENDED DECEMBER 31, 1996 AND 1997 IS UNAUDITED)

4. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1997
-------------- -------------- DECEMBER 31,
1997
--------------
(UNAUDITED)
<S> <C> <C> <C>
Bulk wine................................... $ 7,069,599 $ 12,033,151 $ 24,422,711
Cased and bottled wine...................... 1,333,063 964,418 1,613,126
Brandy...................................... 1,324,502 1,198,129 1,203,549
Juice, supplies and other................... 1,336,385 2,849,394 2,715,170
Unharvested crop costs...................... 7,255,429 6,378,916 1,877,590
-------------- -------------- --------------
Total..................................... $ 18,318,978 $ 23,424,008 $ 31,832,146
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1997
-------------- -------------- DECEMBER 31,
1997
--------------
(UNAUDITED)
<S> <C> <C> <C>
Land and improvements....................... $ 10,467,504 $ 11,657,660 $ 12,380,753
Vineyards................................... 25,813,207 26,167,912 26,167,912
Buildings................................... 6,511,391 10,008,507 11,024,707
Cooperage................................... 11,227,413 14,188,452 14,853,039
Equipment................................... 9,674,693 11,840,733 14,514,271
Construction in progress.................... 1,306,011 3,778,531 2,655,821
-------------- -------------- --------------
Total..................................... 65,000,219 77,641,795 81,596,503
Less accumulated depreciation and
amortization.............................. 3,719,481 7,448,581 9,543,661
-------------- -------------- --------------
Property, plant and equipment--net.......... $ 61,280,738 $ 70,193,214 $ 72,052,842
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

In December 1996, the Company purchased a wine processing facility,
including land, buildings, improvements, equipment and related personal
property, located near Soledad, California, for total consideration of
approximately $4,500,000. The Company financed approximately $3,800,000 and
$500,000 in two new debt agreements with a bank and the previous owner,
respectively.

In May 1997, the Company purchased a wine warehouse located near the
Company's Napa processing facility. The purchase price approximated $2,200,000
which included land, building, improvements and personal property. In connection
with this acquisition, GSV assumed two existing notes of $1,994,000 and $62,000.

F-13
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTHS

ENDED DECEMBER 31, 1996 AND 1997 IS UNAUDITED)

6. BANK LINE OF CREDIT AND LONG-TERM DEBT

The Company has a revolving bank line of credit which provides for loans of
up to $22,500,000 with variable interest based on interest rate options elected
by the Company (8.85% and 7.46% at June 30, 1996 and 1997, respectively).
Borrowings on the line were $9,000,000, $12,800,000 and $18,600,000 (unaudited)
at June 30, 1996 and 1997 and December 31, 1997, respectively. Unused
availability under the line of credit was $9,700,000 at June 30, 1997. The
agreement expires in March 1998, at which time management anticipates a renewal
of the line under substantially similar terms (see Note 15).

Long-term debt as of June 30, 1996 and 1997 is as follows:

<TABLE>
<CAPTION>
1996 1997
-------------- --------------
<S> <C> <C>
Insurance company Senior Secured First Mortgage Notes, principal and interest
(9.69% through April 2000 and at 2.75% above the short-term U.S. Treasury Note
rate thereafter) payable $370,000 monthly, balance of $18,845,000 due April 1,
2005........................................................................... $ 34,192,371 $ 33,020,446
Bank term loan at variable market interest rate options elected by the Company
(7.84% at June 30, 1997), interest payable monthly, annual principal payments
of $325,000 in 1996 and 1997 and $413,000 thereafter, balance of $2,984,000 due
on March 5, 2005............................................................... 4,550,000 5,875,000
Bank term loan at variable interest rate options elected by the Company (7.84% at
June 30, 1997), interest payable monthly, annual principal payments of
$560,000, balance of $1,680,000 due on March 5, 2005........................... -- 5,600,000
Insurance company note payable, interest at 11.6% payable annually, annual
principal payments of $200,000, balance of $1,724,000 due on October 1, 2002... 2,724,156 2,724,156
Bank term loan, interest payable monthly at 8%, principal and interest payable
$19,790 monthly, balance of $1,926,000 due January 15, 2000.................... -- 1,992,521
Unsecured loan due to related party, non-interest bearing, discounted (at 10%) to
present value, payable based on excess cash flows (as defined)................. 847,929 828,750
Note payable, interest at 10%, payable semi-annually, principal due May 5,
2000........................................................................... 500,000 500,000
Note payable, interest at 8% payable annually, principal due December 20, 1998... -- 500,000
Bank term loan, paid in 1997..................................................... 1,350,000 --
Capital lease obligations and other loans, interest principally at 8%............ 845,924 1,513,702
-------------- --------------
Total.......................................................................... 45,010,380 52,554,575
Less current portion............................................................. (2,036,976) (2,773,984)
-------------- --------------
Long-term portion................................................................ $ 42,973,404 $ 49,780,591
-------------- --------------
-------------- --------------
</TABLE>

F-14
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTHS

ENDED DECEMBER 31, 1996 AND 1997 IS UNAUDITED)

6. BANK LINE OF CREDIT AND LONG-TERM DEBT (CONTINUED)
Substantially all of the Company's assets are pledged as collateral for
revolving bank loans and long-term debt. The insurance company loan agreement,
as amended, and bank credit agreements include various financial covenants
which, among other things, require that the Company maintain certain specified
financial ratios and restrict the amount of capital expenditures, additional
indebtedness and certain investments. Further, dividends may not be declared and
paid without prior approval. The Company was not in compliance with the capital
expenditures limitations of its bank credit agreements as of June 30, 1997, but
a waiver dated November 21, 1997 was subsequently obtained.

Under the terms of the insurance company Securities Purchase Agreement (the
"Agreement") dated April 21, 1995, the Company may, at its option, prepay the
outstanding Senior Secured First Mortgage Notes (the "Notes") in whole or in
part, after April 1, 1998 at a price equal to the aggregate principal amount of
the Notes being redeemed plus accrued interest thereon to the date of
redemption, plus a premium equal to the net present value of the excess of the
originally scheduled principal and related interest payments through the
original maturity date over the corresponding payments that would have been made
using the U.S. Treasury Notes rate (or the U.S. Treasury Note rate plus .75% if
redemption occurs after April 21, 2000), discounted at the U.S. Treasury Note
rate plus .75%. Prepayment of all outstanding Notes and accrued interest thereon
is required on the occurrence of certain events, as defined in the Agreement.

Scheduled annual maturities of long-term debt as of June 30, 1997 are as
follows:

<TABLE>
<S> <C>
1998.................................................. $ 2,773,984
1999.................................................. 3,358,998
2000.................................................. 3,530,594
2001.................................................. 3,021,096
2002.................................................. 3,164,564
Thereafter............................................ 36,705,339
-----------
Total............................................... $52,554,575
-----------
-----------
</TABLE>

F-15
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTHS

ENDED DECEMBER 31, 1996 AND 1997 IS UNAUDITED)

7. INCOME TAXES

The components of income tax expense are as follows:

<TABLE>
<CAPTION>
SUCCESSOR
PREDECESSOR ---------------------------------------------
--------------- APRIL 27, 1995 YEAR ENDED JUNE 30,
JULY 1, 1994 TO TO ---------------------------
APRIL 26, 1995 JUNE 30, 1995 1996 1997
--------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C>
Current:
Federal.................... $ -- $ -- $ 113,736 $ 3,114,991
State...................... -- -- 296,788 862,690
--------------- ---------------- ------------ -------------
-- -- 410,524 3,977,681
Deferred:
Federal.................... -- -- 347,074 126,599
State...................... -- -- (174,598) (116,280)
--------------- ---------------- ------------ -------------
-- -- 172,476 10,319
--------------- ---------------- ------------ -------------
$ -- $ -- $ 583,000 $ 3,988,000
--------------- ---------------- ------------ -------------
--------------- ---------------- ------------ -------------
</TABLE>

The Company's income tax provision differs from the amount determined by
applying the statutory federal income tax rate, due to the following:

<TABLE>
<CAPTION>
SUCCESSOR
PREDECESSOR -------------------------------------------
--------------- APRIL 27, 1995 YEAR ENDED JUNE 30,
JULY 1, 1994 TO TO -------------------------
APRIL 26, 1995 JUNE 30, 1995 1996 1997
--------------- ---------------- ------------ -----------
<S> <C> <C> <C> <C>
Federal statutory tax (benefit)
rate......................... 35.00 % (35.00)% 35.00% 35.00%
Permanent items................ 0.43 (39.65) .78 .29
State income taxes, net of
federal...................... -- -- 3.22 4.85
Rate differential.............. (1.00) 1.00 (1.00) (1.00)
Change in valuation
allowance.................... (32.29) 75.01 8.62 --
Purchase accounting............ -- -- (19.79) --
Other.......................... (2.14) (1.36) (3.57) .12
------- ------- ------------ -----------
-- % -- % 23.26% 39.26%
------- ------- ------------ -----------
------- ------- ------------ -----------
</TABLE>

F-16
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

Deferred income taxes at June 30, 1996 and 1997 consist of the following:

<TABLE>
<CAPTION>
1996 1997
-------------- --------------
<S> <C> <C>
Current assets (liabilities):.....................................................
Inventory costing............................................................... $ (418,570) $ (373,872)
State franchise taxes........................................................... 84,122 270,579
Compensation and benefits....................................................... 173,200 61,263
Capitalized interest............................................................ 160,207 128,852
Other........................................................................... 152,785 132,332
-------------- --------------
Total......................................................................... $ 151,744 $ 219,154
-------------- --------------
-------------- --------------
Long-term assets (liabilities):
Purchase accounting............................................................. $ (5,033,711) $ (4,885,216)
Accelerated depreciation........................................................ (5,770,169) (5,949,469)
Operating loss carryforwards.................................................... 5,162,329 4,651,121
Tax credit carryforwards........................................................ 572,274 450,246
Compensation and benefits....................................................... 281,712 861,286
Other........................................................................... 69,562 76,158
Valuation allowance............................................................. (2,173,006) (2,172,863)
-------------- --------------
Total......................................................................... $ (6,891,009) $ (6,968,737)
-------------- --------------
-------------- --------------
</TABLE>

The Company's tax returns for years 1992 through 1997 have not been examined
by the taxing authorities. In the opinion of management, adequate accruals have
been made for taxes due in those years. A valuation allowance has been provided
for the tax benefits of operating loss and tax credit carryforwards which may
not be realizable.

As of June 30, 1997, the Company has federal operating loss carryforwards
which expire as follows:

<TABLE>
<S> <C>
2002.................................................. $ 4,498,000
2003.................................................. 3,623,000
2004.................................................. 3,214,000
2005.................................................. 321,000
2010.................................................. 2,024,000
-----------
Total............................................... $13,680,000
-----------
-----------
</TABLE>

Use of these operating loss carryforwards in any one year is limited to
approximately $1,400,000 and may be subject to further reduction if there are
changes in the ownership of the Company or equity shifts, as set forth in the
Internal Revenue Code.

F-17
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

8. REDEEMABLE PREFERRED STOCK

The Company's redeemable preferred stock as of June 30, 1997 is as follows:

<TABLE>
<CAPTION>
AUTHORIZED ISSUED OUTSTANDING
PAR VALUE SHARES SHARES SHARES
----------- ----------- --------- ------------
<S> <C> <C> <C> <C>
8% Junior Preferred Stock......................................... $ .01 200,000 178,105 178,105
12% Senior Preferred Stock........................................ $ .01 100,000 100,000 100,000
</TABLE>

The Junior Preferred shares have no voting rights, have liquidation
preferences to all classes of the Company's common stock, and are entitled to
cumulative dividends at the rate of 8% per year, payable semi-annually.
Effective October 1, 1996, the rate was increased to 8% from 6%. Shares
remaining at June 30, 1997 that were issued in connection with the Company's
acquisition of GSV are exchangeable at any time into 130,349 shares of Class B
common stock. The Junior Preferred Stock is subject to mandatory redemption of
89,052 and 89,053 shares on December 31, 2001 and 2002, respectively, or earlier
if a change in control of the Company occurs. On October 10, 1996, 345,875
shares were redeemed for $1,729,375 ($5 per share). At June 30, 1996, June 30,
1997 and December 31, 1997, the balance outstanding, less unamortized discounts,
was $2,006,831, $697,721 and $714,401, respectively.

In the event of liquidation, dissolution or winding up of the Company,
Junior Preferred stockholders shall be entitled to receive out of the assets of
the Company an amount in cash equal to $5 per share plus accrued but unpaid
dividends.

The Senior Preferred shares have no voting rights, have liquidation
preferences to other shareholders, are subject to mandatory redemption beginning
in 2005 and are entitled to cumulative dividends at the rate of 12% payable
semiannually. Under certain circumstances, the Senior Preferred Stock is
redeemable, at a premium, beginning in 2000. The carrying value of the Senior
Preferred Stock is being increased ratably to its redemption value of
$10,000,000. The shares are also exchangeable at any time, at the Company's
option, into 13.2% notes due 2007. At June 30, 1996, June 30, 1997 and December
31, 1997, the balance outstanding, less unamortized discounts, was $8,027,156,
$8,115,694 and $8,165,527, respectively.

In the event of liquidation, dissolution or winding up of the Company,
Senior Preferred stockholders shall be entitled to receive out of the assets of
the Company, before Junior Preferred stockholders, the amount of dividends
accrued and unpaid thereon to the date of final distribution to such holders,
whether or not declared to the date of such final distribution, $100 per share
plus a premium.

F-18
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

9. SHAREHOLDERS' EQUITY

COMMON STOCK

The Company's authorized capital stock is as follows at June 30, 1997:

<TABLE>
<CAPTION>
AUTHORIZED
PAR VALUE SHARES
----------- -----------
<S> <C> <C>
Class B.................................................... $ .003 7,250,000
Class E.................................................... $ .003 2,900,000
Class K.................................................... $ .003 1,450,000
</TABLE>

Changes in the Company's common stock outstanding during the period April
27, 1995 to June 30, 1995 and the years ended June 30, 1997 are as follows:

<TABLE>
<CAPTION>
A B E K
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Shares outstanding, April 27, 1995....... 1,885,000 3,770,000 1,200,829 --
Shares outstanding, June 30, 1995........ 1,885,000 3,770,000 1,200,829 --
Shares outstanding, June 30, 1996........ 1,885,000 3,770,000 1,200,829 --
Issuance of stock........................ -- 2,776,170 -- 99,862
Repurchase of stock...................... (1,885,000) (985,156) -- --
------------ ----------- ----------- ---------
Shares outstanding, June 30, 1997........ -- 5,561,014 1,200,829 99,862
------------ ----------- ----------- ---------
------------ ----------- ----------- ---------
</TABLE>

Class E and K common stock have no voting rights, except that effective
April 21, 2000, the Class E common stockholders will be entitled to vote. Upon
dissolution, liquidation or winding up of the Company, and subject to the
liquidation preferences of the senior and junior preferred stock, liquidation
proceeds will be divided equally among the Class B, E, and K shareholders.

INCENTIVE STOCK AND STOCK OPTION PLANS

An incentive stock plan (terminated in 1996) provided for grants of stock
appreciation rights ("SARs") to officers, directors and certain key employees.
The SARs entitle the holder to receive cash payments equal to the excess of the
fair market value of the rights over the base price for such rights. SARs
outstanding as of June 30, 1997 have an unlimited term and generally become
exercisable over a two year period. Compensation expense recognized pursuant to
the Company's incentive stock plans was $650,606 and $1,338,506 for the years
ended June 30, 1996 and 1997, respectively, and $593,172 and $6,300,000 for the
six months ended December 31, 1996 and 1997, respectively. In connection with a
prior GSV stock appreciation rights agreement, the president of GSV (and the
Company) was paid $1,162,384 at the time of GSV's acquisition. The Company's
1996 Stock Option Plan covers 893,925 shares of authorized but unissued Class B
common stock. The Plan provides for the grant of incentive and nonstatutory
stock options to officers, key employees and others, at prices not less than
fair value.

F-19
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

9. SHAREHOLDERS' EQUITY (CONTINUED)
Options granted generally become exercisable 25% annually and expire after 10
years. A summary of SAR and stock option activity is as follows:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
STOCK EXERCISE PRICE
OPTIONS SARS PER RIGHT/OPTION
--------- --------- -----------------
<S> <C> <C> <C>
Outstanding at April 27, 1995............. -- --
Granted................................. -- 649,348 $ 1.34
--------- ---------
Outstanding at June 30, 1995.............. -- 649,348 $ 1.34
Granted................................. -- 145,000 $ 2.59
--------- ---------
Outstanding at June 30, 1996.............. -- 794,348 $ 1.57
Granted................................. 800,934 -- $ 4.79
--------- ---------
Outstanding at June 30, 1997.............. 800,934 794,348 $ 3.19
--------- ---------
--------- ---------
Exercisable at June 30, 1997 -- 794,348 $ 1.57
--------- ---------
--------- ---------
Available for grant at June 30, 1997...... 92,991 --
--------- ---------
--------- ---------
</TABLE>

The stock options outstanding at June 30, 1997 become exercisable 200,233
annually commencing in October 1997 at prices ranging from $3.62 to $6.03 per
share and have a remaining term of nine years.

FAS 123 requires the disclosure of pro forma net income amounts had the
Company adopted the fair value method prescribed by that statement. Under FAS
123, the fair value of stock-based awards to employees is calculated using
option 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 require certain subjective assumptions 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, 6.3 years and 5 years as of June 30,1997 and December 31, 1997,
respectively; risk free interest rates, 5.9% and 6.0% as of June 30, 1997 and
December 31, 1997, respectively; no expected volatility, and no dividends during
the expected term. The Company's calculations are based on a multiple option
valuation approach and forfeitures are recognized as they occur. Pro forma net
income for the six months ended December 31,1997 would have been $48,300 less
than net income as reported if the computed fair values of the stock option
awards had been amortized to expense over the vesting period of the awards (no
effect on net income for the year ended June 30, 1997). Pro forma earnings per
share for the six months ended December 31, 1997 would have been as follows:
basic--$.62 and fully diluted--$.58.

10. RETIREMENT PLANS

The Company's 401(k) plan provides retirement benefits to full-time
employees that meet certain eligibility requirements, was established in 1996.
Under the 401 (k) plan, employees may elect to have up to 15% of their annual
eligible compensation, subject to certain limitations, deferred and deposited
with a qualified trustee. The Company may elect to make an annual discretionary
contribution to the Plan

F-20
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

10. RETIREMENT PLANS (CONTINUED)
of up to 25% of each participant's eligible compensation, subject to certain
limitations. Participants' voluntary contributions to the Plan vest immediately
and Company contributions are 100% vested (20% per year after two years of
service) after six years of continuous service. The Company also contributes to
a winery workers' retirement plan which provides retirement benefits for union
employees. Pension costs charged to operations were $75,118 for the period July
1, 1994 to April 26, 1995 (Predecessor) and $2,505 for the period April 27, 1995
to June 30, 1995 (Successor). Retirement plan costs charged to operations were
$36,704 and $68,009 for the years ended June 30, 1996 and 1997, respectively.

11. LEASES

The Company leases cooperage and equipment under both capital and operating
lease arrangements. Future minimum payments by year and in aggregate under such
capital leases and noncancellable operating leases with terms of one year or
more consist of the following at June 30, 1997:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------------- -----------
<S> <C> <C>
1998.............................................................. $ 344,952 $ 55,752
1999.............................................................. 277,074 66,903
2000.............................................................. 291,547 66,903
2001.............................................................. 110,450 144,680
2002.............................................................. 68,736 --
Thereafter........................................................ 143,201 --
------------- -----------
Total minimum lease payments...................................... 1,235,960 $ 334,238
-----------
-----------
Amount representing interest...................................... 235,735
-------------
Net present value of minimum lease payments....................... 1,000,225
Less current maturities........................................... 344,952
-------------
$ 655,273
-------------
-------------
</TABLE>

The following is a summary of cost and accumulated amortization on
capitalized cooperage and equipment leases:

<TABLE>
<CAPTION>
JUNE 30
--------------------------
1996 1997
----------- -------------
<S> <C> <C>
Cooperage......................................................... $ 317,624 $ 678,785
Equipment......................................................... 210,301 598,924
Less accumulated amortization..................................... 59,958 151,731
----------- -------------
$ 467,967 $ 1,125,978
----------- -------------
----------- -------------
</TABLE>

Rent expense totaled approximately $99,794 the period July 1, 1994 to April
26, 1995 (Predecessor), $40,461 the period April 27, 1995 to June 30, 1995
(Successor) and $381,107 and $667,616 the years ended June 30, 1996 and 1997,
respectively.

F-21
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

12. COMMITMENTS AND CONTINGENCIES

EMPLOYMENT AGREEMENT

The Company has an employment agreement with its president which extends to
March 31, 2000 and specifies that the president receive a fixed salary
determined by the Board of Directors and an annual bonus based on the Company's
earnings, as defined. The agreement extends automatically on a year-to-year
basis thereafter unless terminated by either party (see Note 15).

GRAPE PURCHASE COMMITMENTS

The Company has certain grape purchase contracts with independent growers
that generally extend through 1998. Prices to be paid for grapes fluctuate with
prevailing market prices at the time of purchase. In certain cases, the Company
has contracted with its customers to sell a portion of these grapes at
prevailing market prices at the time of sale.

EQUIPMENT AND COOPERAGE PURCHASE COMMITMENTS

As of December 31, 1997, the Company has entered into contracts aggregating
approximately $650,000 for the purchase of processing equipment and cooperage.

CLAIMS

The Company is a party to claims aggregating approximately $3,500,000
arising from alleged negligent performance of services. The Company and its
legal counsel are in the preliminary stages of investigating the merits of such
claims and the availability of insurance coverage, if needed. As of December 31,
1997, the Company has accrued, based on its preliminary investigation, an amount
presently believed to be adequate to resolve these claims. Such amount is
substantially less than the aggregate of the amounts claimed.

13. RELATED PARTY TRANSACTIONS

In May 1995, the Company purchased a 1,750 acre vineyard located in Kern
County, California, from a company owned by the Company's president for
$4,590,000. In connection with this acquisition, the Company assumed two
existing promissory notes of $2,441,000 and $452,791 and executed a non-interest
bearing promissory note for $1,700,000 (discounted at 10% to $774,523) payable
to the seller.

The Company paid approximately $2,400,000 to affiliates of certain
stockholders during the year ended June 30, 1997 for investment banking and
financial advisory services related to certain capital stock repurchases.

During the period July 1, 1994 to April 26, 1995 and the years ended June
30, 1996 and 1997, the Company made grape purchases aggregating approximately
$275,000, $400,000 and $1,400,000, respectively, from a vineyard partially owned
by the Company's president.

F-22
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

14. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information is as follows:

<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
------------- -------------------------------------------
JULY 1, 1994 APRIL 27, YEAR ENDED JUNE 30
TO APRIL 28, 1995 TO JUNE ----------------------------
1995 30, 1995 1996 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest paid.................... $ 2,672,874 $ 408,820 $ 4,938,618 $ 5,578,895
Income taxes paid................ 166,109 40,441 388,250 3,206,000
Notes issued to acquire property,
plant and equipment............ -- 4,168,314 -- 7,238,071
Property acquired under capital
lease.......................... -- -- 407,503 778,593
Conversion of warrants to
preferred stock................ 363,258 -- -- --
</TABLE>

15. SUBSEQUENT EVENTS

On July 15, 1997, the Company granted options to an employee covering 8,700
shares of common stock. Such options, granted at a price of $4.79, are
exercisable 25% annually beginning July 1998 and expire after ten years.

Effective January 1, 1998, the Company's employment contract with its
president was restructured to, among other things, extend the term of the
contract to June 30, 2001 and replace the annual bonus based on the Company's
earnings with a bonus to be determined by the Company's Board of Directors. In
connection with such restructuring, the Company has accrued compensation expense
of $2,500,000 payable to the president. Such amount is included in selling,
general and administrative expenses for the six months ended December 31, 1997.

Effective January 1, 1998, the Company and the holders of the 794,348 SARs
then outstanding agreed to terminate such SARs in exchange for compensation in
an amount equal to the SARs obligation at December 31, 1997 of $8,289,110 and
fully vested non-qualified options to purchase 794,348 shares of the Company's
common stock of $12.07 per share. Such holders received cash of approximately
$5.4 million and 7.5% promissory notes aggregating approximately $5.4 million
payable upon mutual agreement between the parties. Such cash received was
utilized to exercise a total of 337,219 outstanding stock options.

On April 21, 1998, the Company renewed its revolving bank line of credit.
The renewal provides for borrowings up to $22,500,000 with variable interest
rate options, at the Company's election. The line of credit agreement expires on
March 5, 1999.

On April 24, 1998, the Company adopted the 1998 Director Stock Option Plan
(the "Plan"), which covers 348,000 shares of authorized but unissued Class K
Common Stock. Under the terms of the Plan, options may be granted to
non-employee members of the Company's Board of Directors at prices not less than
fair market value (as defined), are fully vested after one year and expire after
ten years. The Plan

F-23
<PAGE>
GOLDEN STATE VINTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

15. SUBSEQUENT EVENTS (CONTINUED)
provides for initial grants to non-employee directors of options to purchase an
aggregate of 59,972 shares of common stock at $12.08 per share. The Plan also
provides for annual grants of options to purchase an additional 10,005 shares of
common stock on May 1 of each year commencing May 1, 1999 to each non-employee
director who has remained in continuous service.

On April 23, 1998, the Board of Directors approved, subject to stockholder
approval, a stock split, which will result in each share of the Company's common
stock being split into 2.9 shares of common stock. All common stock related data
in the accompanying financial statements of the Company reflect the stock split
for all periods presented.

F-24
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs
& Co., Hambrecht & Quist LLC and J.P. Morgan Securities Inc. are acting as
representatives, has severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Class B Common Stock
set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS B COMMON
UNDERWRITER STOCK
- --------------------------------------------------------------------------- -----------------
<S> <C>
Goldman, Sachs & Co........................................................
Hambrecht & Quist LLC......................................................
J.P. Morgan Securities Inc.................................................
-----------------
Total.................................................................... 4,300,000
-----------------
-----------------
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The Underwriters propose to offer the shares of Class B Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Class B Common Stock are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the representatives.

The Company and certain Selling Stockholders have granted the Underwriters
an option exercisable for 30 days after the date of this Prospectus to purchase
up to an aggregate of 645,000 additional shares of Class B Common Stock to cover
over-allotments, if any. If the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
to be purchased by each of them, as shown in the foregoing table, bears to the
4,300,000 shares of Class B Common Stock offered.

The Company and the Selling Stockholders have agreed that, during the period
beginning from the date of this Prospectus and continuing to and including the
date 180 days after the date of the Prospectus, they will not offer, sell,
contract to sell or otherwise dispose of any securities of the Company (other
than pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of Class B Common
Stock or which are convertible into or exchangeable for securities which are
substantially similar to the shares of Class B Common Stock without the prior
written consent of the representatives, except for the shares of Class B Common
Stock offered in connection with the Offering.

The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares of
Class B Common Stock offered by them.

Prior to this offering, there has been no public market for the shares. The
initial public offering price was negotiated among the Company, the Selling
Stockholders and the representatives. Among the factors considered in
determining the initial public offering price of the Class B Common Stock, in
addition to prevailing market conditions, were the Company's historical
performance, estimates of the

U-1
<PAGE>
business potential and earnings prospects of the Company, an assessment of the
Company's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.

Application has been made to list the Class B Common Stock on the Nasdaq
National Market under the symbol "VINT".

In connection with the offering, the Underwriters may purchase and sell the
shares in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicated short positions
created in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the shares; and syndicate short positions involve the
sale by the Underwriters of a greater number of shares than they are required to
purchase from the Company and the Selling Stockholders in the offering. The
Underwriters also may impose a penalty bid, whereby selling concessions allowed
to syndicate members or other broker-dealers in respect of the securities sold
in the offering for their account may be reclaimed by the syndicate if such
shares are repurchased by the syndicate in stabilizing or covering transactions.
These activities may stabilize, maintain or otherwise affect the market price of
the shares, which may be higher than the price that might otherwise prevail in
the open market; and these activities, if commenced, may be discontinued at any
time. These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.

U-2
<PAGE>
- ----------------------------------------------
----------------------------------------------
- ----------------------------------------------
----------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 9
The Company............................................................... 16
Use of Proceeds........................................................... 17
Dilution.................................................................. 17
Dividend Policy........................................................... 18
Capitalization............................................................ 19
Selected Consolidated Financial Data...................................... 20
Supplemental Pro Forma Consolidated Statement of Operations Data.......... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 22
Business.................................................................. 31
Management................................................................ 44
Certain Relationships and Related Transactions............................ 50
Principal and Selling Stockholders........................................ 53
Shares Eligible for Future Sale........................................... 54
Description of Capital Stock.............................................. 56
Legal Matters............................................................. 59
Experts................................................................... 59
Additional Information.................................................... 60
Index to Consolidated Financial Statements................................ F-1
Underwriting.............................................................. U-1
</TABLE>

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

THROUGH AND INCLUDING , 1998 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS B COMMON STOCK IN
THE UNITED STATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

4,300,000 SHARES

GOLDEN STATE
VINTNERS, INC.

CLASS B COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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

PROSPECTUS

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

GOLDMAN, SACHS & CO.

HAMBRECHT & QUIST

J.P. MORGAN & CO.

REPRESENTATIVES OF THE UNDERWRITERS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses expected to be incurred
by the Registrant in connection with the sale and distribution of the securities
being registered hereby, other than underwriting discounts and commissions. All
amounts are estimated except the Securities and Exchange Commission registration
fee and the National Association of Securities Dealers, Inc. filing fee. The
amounts shown include expenses of the Selling Stockholders that are borne by the
Registrant.

<TABLE>
<CAPTION>
PAYABLE BY
REGISTRANT
-------------
<S> <C>
SEC registration fee........................................................... $ 27,717
National Association of Securities Dealers, Inc. filing fee.................... 9,856
Nasdaq Stock Market listing fee................................................ 60,000
Blue Sky fees and expenses..................................................... 5,000
Accounting fees and expenses................................................... 500,000
Legal fees and expenses........................................................ 400,000
Printing and engraving expenses................................................ 200,000
Premium related to Director's and Officer's liability insurance................ 350,000
Registrar and Transfer Agent's fees............................................ 15,000
Miscellaneous fees and expenses................................................ 32,427
-------------
Total...................................................................... $ 1,600,000
-------------
-------------
</TABLE>

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

* to be provided by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law (the "Delaware Law")
provides for the indemnification of officers, directors, and other corporate
agents in terms sufficiently broad to indemnify such persons under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933, as amended (the "Securities Act"). The
Company's Second Amended and Restated Certificate of Incorporation, to be filed
prior to the consummation of the offering, will provide for indemnification of
the Registrant's directors, officers, employees and other agents to the extent
and under the circumstances permitted by the Delaware Law.

In addition, prior to the consummation of the offering, the Registrant will
enter into agreements to indemnify its directors and certain of its officers in
addition to the indemnification provided for in the Certificate of
Incorporation. These agreements, among other things, will indemnify the
Registrant's directors and certain of its officers for certain expenses
(including attorneys' fees), judgments, fines and settlement amounts incurred by
such person in any action or proceeding, including but not limited to any action
by or in the right of the Registrant, on account of services by that person as a
director or officer of the Registrant or as a director or officer of any
subsidiary of the Registrant, or as a director or officer of any other company
or enterprise that the person provides services to at the request of the
Registrant. The Registrant has also purchased directors' and officers' liability
insurance.

The Underwriting Agreement (Exhibit 1.1) provides for indemnification by the
Underwriters of the Registrant, its directors and officers, and by the
Registrant and the Selling Stockholders, severally but not jointly, of the
Underwriters, for certain liabilities, including liabilities arising under the
Securities Act, and affords certain rights of contribution with respect thereto.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since April 1995, the Registrant has sold and issued the following
unregistered securities, which amounts have been adjusted to reflect the
2.9-for-1 stock split to be consummated prior to the offering:

In April 1995, the Registrant sold an aggregate of 1,885,000 shares of Class
A Common Stock and 3,770,000 shares of Class B Common Stock to accredited
investors, at a price per share of $1.72, for an aggregate consideration of
$9,750,000.

In April 1995, the Registrant issued an aggregate of 1,519,542 shares of
Junior Preferred Stock with an aggregate face amount of $2,619,900 to accredited
investors in partial consideration for such accredited investors' sale to the
Registrant of shares of capital stock of Golden State Vintners.

In April 1995, the Registrant sold 290,000 shares of Senior Preferred Stock
to an accredited investor for an aggregate consideration of $1,000,000 and
issued 1,200,829 shares of Class E Common Stock to such accredited investor in
partial consideration for such accredited investor's purchase of senior secured
first mortgage notes with an aggregate principal face amount of $35,000,000 from
Golden State Vintners.

In April 1995, the Registrant granted to an officer of the Registrant stock
appreciation rights with respect to (i) 145,000 shares of Class A Common Stock
at a base price of $.003 per stock appreciation right and (ii) 504,348 shares of
Class A Common Stock, at a base price of $1.72 per stock appreciation. The
holder did not pay cash consideration for these stock appreciation rights.

In November 1995, the Registrant granted to an officer of the Registrant
stock appreciation rights with respect to 145,000 shares of Class B Common Stock
at a base price of $2.59 per stock appreciation right. The holder did not pay
cash consideration for these stock appreciation rights.

In October 1996, the Registrant sold an aggregate of 2,776,170 shares of
Class B Common Stock to accredited investors, at a price of $2.50 per share, for
an aggregate consideration of $6,949,998.

In November 1996, the Registrant sold an aggregate of 99,862 shares of Class
K Common Stock to accredited investors, at a price of $2.50 per share, for an
aggregate consideration of $250,000.

In December 1996, the Registrant granted to an officer of the Registrant
options to purchase 670,434 shares of Class A Common Stock under its 1996 Stock
Option Plan. The options are exercisable for up to 167,608 shares at a price of
$3.62 per share, up to an additional 167,609 shares at a price of $4.31 per
share, up to an additional 167,608 shares at a price of $5.17 per share, and up
to an additional 167,609 shares at a price of $6.03 per share. The optionee did
not pay cash consideration for these options.

Effective as of December 31, 1997, the Registrant terminated all outstanding
stock appreciation rights with respect to the Company's Common Stock. In
exchange for such rights, the Company granted to such holders options to
purchase an aggregate of 794,348 shares of the Registrant's Class B Common Stock
and an amount of cash equal to the difference between the base price of each
stock appreciation right and the fair market value of the Registrant's Common
Stock on December 31, 1997. The options were fully-vested on the date of grant
and are exercisable at a price of $12.07 per share.

In January 1998, the Registrant granted to several officers and a consultant
of the Registrant options to purchase an aggregate of 147,900 shares of Class B
Common Stock under its 1996 Stock Option Plan. The options are exercisable at a
price of $4.79 per share. The optionees did not pay cash consideration for these
options.

In April 1998, in connection with the exercise of options by two executive
officers, the Registrant issued 307,600 shares of Class A Common Stock and
issued 29,619 shares of Class B Common Stock. Each officer paid cash in
connection with the exercise of these options.

II-2
<PAGE>
Immediately prior to the Offering, all outstanding shares of Class B Common
Stock, will be converted into shares of Class A Common Stock and all outstanding
shares of Class E Common Stock and Class K Common Stock were converted into
shares of the Company's newly-created Class B Common Stock.

The sales and issuances of the securities described above were deemed to be
exempt from registration under the Securities Act in reliance upon Section 4(2)
thereof, as transactions not involving a public offering, or, with respect to
stock appreciation rights and options issued to officers, in reliance upon the
exemption from registration provided by Rule 701 of the Commission. The
purchasers in such private offerings represented their intention to acquire the
securities for investment only and not with a view to distribution thereof.
Appropriate legends were affixed to the stock certificates issued in such
transactions. All recipients had adequate access, through employment or other
relationships, to information about the Registrant. No underwriter was employed
with respect to any such sales.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

The following Exhibits are attached hereto and incorporated herein by
reference.

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

2.1 Stock Purchase Agreement dated as of April 27, 1995 by and among the
Registrant, Golden State Vintners and certain shareholders of Golden State
Vintners.

2.2 Preferred Stock Exchange Agreement dated as of April 27, 1995 among the
Registrant and the parties signatory thereto.

2.3 Agreement for Purchase and Sale of Reedley Facility dated March 15, 1995
between the Registrant and Heublein, Inc.

2.4 Vineyard Purchase Agreement dated May 16, 1995 between the Registrant and
The Grape Group, Inc.

2.5 Asset Purchase Agreement of Soledad Facility dated September 4, 1996
between the Registrant and Vintners International Company, Inc., as
amended.

2.6 Common Stock Subscription Agreement dated as of April 27, 1995 among the
Registrant and each of the signatories thereto.

2.7 Purchase Agreement dated as of March 10, 1997 among the Registrant,
William D. Reid and Johnye B. Reid.

3.1 Amended and Restated Certificate of Incorporation of the Registrant, as
amended.

3.2* Form of Second Amended and Restated Certificate of Incorporation of the
Registrant.

3.3 Bylaws of the Registrant.

3.4 Certificate of Designations of the 12% Senior Redeemable Preferred Stock
of the Registrant, as amended and currently in effect.

3.5 Certificate of Powers, Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of Junior Exchangeable
Preferred Stock and Qualifications, Limitations and Restrictions Thereof
of the Registrant, as amended and currently in effect.

4.1* Form of Common Stock Certificate of the Registrant.
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ --------------------------------------------------------------------------
<C> <S>
4.2 Registration Rights Agreement dated as of April 27, 1995 by and among the
Registrant and certain holders of the Registrant's Common Stock.

4.3 Registration Rights Agreement dated October 10, 1996 by and among the
Registrant and certain holders of the Registrant's Common Stock.

4.4 Amended and Restated Stockholders Agreement dated as of October 10, 1996
by and among the Registrant and certain holders of the Registrant's
capital stock.

5.1* Legal opinion of Riordan & McKinzie.

10.1 1996 Stock Option Plan ("1996 Stock Plan") of the Registrant.

10.2 Form of Incentive Stock Option Agreement under the 1996 Stock Plan.

10.3 Form of Nonqualified Stock Option Agreement under the 1996 Stock Plan.

10.4 Form of Indemnity Agreement between the Registrant and its officers and
directors.

10.5 Employment Agreement dated as of April 27, 1995 between the Registrant and
Jeffrey B. O'Neill.

10.6 Securities Purchase Agreement dated April 21, 1995 among the Registrant,
Golden State Vintners and John Hancock Mutual Life Insurance Company
("John Hancock"), as amended.

10.7 First Mortgage Note Due April 1, 2005 issued by Golden State Vintners in
favor of John Hancock in the principal amount of $35,000,000.00.

10.8 Continuing Corporate Guaranty dated April 27, 1995 entered into by the
Registrant in favor of John Hancock.

10.9 Security Agreement dated as of April 21, 1995 entered into by Golden State
Vintners in favor of John Hancock.

10.10 Intercreditor Agreement dated as of April 21, 1995 among Golden State
Vintners, John Hancock and Sanwa Bank California ("Sanwa"), as amended.

10.11* Demand Promissory Note dated April 27, 1995 issued by the Registrant in
favor of Golden State Vintners in the principal amount of $1,300,000.00.

10.12 Intentionally omitted.

10.13 Accounts Receivable Credit Agreement dated as of April 21, 1998 between
Sanwa and the Registrant.

10.14* Continuing Guaranty dated as of April 21, 1998 between the Registrant and
Sanwa.

10.15 Term Loan Agreement dated as of May 1, 1995 between the Registrant and
Sanwa, as amended.

10.16 Term Loan Agreement dated as of December 18, 1996 between the Registrant
and Sanwa, as amended.

10.17 Sublease and Consent among the Registrant, Richard C. McKenzie and 100 Sir
Francis Drake Boulevard, Inc.

10.18 Promissory Note dated May 5, 1995 between the Registrant and Heublein,
Inc.

10.19 Securities Purchase Agreement dated as of August 22, 1996 among the
Registrant and the parties signatory thereto.
</TABLE>

II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ --------------------------------------------------------------------------
<C> <S>
10.20 Stock Purchase Agreement dated as of October 10, 1996 among the
Registrant, SBIC Partners, L.P. and Jeffrey B. O'Neill, together with
Supplemental Signature Page thereto dated November 26, 1996 executed by
R&M Partners/GSV, G.P., Victor Palmieri and Peter Mullin.

10.21 Letter Agreement dated October 9, 1996 between the Registrant and Exeter
Venture Management Corporation.

10.22 Management Agreement dated May 31, 1997 between the Registrant and Forrest
Binkley & Brown Partners L.P.

10.23 1998 Director Stock Option Plan (the "Director Plan").

10.24 Stock Option Agreement dated as of December 31, 1997 between the
Registrant and Jeffrey B. O'Neill.

10.25 Stock Option Agreement dated as of December 31, 1997 between the
Registrant and Brian R. Thompson.

10.26 Employment Agreement dated as of January 1, 1998 between the Registrant
and Jeffrey B. O'Neil.

10.27 Promissory Note issued by the Registrant in favor of Cottonwood Vineyard
in the principal amount of $452,791.17.

10.28 Promissory Note issued by the Registrant in favor of Vintners
International Company, Inc.

10.29* Form of Stock Option Agreement under the Director Plan.

10.30 Promissory Note dated September 30, 1986 between the Registrant, as
assignee of original maker, The Grape Group and The Prudential Insurance
Company of America.

10.31 Loan Note dated January 17, 1990 between the Registrant, as assignee of
original makers, William E. Reid and Johnye B. Reid, and Sumitomo Bank of
California.

10.32 Promissory Note dated June 15, 1995 between the Registrant , as assignee
of original makers, William E. Reid and Johnye B. Reid,and Sumitomo Bank
of California.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Deloitte & Touche LLP Independent Auditors.

23.2* Consent of Riordan & McKinzie (included in Exhibit 5.1).

24.1 Power of Attorney (included on page II-7 of this Registration Statement).

27.1 Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

(b) Financial Statement Schedules

SCHEDULE

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

Schedules other than those referred to above have been omitted because they
are not applicable or not required or because the information is included
elsewhere in the Financial Statements or the notes thereto.

II-5
<PAGE>
ITEM 17. UNDERTAKINGS

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, 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.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon 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 it was declared effective.

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

(3) It will provide to the underwriters at the closing(s) 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-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Greenbrae, State of
California, on the 30th day of April, 1998.

GOLDEN STATE VINTNERS, INC.

By: /s/ JEFFREY B. O'NEILL
-----------------------------------------
Jeffrey B. O'Neill
CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jeffrey B. O'Neill, Jeffrey J. Brown and Brian R.
Thompson, and each of them, his true and lawful attorneys-in-fact and agents,
each with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Registration Statement,
and any registration statement relating to the offering covered by this
Registration Statement and filed pursuant to Rule 462(b) under the Securities
Act of 1933, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.

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

NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
Chief Executive Officer,
/s/ JEFFREY B. O'NEILL President (Principal
- ------------------------------ Executive Officer) and April 30, 1998
Jeffrey B. O'Neill Director

Chief Financial Officer
/s/ BRIAN R. THOMPSON and Secretary (Principal
- ------------------------------ Financial Officer and April 30, 1998
Brian R. Thompson Accounting Officer)

/s/ JEFFREY J. BROWN Chairman of the Board,
- ------------------------------ Assistant Secretary and April 30, 1998
Jeffrey J. Brown Director

/s/ NICHOLAS B. BINKLEY
- ------------------------------ Director April 30, 1998
Nicholas B. Binkley

/s/ DOUGLAS R. WOLTER
- ------------------------------ Director April 30, 1998
Douglas R. Wolter

/s/ KEITH R. FOX
- ------------------------------ Director April 30, 1998
Keith R. Fox

/s/ W. SCOTT HEDRICK
- ------------------------------ Director April 30, 1998
W. Scott Hedrick

/s/ PETER W. MULLIN
- ------------------------------ Director April 30, 1998
Peter W. Mullin

II-7
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT COSTS AND BALANCE AT END
BEGINNING OF YEAR EXPENSES DEDUCTIONS OF YEAR
----------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Predecessor:
Period from July 1, 1994 to April 26, 1995:
Allowance for uncollectible accounts.................... $ 80 $ -- $ -- $ 80
Successor:

Period from April 27, 1995 to June 30, 1995:
Allowance for uncollectible accounts.................... 80 -- -- 80

Year ended June 30, 1996:
Allowance for uncollectible accounts.................... 80 166 (66) 180

Year ended June 30, 1997:
Allowance for uncollectible accounts.................... 180 43 (123) 100
</TABLE>
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ---------- ---------------------------------------------------------------------------------------- -----------------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
2.1 Stock Purchase Agreement dated as of April 27, 1995 by and among the Registrant, Golden
State Vintners and certain shareholders of Golden State Vintners.
2.2 Preferred Stock Exchange Agreement dated as of April 27, 1995 among the Registrant and
the parties signatory thereto.
2.3 Agreement for Purchase and Sale of Reedley Facility dated March 15, 1995 between the
Registrant and Heublein, Inc.
2.4 Vineyard Purchase Agreement dated May 16, 1995 between the Registrant and The Grape
Group, Inc.
2.5 Asset Purchase Agreement of Soledad Facility dated September 4, 1996 between the
Registrant and Vintners International Company, Inc., as amended.
2.6 Common Stock Subscription Agreement dated as of April 27, 1995 among the Registrant and
each of the signatories thereto.
2.7 Purchase Agreement dated as of March 10, 1997 among the Registrant, William D. Reid and
Johnye B. Reid.
3.1 Amended and Restated Certificate of Incorporation of the Registrant, as amended.
3.2* Form of Second Amended and Restated Certificate of Incorporation of the Registrant.
3.3 Bylaws of the Registrant.
3.4 Certificate of Designations of the 12% Senior Redeemable Preferred Stock of the
Registrant, as amended and currently in effect.
3.5 Certificate of Powers, Designations, Preferences and Relative, Participating, Optional
and Other Special Rights of Junior Exchangeable Preferred Stock and Qualifications,
Limitations and Restrictions Thereof of the Registrant, as amended and currently in
effect.
4.1* Form of Common Stock Certificate of the Registrant.
4.2 Registration Rights Agreement dated as of April 27, 1995 by and among the Registrant and
certain holders of the Registrant's Common Stock.
4.3 Registration Rights Agreement dated October 10, 1996 by and among the Registrant and
certain holders of the Registrant's Common Stock.
4.4 Amended and Restated Stockholders Agreement dated as of October 10, 1996 by and among
the Registrant and certain holders of the Registrant's capital stock.
5.1* Legal opinion of Riordan & McKinzie.
10.1 1996 Stock Option Plan ("1996 Stock Plan") of the Registrant.
10.2 Form of Incentive Stock Option Agreement under the 1996 Stock Plan.
10.3 Form of Nonqualified Stock Option Agreement under the 1996 Stock Plan.
10.4 Form of Indemnity Agreement between the Registrant and its officers and directors.
10.5 Employment Agreement dated as of April 27, 1995 between the Registrant and Jeffrey B.
O'Neill.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ---------- ---------------------------------------------------------------------------------------- -----------------
<C> <S> <C>
10.6 Securities Purchase Agreement dated April 21, 1995 among the Registrant, Golden State
Vintners and John Hancock Mutual Life Insurance Company ("John Hancock"), as amended.
10.7 First Mortgage Note Due April 1, 2005 issued by Golden State Vintners in favor of John
Hancock in the principal amount of $35,000,000.00.
10.8 Continuing Corporate Guaranty dated April 27, 1995 entered into by the Registrant in
favor of John Hancock.
10.9 Security Agreement dated as of April 21, 1995 entered into by Golden State Vintners in
favor of John Hancock.
10.10 Intercreditor Agreement dated as of April 21, 1995 among Golden State Vintners, John
Hancock and Sanwa Bank California ("Sanwa"), as amended.
10.11* Demand Promissory Note dated April 27, 1995 issued by the Registrant in favor of Golden
State Vintners in the principal amount of $1,300,000.00.
10.12 Intentionally omitted.
10.13 Accounts Receivable Credit Agreement dated as of April 21, 1998 between Sanwa and the
Registrant.
10.14* Continuing Guaranty dated as of April 21, 1998 between the Registrant and Sanwa.
10.15 Term Loan Agreement dated May 1, 1995 between the Registrant and Sanwa Bank of
California, as amended.
10.16 Term Loan Agreement dated as of December 18, 1996 between the Registrant and Sanwa, as
amended.
10.17 Sublease and Consent among the Registrant, Richard C. McKenzie and 100 Sir Francis Drake
Boulevard, Inc.
10.18 Promissory Note dated May 5, 1995 issued by the Registrant in favor of Heublein, Inc.
10.19 Securities Purchase Agreement dated as of August 22, 1996 among the Registrant and the
parties signatory thereto.
10.20 Stock Purchase Agreement dated as of October 10, 1996 among the Registrant, SBIC
Partners, L.P. and Jeffrey B. O'Neill, together with Supplemental Signature Page thereto
dated November 26, 1996 executed by R&M Partners/GSV, G.P., Victor Palmieri and Peter
Mullin.
10.21 Letter Agreement dated October 9, 1996 between the Registrant and Exeter Venture
Management Corporation.
10.22 Management Agreement dated May 31, 1997 between the Registrant and Forrest Binkley &
Brown Partners L.P.
10.23 1998 Director Stock Option Plan (the "Director Plan").
10.24 Stock Option Agreement dated as of December 31, 1997 between the Registrant and Jeffrey
B. O'Neill.
10.25 Stock Option Agreement dated as of December 31, 1997 between the Registrant and Brian R.
Thompson.
10.26 Employment Agreement dated as of January 1, 1998 between the Registrant and Jeffrey B.
O'Neill.
10.27 Promissory Note issued by the Registrant in favor of Cottonwood Vineyard in the
principal amount of $452,791.17.
10.28 Promissory Note issued by the Registrant in favor of Vintners International Company,
Inc.
10.29 Form of Stock Option Agreement under the Director Plan.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ---------- ---------------------------------------------------------------------------------------- -----------------
<C> <S> <C>
10.30 Promissory Note dated September 30, 1986 between the Registrant, as assignee of original
maker, The Grape Group, and The Prudential Insurance Company of America.
10.31 Loan Note dated January 17, 1990 between the Registrant, as assignee of original makers,
William E. Reid and Johnye B. Reid, and Sumitomo Bank of California.
10.32 Promissory Note dated June 15, 1995 between the Registrant, as assignee of original
makers, William E. Reid and Johnye B. Reid, and Sumitomo Bank of California.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP Independent Auditors.
23.2* Consent of Riordan & McKinzie (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-7 of this Registration Statement).
27.1 Financial Data Schedule.
</TABLE>

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

* To be filed by amendment.

<PAGE>

STOCK PURCHASE AGREEMENT

by and among

CERTAIN SHAREHOLDERS OF GSV

collectively, as "Sellers",

GOLDEN STATE VINTNERS

as the "Company"

and

GOLDEN STATE ACQUISITION CORP.

as "Buyer"

Dated: April 27, 1995

<PAGE>

TABLE OF CONTENTS

PAGE
----

ARTICLE I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Defined Terms. . . . . . . . . . . . . . . . . . . . . 6

ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

PURCHASE AND SALE OF CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . 7
2.1 Transfer of Capital Stock. . . . . . . . . . . . . . . . . . 7
2.2 Consideration for Capital Stock. . . . . . . . . . . . . . . 7
2.3 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Purchase Price Reduction . . . . . . . . . . . . . . . . . . 7

ARTICLE III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Documents to be Delivered. . . . . . . . . . . . . . . . . . 7

ARTICLE IVA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4A.1 Organization of Sellers. . . . . . . . . . . . . . . . . . . 8
4A.2 Organization of the Company. . . . . . . . . . . . . . . . . 8
4A.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . . 9
4A.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 9
4A.5 Absence of Certain Changes or Events . . . . . . . . . . . . 9
4A.6 Title to Assets, Etc.. . . . . . . . . . . . . . . . . . . .12
4A.7 Condition of Tangible Assets . . . . . . . . . . . . . . . .13
4A.8 Contracts and Commitments. . . . . . . . . . . . . . . . . .13
4A.9 No Conflict or Violation . . . . . . . . . . . . . . . . . .14
4A.10 Consents and Approvals . . . . . . . . . . . . . . . . . . .15
4A.11 Financial Statements . . . . . . . . . . . . . . . . . . . .15
4A.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . .15
4A.13 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . .15
4A.14 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . .16
4A.15 Compliance with Law. . . . . . . . . . . . . . . . . . . . .16

i
<PAGE>

TABLE OF CONTENTS
(CONTINUED)

4A.16 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . .16
4A.17 No Other Agreements to Sell the Assets or the Company. . . .16
4A.18 Proprietary Rights . . . . . . . . . . . . . . . . . . . . .16
4A.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . .17
4A.20 Transactions with Certain Persons. . . . . . . . . . . . . .18
4A.21 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . .19
4A.22 Severance Arrangements . . . . . . . . . . . . . . . . . . .20
4A.23 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . .20
4A.24 Accounts Receivable. . . . . . . . . . . . . . . . . . . . .20
4A.25 Inventories. . . . . . . . . . . . . . . . . . . . . . . . .21
4A.26 Purchase Commitments and Outstanding Bids. . . . . . . . . .21
4A.27 Payments . . . . . . . . . . . . . . . . . . . . . . . . . .21
4A.28 Customers and Suppliers. . . . . . . . . . . . . . . . . . .21
4A.29 Compliance With Legislation Regulating Environmental
Quality. . . . . . . . . . . . . . . . . . . . . . . . . . .22
4A.30 Real Estate. . . . . . . . . . . . . . . . . . . . . . . . .22
4A.31 Misstatements Or Omissions . . . . . . . . . . . . . . . . .25
4A.32 Purchase Arrangements. . . . . . . . . . . . . . . . . . . .25

ARTICLE IVB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

REPRESENTATIONS AND WARRANTIES OF THE LENDER SELLERS. . . . . . . . . . .26
4B.1 Organization of such Lender Seller . . . . . . . . . . . . .26
4B.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . .26
4B.3 No Conflict or Violation . . . . . . . . . . . . . . . . . .26
4B.4 Consents and Approvals . . . . . . . . . . . . . . . . . . .26
4B.5 No Other Agreements to Sell the Company. . . . . . . . . . .26
4B.6 Transactions with Certain Persons. . . . . . . . . . . . . .27
4B.7 Misstatements or Omissions . . . . . . . . . . . . . . . . .27
4B.8 Purchase Arrangements. . . . . . . . . . . . . . . . . . . .27

ARTICLE V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . .27
5.1 Organization of Buyer . . . . . . . . . . . . . . . . . . . .27
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . .27
5.3 Consents and Approvals. . . . . . . . . . . . . . . . . . . .27
5.4 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . .28
5.5 No Conflict or Violation. . . . . . . . . . . . . . . . . . .28

ii
<PAGE>

TABLE OF CONTENTS
(CONTINUED)

ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

ACTIONS BY SELLERS, THE COMPANY AND
BUYER PRIOR TO THE CLOSING . . . . . . . . . . . . . . . . . . . . .28
6.1 Maintenance of Business . . . . . . . . . . . . . . . . . . .28
6.2 Certain Prohibited Transactions . . . . . . . . . . . . . . .28
6.3 Investigation by Buyer. . . . . . . . . . . . . . . . . . . .29
6.4 Consents and Best Efforts . . . . . . . . . . . . . . . . . .30
6.5 Notification of Certain Matters . . . . . . . . . . . . . . .30
6.6 No Mergers, Consolidations, Sale of Capital Stock, Etc. . . .31
6.7 Title Insurance, Surveys. . . . . . . . . . . . . . . . . . .31
6.8 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .32

ARTICLE VII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

CONDITIONS TO SELLERS' OBLIGATIONS. . . . . . . . . . . . . . . . . . . .32
7.1 Representations, Warranties and Covenants . . . . . . . . . .33
7.2 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.3 No Governmental Proceeding or Litigation. . . . . . . . . . .33
7.4 Certificates. . . . . . . . . . . . . . . . . . . . . . . . .33
7.5 Corporate Documents . . . . . . . . . . . . . . . . . . . . .33
7.6 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.7 Other Agreements. . . . . . . . . . . . . . . . . . . . . . .33
7.8 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . .33
7.9 Employment Agreements . . . . . . . . . . . . . . . . . . . .33
7.10 Delivery of Documents . . . . . . . . . . . . . . . . . . . .34

ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

CONDITIONS TO BUYER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . .34
8.1 Representations, Warranties and Covenants . . . . . . . . . .34
8.2 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . .34
8.3 No Governmental Proceeding or Litigation. . . . . . . . . . .34
8.4 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . .34
8.5 Certificates. . . . . . . . . . . . . . . . . . . . . . . . .34
8.6 Corporate Documents . . . . . . . . . . . . . . . . . . . . .35
8.7 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . .35

iii
<PAGE>

TABLE OF CONTENTS
(CONTINUED)

8.8 Federal Alcohol Administration Act. . . . . . . . . . . . . .35
8.9 Financing . . . . . . . . . . . . . . . . . . . . . . . . . .35
8.10 Disclosure Schedules. . . . . . . . . . . . . . . . . . . . .35
8.11 Balance Sheet and Financial Statements. . . . . . . . . . . .35
8.12 Employment Agreements . . . . . . . . . . . . . . . . . . . .35
8.13 Estoppel Certificates . . . . . . . . . . . . . . . . . . . .35
8.14 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . .36
8.15 Delivery of Documents . . . . . . . . . . . . . . . . . . . .36
8.16 FIRPTA Certificates . . . . . . . . . . . . . . . . . . . . .36

ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36

COVENANT NOT TO COMPETE . . . . . . . . . . . . . . . . . . . . . . . . .36

ARTICLE X. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

ACTIONS BY SELLERS, THE COMPANY
AND BUYER AFTER THE CLOSING. . . . . . . . . . . . . . . . . . . . .37
10.1 Books and Records . . . . . . . . . . . . . . . . . . . . . .37
10.2 Further Assurances. . . . . . . . . . . . . . . . . . . . . .38
10.3 Compliance With Legislation Regulating Environmental
Quality . . . . . . . . . . . . . . . . . . . . . . . . . . .38

ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
11.1 Survival of Representations, Etc. . . . . . . . . . . . . . .38
11.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . .38
11.3 Indemnification Procedures. . . . . . . . . . . . . . . . . .39
11.4 No Right of Contribution. . . . . . . . . . . . . . . . . . .41
11.5 Characterization; Taxes . . . . . . . . . . . . . . . . . . .41

ARTICLE XII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

SECURITIES LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
12.1 Acquisition for Investment. . . . . . . . . . . . . . . . . .41
12.2 Legend. . . . . . . . . . . . . . . . . . . . . . . . . . . .41

iv
<PAGE>

TABLE OF CONTENTS
(CONTINUED)

PAGE
----

ARTICLE XIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
13.1 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . .42

ARTICLE XIV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42

MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
14.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . .42
14.2 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . .43
14.3 Notices; Transfer of Funds. . . . . . . . . . . . . . . . . .43
14.4 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . .45
14.5 Entire Agreement; Amendments and Waivers. . . . . . . . . . .46
14.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .46
14.7 Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . .46
14.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . .46
14.9 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .46
14.10 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . .46
14.11 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . .46
14.12 Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . .47
14.13 Confidential Information. . . . . . . . . . . . . . . . . . .47
14.14 Liability of Lender Sellers . . . . . . . . . . . . . . . . .48

v
<PAGE>

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement, dated as of April 27, 1995, is entered
into by and among Golden State Acquisition Corp., a Delaware corporation
("Buyer"), Golden State Vintners, a California corporation (the "Company") and
certain shareholders of the Company (each, a "Seller" and, collectively,
"Sellers").

RECITALS

A. Sellers own no less than 90% of the shares of common stock, no
par value, of the Company (the "Common Stock"), and no less than 90% of the
shares of preferred stock, no par value, of the Company (the "Preferred Stock",
and together with the Common Stock, the "Capital Stock") constituting all of the
outstanding Capital Stock of the Company. The Company currently engages in,
among other things, (i) growing wine grapes on a long term contract basis, (ii)
processing, custom crushing and selling commodity and premium wine made from
both North Coast and Central Valley, California grapes, (iii) producing a line
of proprietary case goods, and (iv) bottling for unrelated third parties on a
contract basis (the foregoing, together with all other business and operations
of the Company and any of its subsidiaries or divisions shall hereinafter be
collectively referred to as the "Business"). For purposes of this Agreement,
"Capital Stock" shall also include certain warrants (which shall be treated as
if exercised) held by certain of the Sellers.

B. Buyer desires to purchase from Sellers, and Sellers desire to
transfer to Buyer, all of the Capital Stock subject to the terms and conditions
of this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Parties hereto agree as follows:

ARTICLE I

DEFINITIONS

1.1 DEFINED TERMS. As used herein, the terms below shall have the
following meanings:

"ADVERSE EFFECT" shall mean a materially adverse effect on any of the
Business, the Sale, the Capital Stock, liabilities, Assets, working capital,
earnings, financial condition, operating results, prospects, or employee,
customer or supplier relations of the Company, or the ability of the Company or
any Seller to perform its respective obligations under the Transaction

1
<PAGE>

Documents or the ability of the Company or any Seller to conduct the Business as
presently conducted.

"AGREEMENT" shall mean this Stock Purchase Agreement, dated as of
April 27, 1995, by and among Buyer, Sellers and the Company, as such Agreement
may be amended from time to time.

"BALANCE SHEET" shall mean the audited Consolidated Balance Sheet of
the Company as of June 30, 1994 together with the notes thereon and the related
unqualified report of Deloitte & Touche, the Company's certified public
accountants, previously delivered to Buyer and attached hereto as Schedule 1.1.

"BALANCE SHEET DATE" shall mean June 30, 1994.

"BEST OF THE COMPANY'S KNOWLEDGE" shall mean the current actual
knowledge of O'Neill, Ronald Foster and Larry Brink, in each case after due
inquiry as to the subject matter involved, which inquiry is implicit in the use
of the "knowledge" qualifier.

"BUSINESS" shall have the meaning assigned to such term in Recital A
hereof.

"BUYER'S EXPENSES" shall mean all costs and expenses incurred by Buyer
in connection with the negotiation, preparation, execution and delivery of the
Transaction Documents and the consummation of the transactions contemplated
therein.

"CAPITAL STOCK" shall have the meaning assigned to such term in
Recital A hereof.

"CLOSING" shall have the meaning assigned to such term in Section 3.1.

"CLOSING DATE" shall mean the close of business on April 27, 1995, or
such other date as may be mutually agreed upon in writing by the Parties.

"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

"COMMON STOCK" shall have the meaning assigned to such term in Recital
A to this Agreement.

"COMMON STOCK SUBSCRIPTION AGREEMENT" shall mean that certain Common
Stock Subscription Agreement by and among the Buyer, FAC, Ltd., Exeter Equity
Partners, L.P., Exeter Venture Lenders, L.P. and SBIC Partners, L.P. attached
hereto as Exhibit 1.1(a).

"CONTRACTS" shall mean any of the agreements, contracts, commitments
or other documents described in Section 4A.8 (a)-(l) hereof.

2
<PAGE>

"CONTROLLED GROUP" shall have the meaning assigned to such term in
Section 4A.19 hereof.

"DAMAGES" shall have the meaning assigned to such term in section 11.2
hereof.

"DISCLOSURE SCHEDULE" means a schedule executed and delivered by
Sellers to Buyer prior to the date hereof which sets forth exceptions to the
representations and warranties contained in Article IVA hereof and certain other
information called for by Article IVA hereof and other provisions of this
Agreement and which hereby is made a part of this Agreement and incorporated
herein by reference, as updated pursuant to Section 8.10.

"ENCUMBRANCES" shall mean any claim, mortgage, deed of trust,
restrictive covenant, reservations, lien, pledge, option, charge, easement,
security interest, right-of-way, encumbrance of any kind or other rights of
third parties, whether or not filed, recorded or otherwise perfected under
applicable law, as well as the interest of any vendor, vendee or lessor or
lessee under any conditional sale agreement, capital lease or other title
retention agreement.

"ERISA" shall have the meaning assigned to such term in Section 4A.19
hereof.

"ESCROW AGREEMENT" shall have the meaning assigned to such term in
Section 2.3 hereof.

"EQUITY INTERESTS" shall mean any capital stock or warrants, options
or other rights to acquire capital stock.

"EXCHANGEABLE PREFERRED STOCK" shall have the meaning assigned to such
term in Section 2.2 hereof.

"FAC" shall mean FAC, Ltd., a Cayman Islands corporation.

"FACILITIES" shall mean the plants, offices, wine processing and
bottling facilities, stores, warehouses, administration buildings, wineries,
tracts of land for growing grapes, tasting rooms, hospitality centers and all
other Real Estate, and related facilities which are owned or leased by the
Company or the Sellers on behalf of the Company.

"FINANCIAL STATEMENTS" shall mean the audited Consolidated Statements
of Income and Consolidated Statements of Stockholder's Equity for the Company
for the twelve month period ended as of the Balance Sheet Date together with the
notes thereon and the related unqualified report of Deloitte & Touche, the
Company's certified public accountants, previously delivered to Buyer and
attached hereto as Schedule 1.1.

"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery and equipment owned or leased by the Company or the
Sellers on behalf of the

3
<PAGE>

Company and located in, at or upon the Facilities as of the Balance Sheet Date
plus all additions, replacements or deletions since the Balance Sheet Date to
the Closing Date.

"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.

"INDEBTEDNESS" shall mean, with respect to any Person, (a)
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor or otherwise (other than trade payables and other current
liabilities incurred in the ordinary course of business and consistent with past
practices) and any commitment by which such Person insures a creditor against
loss, including contingent reimbursement obligations with respect to letters of
credit, (b) indebtedness guaranteed in any manner by such Person, including a
guarantee in the form of an agreement to repurchase or reimburse, (c)
obligations under capitalized leases in respect of which such Person is liable,
contingent ly or otherwise, as obligor, guarantor or otherwise, or in respect of
which obligations such Person insures a creditor against loss, and (d) any
unsatisfied obligation of such Person for "withdrawal liability" to a
"multiemployer plan," as such terms are defined under ERISA.

"INVESTMENT" shall mean, with respect to any Person, (a) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or other ownership or beneficial interest
(including partnership interests and joint venture interests) of any other
Person, and (b) any capital contribution by such Person to any other Person.

"JUNIOR PREFERRED STOCK EXCHANGE AGREEMENT" shall mean that certain
Junior Preferred Stock Exchange Agreement by and among the Company and Sellers,
dated the Closing Date.

"OTHER PLANS" shall have the meaning assigned to such term in Section
4A.19 hereof.

"O'NEILL" shall mean Jeffrey B. O'Neill.

"O'NEILL EMPLOYMENT AGREEMENT" shall have the meaning assigned to such
term in Section 7.9 hereof.

"PBGC" shall have the meaning assigned to such term in section 4A.19
hereof.

"PARTIES" shall mean the Buyer, the Company and each of the Sellers.

4
<PAGE>

"PERSON" shall mean an individual, partnership, corporation,
association, joint stock company, trust, joint venture, unincorporated
organization, government entity or any other entity or organization of any kind
whatsoever.

"PREFERRED STOCK" shall have the meaning assigned to such term in
Recital A hereof.

"REAL ESTATE" shall mean all real property, whether owned or leased,
or any interest therein, and all plants, buildings and other improvements
located on such owned or leased property, and all easements, licenses, rights of
way, permits and all appurtenances to such owned or leased property, including,
without limitation, all appurtenant rights in and to public streets, whether or
not vacated.

"REPRESENTATIVE'' shall mean, with respect to any Person, any officer,
director, partner, principal, attorney, agent, employee or other authorized
representative of such Person.

"SALE" shall have the meaning assigned to such term in Section 2.1
hereof.

"SELLERS' EXPENSES" shall mean all costs and expenses incurred by the
Sellers in connection with the negotiation, preparation, execution and delivery
of the Transaction Documents and the consummation of the transactions
contemplated thereby.

"SUBSIDIARIES" shall mean any Person in which the Company either owns
capital stock or is a partner or is in some other manner affiliated through an
investment or participation in the equity or voting interests of such Person.

"TAX" or "TAXES" shall mean any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Sec. 59A), customs duties, capital stock, franchise, profits, withholding,
social security or similar, unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including without
limitation any interest, penalty, or addition thereto, whether disputed or not.

"TAX RETURN" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.

"TRANSACTION DOCUMENTS" shall mean this Agreement and all other
agreements, instruments, certificates and other documents to be entered into or
delivered by any Person in connection with the transactions contemplated to be
consummated pursuant to any of the foregoing.

5
<PAGE>

"TRANSFER TAXES" shall mean any and all sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees.

1.2 OTHER DEFINED TERMS. The following terms shall have the
meanings assigned to such terms in the corresponding Sections of this Agreement
set forth below:

<TABLE>
<CAPTION>
TERM SECTION
- ---- -------
<S> <C>
Action 4A.12
Assets 4A.6
Buyer's Indemnitees 11.2
Closing 3.1
Closing Disclosure Schedule 8.10
Damages 11.2
Indemnification Claim Notice 11.2
Indemnified Party 11.3
Indemnifying Party 11.3
Interim Financial Statements 8.11
Personnel 4A.5
Proceeding 11.2
Purchase Price 2.2
Proprietary Rights 4A.18
Seller's Indemnitees 11.2
Survey 6.7
</TABLE>

6
<PAGE>

ARTICLE II

PURCHASE AND SALE OF CAPITAL STOCK

2.1 TRANSFER OF CAPITAL STOCK. Upon the terms and subject to the
conditions contained herein, Sellers will sell, convey, transfer, assign and
deliver to Buyer, and Buyer will acquire on the Closing Date, no less than 90%
of the shares of Capital Stock (the "Sale").

2.2 CONSIDERATION FOR CAPITAL STOCK. Upon the terms and subject
to the conditions contained herein, as consideration for the purchase of up to
100% of the shares of Capital Stock, Buyer shall (i) pay a purchase price (the
"Purchase Price") of $.104933 per share for an aggregate of up to Twenty Million
Eight Hundred Fifty-Two Thousand One-Hundred Eighteen Dollars and Fifty-Six
Cents ($20,852,118.56), payable by the delivery to Sellers of immediately
available funds and (ii) issue in escrow (in accordance with Section 2.3 hereof)
for the benefit of Sellers 523,980 shares of exchangeable 6% junior preferred
stock of the Buyer in the aggregate face amount of $2,619,900 (the "Exchangeable
Preferred Stock") subject to the terms and conditions of that certain Junior
Preferred Stock Exchange Agreement; PROVIDED, HOWEVER, that Buyer shall
substitute cash for Exchangeable Preferred Stock with respect to certain Sellers
entitled to receive Exchangeable Preferred Stock hereunder in an aggregate face
amount less than $47,266 at Closing, and such Sellers shall accept such cash
consideration in lieu of the Exchangeable Preferred Stock.

2.3 ESCROW. At the Closing, Sellers and Buyer will enter into an
escrow agreement (the "Escrow Agreement"), relating to certain indemnification
obligations of Sellers arising under Article XI of this Agreement.

2.4 PURCHASE PRICE REDUCTION. The Purchase Price shall be reduced
at Closing on a dollar for dollar basis, by the amount of any prepayments or
other penalties or fees payable or incurred in connection with the refinancing
of the Company's existing Indebtedness.

ARTICLE III

CLOSING

3.1 CLOSING. The closing of the transactions contemplated herein
(the "Closing") shall be held at 10 a.m. New York City time on the Closing Date
at the offices of Anderson Kill Olick & Oshinsky, P.C., 1251 Avenue of the
Americas, New York, New York, unless the Parties hereto otherwise agree.

3.2 DOCUMENTS TO BE DELIVERED. To effect the transfer referred to
in section 2.1 and the delivery of the consideration described in Section 2.2
hereof, Sellers and Buyer shall, on the Closing Date, deliver the following:

7
<PAGE>

(a) Sellers shall deliver to Buyer certificate(s) evidencing up to
100% of the shares of Capital Stock, free and clear of any Encumbrances of any
nature whatsoever, duly endorsed in blank for transfer or accompanied by stock
powers duly executed in blank.

(b) Sellers and Buyer shall each deliver all documents required to
be delivered pursuant to Articles VII and VIII hereof.

(d) All instruments and documents executed and delivered to Buyer
pursuant hereto shall be in form and substance, and shall be executed in a
manner, reasonably satisfactory to Buyer. All instruments and documents
executed and delivered to Sellers pursuant hereto shall be in form and
substance, and shall be executed in a manner, reasonably satisfactory to
Sellers.

(e) Buyer shall deliver to an escrow account pursuant to the
Escrow Agreement certificates in Sellers' names evidencing the Exchangeable
Preferred Stock, free and clear of any Encumbrances (except with respect to the
indemnification obligations of Sellers set forth herein) of any nature
whatsoever.

ARTICLE IVA

REPRESENTATIONS AND WARRANTIES OF SELLERS
AND THE COMPANY

Except as otherwise set forth in the Disclosure Schedule, each of the
Sellers and the Company hereby represent and warrant to Buyer as follows:

4A.1 ORGANIZATION OF SELLERS. Each Seller, which is not an
individual, is duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation. Sellers own of record and
beneficially all of the outstanding Capital Stock of the Company free and clear
of all Encumbrances.

4A.2 ORGANIZATION OF THE COMPANY. The Company is duly organized,
validly existing and in good standing under the laws of the State of California,
has full corporate power and authority to conduct its Business as it is
presently being conducted and as proposed to be conducted and to own and lease
its properties and Assets. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is necessary or required under applicable law as a result of the
conduct of the Business or the ownership of its Assets or properties and the
failure to so qualify would have an Adverse Effect. Each jurisdiction in which
the Company is qualified to do business as a foreign corporation is listed on
the Disclosure Schedule. The Company has authorized 500,000,000 shares of
Common Stock, no par value, 4,187,515 shares of which are issued and outstanding

8
<PAGE>

and 300,000,000 shares of Preferred Stock, no par value, 149,636,004 shares of
which are outstanding. The Capital Stock constitutes all of the Equity
Interests of the Company, and all of the Company's outstanding shares of Capital
Stock have been duly authorized and validly issued and are fully paid and
non-assessable.

4A.3 AUTHORIZATION. Each Seller has all necessary corporate or
other power and authority, as the case may be, to enter into the Transaction
Documents and has taken all corporate or other action necessary to consummate
the transactions contemplated thereby and to perform its respective obligations
thereunder. The Company has all necessary corporate power and authority to
enter into the Transaction Documents and has taken all corporate action
necessary to consummate the transactions contemplated thereby and to perform its
obligations thereunder. As of the Closing Date, each of the Transaction
Documents has been duly executed and delivered by each Seller and the Company
and each Transaction Document shall be a legal, valid and binding obligation of
each Seller and the Company enforceable against each Seller and the Company in
accordance with its respective terms.

4A.4 SUBSIDIARIES. The Disclosure Schedule sets forth a complete
and accurate list of all of the Subsidiaries, all of which are, directly or
indirectly, wholly-owned by the Company. All references herein to the Company,
unless the context indicates otherwise, shall be deemed to mean the Company and
its Subsidiaries. The Disclosure Schedule also contains the jurisdiction of
incorporation of each of the Subsidiaries, each jurisdiction in which such
Subsidiary is qualified to do business and the number of shares of such
Subsidiary outstanding. The outstanding shares of such Subsidiaries have been
duly and validly authorized and issued, are fully paid and non-assessable, and
were issued pursuant to, and within the limitations contained in, appropriate
and effective permits and consents of each governmental authority from whom any
permit or consent was required by law, and the outstanding shares owned by the
Company are owned free and clear of any Encumbrances. There are no
subscriptions, options, warrants, calls, commitments or other rights of any kind
outstanding for the purchase of, nor any securities convertible or exchangeable
for, any securities of any of the Subsidiaries. Each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
jurisdiction of its incorporation, with full corporate power to own its assets
and properties and to conduct the Business as now being conducted and as
proposed to be conducted and is duly qualified and in good standing to transact
business in each jurisdiction (listed in the Disclosure Schedule) where, by
virtue of its business carried on or properties or assets owned, it is required
to be so qualified.

4A.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet
Date, with respect to the Company there has not been any:

(a) significant change in the Company's condition (financial or
otherwise), Assets, liabilities, working capital, reserves, earnings, Business
or prospects, in each case, outside the ordinary course of business and
consistent with past practices;

9
<PAGE>

(b) (i) except for normal periodic increases in the ordinary
course of business consistent with past practice, increase in the compensation
payable or to become payable by the Company to any of its officers, employees or
agents (collectively, "Personnel") whose total compensation for services
rendered to the Company is currently at an annual rate of more than $75,000,
(ii) any bonus, incentive compensation, service award or other like benefit
granted, made or accrued, contingently or otherwise, for or to the credit of any
of the Personnel, (iii) any employee welfare, pension, retirement,
profit-sharing or similar payment or arrangement made or agreed to by the
Company for any Personnel except pursuant to the existing plans and arrangements
described in the Disclosure Schedule or (iv) any new employment agreement to
which the Company is a party;

(c) addition to or modification of the employee benefit plans,
arrangements or practices described in the Disclosure Schedule affecting
Personnel other than (i) contributions made for 1994 in accordance with the
normal practices of the Company or (ii) the extension of coverage to other
Personnel who became eligible after the Balance Sheet Date;

(d) sale, assignment or transfer of any of the Assets, other than
in the ordinary course of business and consistent with past practices;

(e) cancellation of any Indebtedness owed to the Company or waiver
of any rights of substantial value to the Company, whether or not in the
ordinary course of business;

(f) amendment, cancellation or termination of any Contract,
license or other instrument material to the assets, sales, Business, prospects,
earnings or condition (financial or otherwise) of the Company;

(g) capital expenditure or execution of any lease or incurring of
liability therefor by the Company not in the ordinary course of business;

(h) failure to repay any obligation of the Company other than
those obligations disputed by the Company in good faith, which disputed
obligations have been listed on the Disclosure Schedule;

(i) failure to operate the Business in the ordinary course and
consistent with past practices and to preserve the Business intact, use its
commercially reasonable efforts to keep available to Buyer the services of
substantially all of the Personnel in a manner consistent with past practices,
or to preserve for Buyer the goodwill of the Company's suppliers, customers and
others having business relations with it;

(j) change in accounting methods or practices by the Company
affecting its assets, earnings, reserves, working capital, prospects,
liabilities or Business;

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(k) revaluation by the Company of any of its Assets or properties,
including without limitation, writing off notes or accounts receivable other
than in the ordinary course of business and consistent with past practices;

(l) damage, destruction or loss (whether or not covered by
insurance) adversely affecting the Facilities, properties, assets, Business,
condition (financial or otherwise) or prospects of the Company in an amount
greater than $25,000;

(m) mortgage, pledge or other Encumbrance of any Assets or
properties of the Company other than in the ordinary course of business and
consistent with past practices;

(n) declaration, setting aside or payment of dividends or
distributions in respect of any Capital Stock or any redemption, purchase or
other acquisition of any Capital Stock;

(o) issuance by the Company of, or commitment of the Company to
issue, any shares of stock or other equity securities or obligations or
securities convertible into or exchangeable for shares of Capital Stock;

(p) Indebtedness incurred by the Company for borrowed money or any
commitment to borrow money entered into by the Company, or any loans made or
agreed to be made by the Company except in the ordinary course of business and
consistent with past practices.

(q) liabilities incurred not in the ordinary course of business
and consistent with past practice, or any increase or change in any assumptions
underlying or methods of calculating any bad debt, contingency or other
reserves;

(r) payment, discharge or satisfaction of any liabilities other
than the payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice of liabilities reflected or reserved against
in the Balance Sheet or incurred in the ordinary course of business and
consistent with past practice since the Balance Sheet Date;

(s) activity which has resulted or may, to the Best of the
Company's Knowledge with respect to activities of third parties only, result
with the passage of time or the giving of notice or otherwise, result in the
acceleration or delay of the collection of its accounts or notes receivable or
any delay in the payment of its accounts payable, in each case as compared with
its custom and practice in the conduct of the Business immediately prior to the
Balance Sheet Date;

(t) loan or advance of any of the Company's funds or other
property to, or guarantee for the benefit of, or any Investment of any of its
funds or other property in, any other Person;

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(u) receipt of any written notice by the Company or to the Best of
the Company's Knowledge any indication, whether in writing or otherwise (i) from
any of its suppliers to the effect that such supplier may stop, or decrease the
rate of, supplying products or services to the Company; (ii) from any of its
customers to the effect that such customer may stop, or decrease the rate of,
buying products or services from the Company; or (iii) with respect to any of
its significant suppliers or customers to the effect that any of such suppliers
or customers have or are reasonably likely to experience an event or condition
which may have an Adverse Effect on such suppliers or customers;

(v) other event or condition of any character outside the ordinary
course of business, which, in any one case or in the aggregate, has resulted in
an Adverse Effect or any event or condition known to the Company or any of the
Sellers which could, in any one case or in the aggregate, result in an Adverse
Effect;

(w) agreement by the Company or, to the Best of the Company's,
Knowledge, by any of its Representatives to do any of the foregoing.

4A.6 TITLE TO ASSETS, ETC.

(a) Except as set forth on the Disclosure Schedule, the Company
has good and marketable fee simple (where applicable) title to, or valid
leasehold interest in, all the assets reflected on the Balance Sheet or acquired
in the ordinary course of business since the Balance Sheet Date (the "Assets").

(b) None of the Assets are subject to any Encumbrances.

(c) The Assets constitute all of the assets and rights which are
necessary for the conduct of the Business as currently conducted. The Company
has performed all the obligations required to be performed by it with respect to
all Assets leased by it through the date hereof.

(d) The Company enjoys exclusive possession of all Facilities
owned or leased by it, and such Facilities are not subject to any Encumbrances,
encroachments, building or use restrictions, exceptions, reservations or
limitations which in any respect interfere with or impair the present and
continued use thereof in the usual and normal conduct of the Business.

(e) There are no pending or to the Best of the Company's
Knowledge, threatened condemnation proceedings relating to any of the
Facilities.

(f) The real property improvements (including leasehold
improvements), equipment and other tangible assets owned or used by the Company
at the Facilities are, to the Best of the Company's Knowledge, structurally
sound with no defects. None of said

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improvements, equipment and other assets is subject to any commitment or other
arrangement for their sale or use by any affiliate of the Company or third
parties.

4A.7 CONDITION OF TANGIBLE ASSETS. The Facilities and Fixtures and
Equipment are to the Best of the Company's Knowledge in good operating condition
and repair and are in substantial compliance with all applicable laws,
ordinances, orders, regulations and other requirements (including applicable
zoning, environmental, motor vehicle safety or standards, occupational safety
and health laws and regulations) relating thereto currently in effect.

4A.8 CONTRACTS AND COMMITMENTS. Except as set forth on the
Disclosure Schedule, the Company is not a party to any written or oral:

(a) commitment, contract, note, loan, evidence of Indebtedness,
purchase order or letter of credit involving any obligation or liability on the
part of the Company of more than $75,000 and not cancelable (without liability)
within 60 days;

(b) lease of real property (the Disclosure Schedule indicates with
respect to each lease listed on the Disclosure Schedule the term, annual rent,
renewal options, approximate number of square feet leased);

(c) lease of personal property involving any annual expense in
excess of $25,000 and not cancelable (without liability) within 60 days (the
Disclosure Schedule indicates with respect to each lease listed on the
Disclosure Schedule a general description of the leased items, term, annual rent
and renewal options);

(d) governmental or regulatory licenses or permits required to
conduct the Business as presently conducted and as proposed to be conducted;

(e) contracts or agreements containing covenants limiting the
freedom of the Company to engage in any line of business or compete with any
Person;

(f) employment contracts, including without limitation, contracts
to employ executive officers and other contracts with officers or directors of
the Company, and contracts with independent contractors on a full-time,
part-time, consulting or other basis;

(g) pension, profit sharing, stock option, stock appreciation,
employee stock purchase or other plan or arrangement providing for deferred or
other compensation to employees or any other employee benefit, welfare or stock
plan or arrangement, or any contract with any labor union or any severance
agreement;

(h) contract pursuant to which it has advanced or loaned funds or
made any Investments of its funds or other property or Assets, or agreed to
advance or loan funds to any

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<PAGE>

other Person or to do any of the foregoing other than advances to growers in the
ordinary course of business;

(i) contract or indenture relating to the mortgaging, pledging, or
otherwise placing an Encumbrance on any Assets (other than any Encumbrance which
will be extinguished prior to the Closing Date);

(j) assignment, license, indemnification or other contract with
respect to any intangible property (including any Proprietary Right);

(k) independent or service representative or distributorship
agreement; or

(l) contracts or financial commitments of more than $50,000 and
not cancelable (without liability) within sixty days not otherwise described
above or listed in the Disclosure Schedule (including without limitation
purchase orders, franchise agreements and undertakings or commitments to any
governmental or regulatory authority) relating to the Business or otherwise
affecting the Business not in the ordinary course of business;

The Company has performed all obligations required to be performed by
it under each Contract and it is not (and, to the Best of the Company's
Knowledge, no other party is) in breach or violation of, or default under any of
the Contracts or other instruments, obligations, evidences of Indebtedness or
commitments described in (a)-(l) above. To the Best of the Company's Knowledge,
no event has occurred which, with the passage of time or the giving of notice
(or both), would result in a default, breach or event of noncompliance under any
obligation of the Company pursuant to any Contract. The Company does not have a
present expectation or intention of not fully performing any obligation pursuant
to any Contract. Each Contract described on the Disclosure Schedule is, to the
Best of the Company's Knowledge, legal, valid, binding and enforceable in
accordance with its terms.

With respect to each Contract which is a lease of personal property,
the Company holds a valid and existing leasehold interest under such lease for
the term set forth with respect to such lease an the Disclosure Schedule.

4A.9 NO CONFLICT OR VIOLATION. Neither the execution and delivery
of the Transaction Documents nor the consummation of the transactions
contemplated thereby will result in (a) a violation of or a conflict with any
provision of the Certificate of Incorporation or Bylaws of any Seller, which is
not an individual, or the Company, (b) a breach of, or a default under, any term
or provision of any Contract, agreement, Indebtedness, lease, Encumbrance,
commitment, license, franchise, permit, authorization or concession to which any
Seller or the Company is a party or by which any of the Assets are bound, (c) a
violation by Sellers or the Company of any statute, rule, regulation, ordinance,
code, order, judgment, writ, injunction, decree or award, or (d) an imposition
of any Encumbrance, restriction or charge on the Business, the Company or on any
of the Assets.

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<PAGE>

4A.10 CONSENTS AND APPROVALS. Except as set forth on the Disclosure
Schedule, no consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority, or any other Person
is required to be made or obtained by Sellers or the Company in connection with
the execution, delivery and performance of the Transaction Documents and the
consummation of the transactions contemplated thereby.

4A.11 FINANCIAL STATEMENTS. Sellers have heretofore delivered to
Buyer the Balance Sheet and Financial Statements. Except as otherwise set forth
therein, the Financial Statements are complete, are in accordance with the books
and records of the Company, accurately reflect the assets, liabilities and
financial condition and results of operations indicated thereby in accordance
with generally accepted accounting principles consistently applied, and contain
and reflect all necessary adjustments for a fair representation of the Financial
Statements as of the dates and for the periods covered thereby.

4A.12 LITIGATION. Except as set forth on the Disclosure Schedule,
there is no action, order, writ, injunction, judgment or decree outstanding or
claim, suit, litigation, proceeding, labor dispute (other than routine grievance
procedures or routine, uncontested claims for benefits under any benefit plans
for Personnel), arbitral action or investigation (collectively, "Actions")
pending or anticipated by the Company or, to the Best of the Company's
Knowledge, threatened against, relating to or affecting (i) the Company, (ii)
any benefit plan for Personnel or any fiduciary or administrator thereof or
(iii) the transactions contemplated by the Transaction documents. The Company
is not in default with respect to any judgment, order, writ, injunction or
decree of any court or governmental agency, and there are no unsatisfied
judgments against the Company or the Business. Management of the Company
believes there is not a reasonable likelihood of an adverse determination of any
pending Actions which could, individually or in the aggregate, result in an
Adverse Effect.

4A.13 LABOR MATTERS. Except as set forth on the Disclosure
Schedule, the Company is not a party to any labor agreement with respect to its
employees with any labor organization, group or association. To the Best of the
Company's Knowledge since January 1, 1990, the Company has not experienced any
attempt by organized labor or its representatives to make the Company conform to
demands of organized labor relating to its employees or to enter into a binding
agreement with organized labor that would cover the employees of the Company.
The Company is in substantial compliance with all applicable laws respecting
employment practices, terms and conditions of employment and wages and hours and
is not engaged in any unfair labor practice. There is no unfair labor practice
charge or complaint against the Company pending before the National Labor
Relations Board or any other governmental agency arising out of the Company's
activities, and the Company has no knowledge of any facts or information which
would give rise thereto; there is no labor strike or labor disturbance pending
or threatened against the Company nor is any grievance currently being asserted;
and since January 1, 1990, the Company has not experienced a work stoppage or
other labor difficulty.

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<PAGE>

4A.14 LIABILITIES. To the Best of the Company's Knowledge, the
Company has no liabilities or obligations (absolute, accrued, contingent or
otherwise) except (i) liabilities which are reflected and adequately reserved
against on the Balance Sheet, (ii) liabilities incurred in the ordinary course
of business and consistent with past practice since the Balance Sheet Date, and
(iii) liabilities arising under Contracts, letters of credit, purchase orders,
licenses, permits, purchase agreements and other agreements, business
arrangements and commitments described in the Disclosure Schedule or which are
of the type described in Section 4A.8 but which, because of the dollar amount or
other qualifications, are not required to be listed in the Disclosure Schedule.

4A.15 COMPLIANCE WITH LAW. The Company and the conduct of the
Business are in substantial compliance with all applicable laws, statutes,
rules, ordinances and regulations, whether federal, state or local. The Company
has not received any written notice to the effect that, or to the Best of the
Company's Knowledge, otherwise been advised that, it is not in compliance with
any of such statutes, rules, regulations, orders, ordinances or other laws, and
the Company has no reason to anticipate that any presently existing
circumstances are likely to result in violations of any such laws, statutes,
rules, ordinances and regulations.

4A.16 NO BROKERS. Except for that certain fee to be paid by Buyer
to Lazard Freres & Co. as set forth in the Disclosure Schedule, neither the
Company nor any affiliate of the Company has entered into or will enter into any
Contract, agreement, arrangement or understanding with any Person which will
result in the obligation of Buyer to pay any finder's fee, brokerage commission
or similar payment in connection with the transactions contemplated by the
Transaction Documents.

4A.17 NO OTHER AGREEMENTS TO SELL THE ASSETS OR THE COMPANY.
Neither any of the Sellers nor the Company have any legal obligation, absolute
or contingent, to any other Person to sell the Assets, to sell any Capital Stock
or to effect any merger, consolidation or other reorganization of the Company or
to enter into any agreement with respect thereto.

4A.18 PROPRIETARY RIGHTS. All of the Company's (i) registrations of
trademarks and of other marks, trade names or other trade rights, and all
pending applications for any such registrations, (ii) patents and copyrights and
all pending applications therefor, and (iii) other trademarks and other marks,
trade names and other trade rights and all other trade secrets, designs, plans,
specifications and other proprietary rights, whether or not registered,
(collectively, "Proprietary Rights") are listed in the Disclosure Schedule. The
Proprietary Rights listed in the Disclosure Schedule are all those used in the
Business as presently conducted and as proposed to be conducted. No Person has
a right to receive a royalty or similar payment in respect of any Proprietary
Rights pursuant to any contractual arrangements entered into by the Company, and
no Person otherwise has a right to receive a royalty or similar payment in
respect of any such Proprietary Rights. The Company has no licenses granted by
or to it or no other agreements to which it is a party, relating in whole or in
part to any of the Proprietary Rights. The Company's use of the Proprietary
Rights is not infringing upon or otherwise violating the

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<PAGE>

rights of any third party in or to such Proprietary Rights, and no proceedings
have been instituted against or notices received by the Company that are
presently outstanding alleging that the Company's use of its Proprietary Rights
infringes upon or otherwise violates any rights of a third party in or to such
Proprietary Rights. To the Best of the Company's Knowledge, the Proprietary
Rights have not been infringed or misappropriated by any other Person.

Except as set forth on the Disclosure Schedule, the Company owns and
possesses all right, title and interest in and to (or as indicated on the
Disclosure Schedule, has the right to use pursuant to a valid and enforceable
license) all Proprietary Rights, in each case free and clear of all
Encumbrances, and to the Best of the Company's Knowledge, the Company has taken
all necessary actions to maintain and protect the Proprietary Rights which it
owns or uses. The consummation of the transactions contemplated by the
Transaction Documents will not have an adverse effect on any Proprietary Right.

4A.19 EMPLOYEE BENEFIT PLANS

(i) MULTIEMPLOYER PLANS. The Company does not have any obligation
to contribute to (or any other liability, including current or potential
withdrawal liability, with respect to) any "multiemployer plan" (as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")).

(ii) RETIREE WELFARE PLANS. The Company does not maintain or have
any obligation to contribute to (or any other liability with respect to) any
plan or arrangement whether or not terminated, which provides medical, health,
life insurance or other welfare-type benefits for current or future retired or
terminated employees (except for limited continued medical benefit coverage
required to be provided under Section 4980B of the Code or as required under
applicable state law).

(iii) DEFINED BENEFIT PLANS. The Company does not maintain,
contribute to or have any liability under (or with respect to) any employee plan
which is a tax-qualified "defined benefit plan" (as defined in Section 3(35) of
ERISA), whether or not terminated.

(iv) DEFINED CONTRIBUTION PLANS. The Company does not maintain,
contribute to or have any liability under (or with respect to) any employee plan
which is a tax-qualified "defined contribution plan" (as defined in Section
3(34) of ERISA), whether or not terminated.

(v) OTHER PLANS. Except as set forth in the Disclosure Schedule,
the Company does not maintain, contribute to or have any liability under (or
with respect to) any plan or arrangement providing benefits to current or former
employees, including any bonus plan, plan for deferred compensation, employee
health or other welfare benefit plan or other arrangement, whether or not
terminated. Such plans and other arrangements are referred to herein as the
"Other Plans."

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<PAGE>

(vi) PAYMENTS AND ACCRUALS. With respect to the "defined
contribution plan" (as defined in Section 3(34) of ERISA) if any and the Other
Plans (the "PLANS"), all required payments, premiums, contributions,
reimbursements or accruals for all periods ending prior to or as of the Closing
Date shall have been made or properly accrued as of the Balance Sheet Date.
None of the plans has any material unfunded liabilities which are not reflected
on the Balance Sheet.

(vii) COMPLIANCE. The Plans and all related trusts, insurance
contracts and funds have been maintained, funded and administered in compliance
with the applicable provisions of ERISA, the Code and other applicable laws.
Each Plan which is intended to be qualified under Section 401(a) of the Code (i)
has been amended to reflect all requirements of the Tax Reform Act of 1986 ("TRA
86") and all subsequent legislation which is required to be adopted prior to the
end of the TRA 86 remedial amendment period and (ii) has received from the
Internal Revenue Service a favorable determination letter which considers the
terms of the Plan as amended for such tax law changes. Neither the Company nor
any trustee or administrator of the Plans has engaged in any transaction with
respect to the Plans which could subject the Company or to the Best of the
Company's Knowledge, any trustee or administrator of the Plans, or any party
dealing with any such Plan, nor do the transactions contemplated by this
Agreement constitute transactions which could subject any such party, to either
a civil penalty assessed pursuant to Section 502(i) of ERISA or the tax or
penalty on prohibited transactions imposed by Section 4975 of the Code. To the
Best of the Company's Knowledge no actions, suits or claims with respect to the
assets of the Plans (other than routine claims for benefits) are pending or
threatened which could result in or subject the Company to any liability, and
there are no circumstances which could give rise to or be expected to give rise
to any such actions, suits or claims.

(viii) CONTROLLED GROUP. Neither the Company nor the Sellers
incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC"), the
Internal Revenue Service, any multiemployer plan or otherwise with respect to
any Plan or with respect to any employee pension benefit plan currently or
previously maintained by members of the controlled group of companies (as
determined in Sections 414(b) and (c) of the Code (the "CONTROLLED GROUP"))
which includes the Company and that has not been satisfied in full, and to the
Best of the Company's Knowledge, no condition exists that presents a risk to the
Company or any member of the Controlled Group of incurring such a liability for
premiums due to the PBGC.

(ix) CORRECT COPIES. The Sellers have provided the Buyer with true
and complete copies of all documents pursuant to which the Plans are maintained
and administered and the most recent annual reports (Form 5500 and attachments)
for the Plans.

4A.20 TRANSACTIONS WITH CERTAIN PERSONS. Neither any officer,
director or employee of Sellers or the Company nor any member of any such
person's immediate family is presently a Party to any transaction with the
Company relating to the Business, including without limitation, any contract,
agreement or other arrangement (i) providing for the furnishing of

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<PAGE>

services by, (ii) providing for the rental of real or personal property from, or
(iii) otherwise requiring payments to (other than for services as officers,
directors or employees of the Company) any such person or corporation,
partnership, trust or other entity in which any such person has a substantial
interest as a shareholder, officer, director, trustee or partner.

4A.21 TAX MATTERS. Except as set forth in the attached Disclosure
Schedule:

(i) the Company has filed all Tax Returns which are required to be
filed with respect to all periods ending at or prior to the Closing Date
and each such Tax Return is, to the Best of the Company's Knowledge,
correct and complete, the Company has paid all Taxes (whether or not shown)
due and owing by it as of the Closing Date (whether or not shown on any Tax
Return) and has withheld and paid over all Taxes which it is obligated to
withhold from amounts paid or owing to any employee, independent
contractor, shareholder, creditor or other third party;

(ii) no Tax audits are pending or being conducted with respect to
the Company;

(iii) no information related to Tax matters has been requested by
any Taxing authority, and the Company has not received notice indicating an
intent to open an audit or other review from any Taxing authority and
neither the Company nor any officer or director thereof expects or has
reason to expect any authority to assess any additional Taxes for any
period for which Tax Returns have been filed;

(iv) the Company has no knowledge of any asserted claim (whether in
writing or otherwise) by any Taxing authority concerning the Company's
liability for Taxes;

(v) no claim has ever been made by any jurisdiction in which the
Company does not file Tax Returns to the effect that the Company is or may
be subject to any Tax imposed by that jurisdiction;

(vi) the Company has not waived any statute of limitations in
respect of Taxes or agreed to an extension of time with respect to any Tax
assessment or deficiency;

(vii) the Company is not a party to any agreement that could
obligate it to make any payments that would not be deductible pursuant to
Section 28OG of the Code and the Company has not filed a consent pursuant
to section 341(f) of the Code;

(viii) the Company has delivered to Buyer correct and complete copies
of all federal, state and local income Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by the
Company.

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<PAGE>

(ix) the Company is not a party to any Tax sharing or allocation
agreement, and has no liability for the Taxes of any Person (other than the
Company) under Section 1.1502-6 of the Treasury Regulations (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise.

(x) the unpaid Taxes of the Company do not exceed, as of the
Balance Sheet Date, the reserve for Tax liabilities set forth on the
Balance Sheet and such unpaid taxes, as of the Closing Date, do not exceed
that reserve adjusted to take account of the passage of time through the
Closing Date in accordance with the Company's past custom and practice in
computing its Taxes and filing Tax Returns.

4A.22 SEVERANCE ARRANGEMENTS. The Company has not entered into any
written, or to the Best of the Company's Knowledge, oral severance or similar
arrangement in respect of any present or former Personnel that will result in
any obligation (absolute or contingent) of Buyer or the Company to make any
payment in excess of $30,000 to any present or former Personnel following
termination of employment.

4A.23 INSURANCE. The Disclosure Schedule contains a complete and
accurate list of all policies or binders of fire, casualty, liability, title,
worker's compensation, dram shop, liquor liability, earthquake, and other forms
of insurance (showing as to each policy or binder the carrier, policy number,
coverage limits, expiration dates, annual premiums and a general description of
the type of coverage provided) maintained by the Company on its Business,
Facilities, property, Assets or Personnel. All of such policies are sufficient
for compliance with all requirements of law and of all Contracts to which the
Company is a party. The Company is not in default under any of such policies or
binders, and the Company has not failed to give any notice or to present any
claim under any such policy or binder in a due and timely fashion nor, to the
Best of the Company's Knowledge, have any facts or events occurred which
necessitate the giving of notice or filing of a claim with respect to any such
policy. To the Best of the Company's Knowledge, there are no facts upon which
an insurer might be justified in reducing coverage or increasing premiums on
existing policies or binders. There are no outstanding unpaid claims under any
such policies or binders. Such policies and binders are in full force and
effect on the date hereof, and the Company shall use its best efforts to keep
such policies and binders in full force and effect through the Closing Date.

4A.24 ACCOUNTS RECEIVABLE. The accounts receivable reflected in the
Balance Sheet, and all accounts receivable arising since the Balance Sheet Date,
represent bona fide claims against debtors for sales, services performed or
other charges arising on or before the date hereof, and all the goods delivered
and services performed which gave rise to said accounts were delivered or
performed in substantial compliance with the applicable orders, Contracts or
customer requirements. Said accounts receivable are subject to no defenses,
counterclaims or rights of set off and are fully collectible in the ordinary
course of business without cost to the Company in collection efforts therefor
except, in the case of accounts receivable shown on the Balance Sheet, to the
extent of the appropriate reserves set forth on the Balance Sheet, and, in the

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case of accounts receivable arising since the Balance Sheet Date, to a
reasonable allowance for bad debts which does not, to the Best of the Company's
Knowledge, reflect a rate of bad debts more than that reflected by the reserve
for bad debts on the Balance Sheet.

4A.25 INVENTORIES. The values at which inventories are shown on the
Balance Sheet have been determined in accordance with the normal valuation
policy of the Company, consistently applied and in accordance with generally
accepted accounting principles. The inventories (and items of inventory
acquired or manufactured subsequent to the Balance Sheet Date) consist only of
items of quality and quantity commercially usable and salable in the ordinary
course of business, except for any items of obsolete material or material below
standard quality, all of which have been written down to realizable market
value, or for which adequate reserves have been provided, and the present
quantities of all inventories are reasonable in the present circumstances of the
Business.

4A.26 PURCHASE COMMITMENTS AND OUTSTANDING BIDS. As of the date of
this Agreement, the aggregate of all accepted and unfulfilled orders for the
sale of merchandise entered into by the Company does not exceed the amount set
forth on the Disclosure Schedule, and the aggregate of all Contracts or
commitments for the purchase of supplies by it does not exceed the amount set
forth on the Disclosure Schedule, all of which orders, Contracts and commitments
were made in the ordinary course of business and consistent with past practices.
As of the date of this Agreement, there are no claims against the Company to
return merchandise by reason of alleged overshipments, defective merchandise or
otherwise, or of merchandise in the hands of customers under an understanding
that such merchandise would be returnable, in either such case, in excess of the
amount set forth on the Disclosure Schedule. To the Best of the Company's
Knowledge, no outstanding purchase or outstanding lease commitment of the
Company presently is in excess of the normal, ordinary and usual requirements of
its Business or was made at any price in excess of the now current market price
or contains terms and conditions more onerous than those usual and customary in
the Business. There is no outstanding bid, proposal, Contract or unfilled order
of the Company which will or could, if accepted, have an Adverse Effect.

4A.27 PAYMENTS. The Company has not, directly or indirectly, paid
or delivered any fee, commission or other sum of money or item or property,
however characterized, to any finder, agent, government official or other party,
in the United States or any other country, which is in any manner related to the
Business which Sellers or the Company knows, should know or has reason to
believe to have been illegal under any federal, state or local laws of the
United States or any other country having jurisdiction; and the Company has not
participated, directly or indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers.

4A.28 CUSTOMERS AND SUPPLIERS. The Disclosure Schedule contains a
complete and accurate list of (i) the ten (10) largest customers of the Company
in terms of sales during the Company's last fiscal year, showing the approximate
total sales by the Company to each such

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customer during such fiscal year; (ii) the ten (10) largest suppliers of the
Company in terms of purchases during the Company's last fiscal year, showing the
approximate total purchases by the Company from each such supplier during such
fiscal year. Since the Balance Sheet Date, there has been no adverse change in
the business relationship of the Company with any of such ten largest customers
or suppliers referred to in clauses (i) and (ii) above.

4A.29 COMPLIANCE WITH LEGISLATION REGULATING ENVIRONMENTAL QUALITY.
There are no toxic wastes or other toxic or hazardous substances or materials
being stored or otherwise held on, under or about any of the Facilities by the
Company or, to the Best of the Company's Knowledge, by any other party. The
Facilities have been maintained in substantial compliance with all federal,
state, local and foreign environmental protection, occupational, health and
safety or similar laws, statutes, ordinances, restrictions, licenses and local
environmental protection, occupational, health and safety or similar laws,
statutes, ordinances, restrictions, licenses and regulations, including those
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous or
otherwise regulated materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation,
and also including, but not limited to, the Federal Water Pollution Control Act
(33 U.S.C. Section 1251 ET SEQ.), Resource Conservation Recovery Act (42 U.S.C.
Section 6901 ET SEQ.), Safe Drinking Water Act (21 U.S.C. Sections 349, 42
U.S.C. Sections 201, 300f), Toxic Substances Control Act (15 U.S.C. Section 2601
ET SEQ.), Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
ET SEQ.), California Health & Safety Code (Section 25100 ET SEQ., Section 39000
ET SEQ.), and California Water Code (Section 13000 ET SEQ.). The Company has
not received any written notice, report or other information to the effect that,
or to the Best of the Company's Knowledge, otherwise been advised regarding any
liabilities or potential liabilities it may have (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, arising under any environmental, health or safety
requirement.

4A.30 REAL ESTATE.

(a) OWNED PROPERTIES. The Disclosure Schedule lists and describes
briefly all Real Estate that the Company owns. Except as otherwise described on
the Disclosure Schedule or in the title reports or summaries and surveys
provided to Buyer by Sellers or pursuant to Section 6.7, with respect to each
such parcel (including the improvements thereon) of owned Real Estate:

(i) the Company owns such parcel in fee simple and such parcel is
free and clear of any Encumbrance;

(ii) there are no pending or, to the Best of the Company's
Knowledge, threatened condemnation proceedings, lawsuits,
violations of applicable

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law or administrative actions relating to such parcel or other
matters affecting adversely the current use, occupancy, or
value of such parcel;

(iii) such parcel does not serve any adjoining property for any
purpose to the Best of the Company's Knowledge, inconsistent
with the current use of the land by the Company, and the
property is not located within any flood plain or subject to
any similar type of restriction for which any permits or
licenses necessary to the use thereof have not been obtained;

(iv) there are no leases, subleases, licenses, concessions, or
other agreements, written or, to the Best of the Company's
Knowledge, oral, granting to any Person the right of use or
occupancy of any portion of such parcel;

(v) there are no outstanding options or rights of first refusal to
purchase or lease such parcel, or any portion thereof or
interest therein;

(vi) no Person is in possession of such parcel;

(vii) the Company is not restricted in any adverse way in the
current use of its water rights, water supply or mineral
rights, and such water rights and supply are sufficient for
the current operation of the Business;

(viii) the buildings, improvements and other property thereon have
received all approvals of governmental authorities (including
certificates of occupancy, permits and licenses) required in
connection with the Business and have been operated and
maintained in compliance with all applicable legal
requirements; and

(ix) the buildings, improvements and other property thereon are
supplied with utilities and other services reasonably
necessary for the current operation of the Business with
respect thereto (including any necessary gas, electricity,
water (including without limitation, the use and right to a
water supply sufficient for the current operation of the
Business), irrigation, sanitary and storm sewer service).

(b) LEASED PROPERTIES. The Disclosure Schedule lists and
describes briefly all Real Estate that is used or occupied, but not owned, by
the Company (with respect to the Business) and the leases, subleases and
agreements by which such Real Estate is used and occupied. Except as otherwise
described on such Disclosure Schedule, with respect to each such parcel of
leased Real Property:

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(i) the leases and subleases described on the Disclosure Schedule
constitute all of the leases, subleases and agreements under
which the Company holds any interest (other than a fee
interest) in any Real Estate;

(ii) each such lease, sublease or agreement is legal, valid,
binding, enforceable and in full force and effect, is fully
assignable to the Buyer without obtaining any required consent
or approval from any Person, and will continue to be legal,
valid, binding, enforceable and in full force and effect on
identical terms after the Closing other than by reason of a
change of law and except as such unenforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally;

(iii) the Company and, to its knowledge, any other party to any such
lease, sublease or agreement is not in breach or default
thereof, and to the Best of the Company's Knowledge, no
condition or circumstance exists or is threatened which, with
notice or the lapse of time, or both, would constitute such a
breach or default or permit termination, modification or
acceleration thereof or thereunder;

(iv) no party to any such lease, sublease or agreement has
repudiated any provision thereof;

(v) there are no disputes, oral agreements or forbearance programs
in effect with respect to the Company or, to the Best of the
Company's Knowledge, with respect to any third party, in
either case, as to any such lease, sublease or agreement;

(vi) no such lease, sublease or agreement has been modified in any
material respect, except to the extent disclosed in the
Disclosure Schedule;

(vii) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in any
leasehold or sub-leasehold;

(viii) the portions of buildings, improvements and other property
thereon leased by the Company have received all approvals of
governmental authorities (including certificates of occupancy,
permits and licenses) required in connection with the Business
as presently conducted and have been operated and maintained
in compliance with all applicable legal requirements;

(ix) the portions of buildings, improvements and other property
thereon leased by the Company are supplied with utilities and
other services reasonably

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<PAGE>

necessary for the Business as presently conducted with respect
thereto (including any necessary gas, electricity, water
(including without limitation, the use and right to a water
supply sufficient for the Business), irrigation, sanitary and
storm sewer service);

(x) there are no pending or, to the Best of the Company's
Knowledge, threatened condemnation proceedings, or
administrative actions relating thereto or other matters
affecting adversely the Company's current use, occupancy, or
value of such parcel;

(xi) as to each parcel, the land and improvements thereon does not
serve any adjoining property for any purpose to the Best of
the Company's Knowledge, inconsistent with the current use of
such land by the Company, and the property is not located
within any flood plain or subject to any similar type
restriction for which any permits or licenses necessary to the
use thereof have not been obtained; and

(xii) other than documents described on the Disclosure Schedule,
there are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any Person the
right of use or occupancy of any portion of such parcel which
the Company is entitled to occupy, and no Person (other than
the Company) is in possession of any such portion of any such
parcel.

4A.31 MISSTATEMENTS OR OMISSIONS. No representations or warranties
by any of Sellers or the Company in this Agreement, the Transaction Documents or
any exhibit, certificate or schedule furnished to Buyer pursuant hereto and
thereto, contains or will contain any untrue statement of fact, or omits or will
omit to state any fact necessary to make the statements or facts contained
therein not misleading. Sellers and the Company have disclosed all material
events, conditions and facts affecting the Business, assets, properties,
Facilities, earnings, prospects and condition (financial or otherwise) of the
Company as of the Closing Date.

4A.32 PURCHASE ARRANGEMENTS. Except for O'Neill, none of the
Sellers possesses any specific knowledge of or information relating to the terms
of any supply or purchase arrangement, contract or similar commitment which the
Company has, at any time, entered or considered entering into with any customer
or supplier.

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<PAGE>

ARTICLE IVB

REPRESENTATIONS AND WARRANTIES OF THE LENDER SELLERS

Each of the parties listed on Schedule 14.14A hereto (collectively,
the "Lender Sellers") hereby represents and warrants to the Buyer as follows:

4B.1 ORGANIZATION OF SUCH LENDER SELLER. Such Lender Seller, to
the extent that it is not an individual, is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization. Such
Lender Seller owns of record the Capital Stock of the Company identified
opposite its name on Exhibit 14.14(A) free and clear of all Encumbrances.

4B.2 AUTHORIZATION. Such Lender Seller has all necessary corporate
or other power and authority, as the case may be, to enter into the Transaction
Documents to which it is a party and has taken all corporate or other action
necessary to consummate the transactions contemplated thereby and to perform its
respective obligations thereunder. As of the Closing Date, each of the
Transaction Documents to which such Lender Seller is a party has been duly
executed and delivered by each such Lender Seller and each such Transaction
Document to which Lender Seller is a party shall be a legal, valid and binding
obligation of such Lender Seller in accordance with its respective terms.

4B.3 NO CONFLICT OR VIOLATION. Neither the execution and delivery
of the Transaction Documents to which such Lender Seller is a party nor the
consummation of the transactions contemplated thereby will result in (a) if such
Lender Seller is a corporation, a violation of or a conflict with any provision
of such Lender Seller's certificate of incorporation, articles of incorporation
or bylaws, (b) a breach of, or a default under, any term or provision of any
contract, agreement, Indebtedness, lease, Encumbrance, commitment, license,
franchise, permit, authorization or concession to which such Lender Seller is a
party or (c) a violation by such Lender Seller of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award binding on
such Lender Seller.

4B.4 CONSENTS AND APPROVALS. Except as set forth on the Disclosure
Schedule, no consent, approval, authorization of, or declaration, filing or
registration with, any governmental or regulatory authority, or any other
Person, is required to be made or obtained by such Lender Seller in connection
with the execution, delivery or performance by such Lender Seller of the
Transaction Documents to which such Lender Seller is a party.

4B.5 NO OTHER AGREEMENTS TO SELL THE COMPANY. Such Lender Seller
has no legal obligation, absolute or contingent, to any other Person, to sell
any Capital Stock or to effect any merger, consolidation or other reorganization
of the Company or to enter into any agreement with respect thereto.

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<PAGE>

4B.6 TRANSACTIONS WITH CERTAIN PERSONS. No officer, director or
employee of such Lender Seller nor any Member of any such Person's immediate
family is presently a Party to any transaction with the Company relating to the
Business, including without limitation, any contract, agreement or other
arrangement (i) providing for the furnishing of services by, (ii) providing for
the rental of real or personal property from, or (iii) otherwise requiring
payments to (other than for services as officers, directors or employees of the
Company) any such Person or corporation, partnership, trust or other entity in
which any such Person has a substantial interest as a shareholder, officer,
director, trustee or partner.

4B.7 MISSTATEMENTS OR OMISSIONS. No representations or warranties
by such Lender Seller in the Transaction Documents or any exhibit, certificate
or schedule furnished by such Lender Seller to Buyer pursuant thereto, contains
or will contain any untrue statement of fact, or omits or will omit to state any
fact necessary to make the statements or facts contained therein not misleading.

4B.8 PURCHASE ARRANGEMENTS. Other than with respect to those
certain Gallo contracts as described Schedule 4B.8 hereto, such Lender Seller
possesses no specific knowledge of or information relating to the terms of any
supply or purchase arrangement, contract or similar commitment which the Company
has, at any time, entered or considered entering into with any customer or
supplier.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Sellers as follows:

5.1 ORGANIZATION OF BUYER. Buyer is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to conduct its business and to own and lease
its properties.

5.2 AUTHORIZATION. Buyer has all necessary corporate authority to
enter into the Transaction Documents and has taken all necessary corporate
action to consummate the transactions contemplated thereby and to perform its
obligations thereunder. Each of the Transaction Documents has been duly
executed and delivered by Buyer and is a legal, valid and binding obligation of
Buyer enforceable against it in accordance with its terms.

5.3 CONSENTS AND APPROVALS. No consent, approval or authorization
of, or declaration, filing or registration with, any United States federal or
state governmental or regulatory authority is required to be made or obtained by
Buyer in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby other
than the filings required under the HSR Act, if any.

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<PAGE>

5.4 NO BROKERS. Except with respect to that certain fee payable
by Buyer to Lazard Freres & Co. and as otherwise set forth on the Disclosure
Schedule, neither Buyer nor any affiliate of Buyer has entered into or will
enter into any agreement, arrangement or understanding with any Person which
will result in the obligation of Sellers to pay any finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.

5.5 NO CONFLICT OR VIOLATION. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will result in (a) a violation of or a conflict with any provision of the
Certificate of Incorporation or bylaws of Buyer, (b) a breach of, or a default
under, any term or provision of any contract, agreement, Indebtedness, lease,
commitment, license, franchise, permit, authorization or concession to which
Buyer is a party or (c) a violation by Buyer of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award.

ARTICLE VI

ACTIONS BY SELLERS, THE COMPANY AND
BUYER PRIOR TO THE CLOSING

Sellers, the Company and Buyer, unless otherwise stated, covenant as
follows for the period from the date hereof through the Closing Date:

6.1 MAINTENANCE OF BUSINESS. The Company shall diligently carry
on the Business in the ordinary course consistent with past practice.

6.2 CERTAIN PROHIBITED TRANSACTIONS. The Company shall not
without the prior written approval of Buyer:

(a) incur any Indebtedness for borrowed money, assume, guarantee,
endorse or otherwise become responsible for obligations of any other Person, or
make any loans or advances to any Person except in the ordinary course of
business and consistent with past practice;

(b) issue any shares of its Capital Stock or any other Equity
Interests or any other securities;

(c) pay or incur any obligation to pay any dividend on its Capital
Stock or make or incur any obligation to make any distribution or redemption
with respect to its Capital Stock;

(d) make any change to its Certificate of Incorporation or bylaws;

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<PAGE>

(e) mortgage, pledge or otherwise encumber any of its properties
or assets or sell, transfer or otherwise dispose of any of its properties or
assets or cancel, release or assign any Indebtedness owed to it or any claims
held by it, except in the ordinary course of business and consistent with past
practice;

(f) make any Investment of a capital nature either by purchase of
stock or securities, contributions to capital, property transfer or otherwise,
or by the purchase of any property or assets of any other Person, except in the
ordinary course of business and consistent with past practice;

(g) enter into or terminate any contract or agreement, or make any
material change in any of its leases and Contracts, other than in the ordinary
course of business and consistent with past practice;

(h) increase compensation payable to senior management employees
and any other employees or make any discretionary bonuses or promise to do any
of the foregoing, in any such case, outside of the ordinary course of business;

(i) enter into any transaction with any Person on terms other than
those which are on an arms-length basis;

(j) make any payments or engage in transactions with related or
affiliated Parties in each case other than in the ordinary course of business
and consistent with past practice; or

(k) do any other act which would cause any representation or
warranty of Sellers or the Company in this Agreement to be or become untrue.

6.3 INVESTIGATION BY BUYER. The obligations of the Parties shall
be contingent upon Buyer's completion of a business, environmental, financial
and legal investigation of the Company with the results being satisfactory to
Buyer in its sole and absolute discretion. Sellers and the Company shall allow
Buyer through Buyer's Representatives, to make such investigation of the
Business, properties, books and records of the Company, and to conduct such
examination of the condition of the Company, as Buyer deems necessary or
advisable to familiarize itself with such Business, properties, books, records,
condition and other matters, and to verify the representations and warranties of
Sellers and the Company hereunder.

Upon reasonable prior notice, Sellers and the Company shall afford
Buyer and authorized representatives of the Buyer reasonable access, at
reasonable times during business hours, to the Facilities for the purposes of
satisfying Buyer with respect to the representations, warranties and covenant of
Seller and the Company contained herein and the conditions precedent to the
Closing. In performing its examinations and inspections of the Facilities,
Buyer shall use reasonable efforts to minimize any interference with Seller's
use of the Facilities.

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<PAGE>

Buyer shall not conduct or allow any physically intrusive testing of, on or
under the Facilities without first obtaining Seller's written consent, which
shall not be unreasonably withheld or delayed, as to the timing and scope of the
work to be performed and, upon the request of the Seller, entering into an
access agreement in form and substance acceptable to Seller.

Subject to the provisions and limitations set forth in Article 11
hereof, Buyer shall indemnify, defend and hold Sellers and Company harmless from
and against all losses, costs, damages, actions, liabilities and expenses
arising from or in any way related to the gross negligence or willful misconduct
of Buyer or Buyer's Representatives in connection with such parties' entry upon,
inspection of or investigation of the Facilities or breach of this Section 6.3.
All environmental testing and inspections shall be at Buyer's sole cost and
expense, and Buyer agrees to keep the results of such testing and inspections
confidential, except to the extent that disclosure is required by law or legal
process (in which case, Buyer will notify Sellers and the Company prior to
making any such disclosure); provided, however, that such confidentiality
obligation shall terminate upon Closing.

6.4 CONSENTS AND BEST EFFORTS. Promptly after execution and
delivery of this Agreement, Buyer, Sellers and the Company shall make all
governmental filings required by each of them in connection with the
transactions to be consummated pursuant to the Transaction Documents, including
without limitation, filings under the HSR Act and the Federal Alcohol
Administration Act. Sellers shall use all of their commercially reasonable
efforts to cause the Company's stockholders to tender 100% of the shares of
Capital Stock to Buyer on the terms and conditions set forth herein. Sellers
and the Company will, as promptly as practicable, commence to take all action
required to obtain all consents, approvals and agreements of, and to give all
notices and make all other filings with, any third Parties, including
governmental authorities, necessary to authorize, approve or permit the full and
complete sale, conveyance, assignment or transfer of all of the Capital Stock;
PROVIDED, HOWEVER, that Buyer shall not be required to agree to any unfavorable
or commercially unreasonable modification of any existing contract or agreement
by Sellers or the Company in order to obtain any such consent. In addition,
subject to the terms and conditions herein provided, each of the Parties
covenants and agrees to use its best efforts to take, or cause to be taken, all
action or do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by the Transaction Documents and to cause the
fulfillment of the Parties' obligations hereunder.

6.5 NOTIFICATION OF CERTAIN MATTERS. Sellers shall give prompt
notice to Buyer, and Buyer shall give prompt notice to Sellers, of (i) the
occurrence or existence, or failure to occur or exist, of any fact, information
or event, which occurrence or existence or failure could cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate any time from the date hereof to the Closing Date and (ii) any
failure of Sellers, the Company or Buyer, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
hereunder, and each Party shall use its best efforts to remedy same.

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6.6 NO MERGERS, CONSOLIDATIONS, SALE OF CAPITAL STOCK, ETC. The
Company and Sellers will not, directly or indirectly, solicit or participate in
any inquiries or proposals or enter into or continue any discussions,
negotiations or agreements relating to the sale or exchange of the Capital
Stock, the merger of the Company, or the direct or indirect disposition of a
significant amount of the Assets or Business to any Person other than Buyer or
provide any assistance or any information to or otherwise cooperate with any
other Person in connection with any such inquiry, proposal or transaction. In
the event that the Company or any of Sellers receive an unsolicited offer for
such a transaction or obtain or become aware of information that such an offer
is likely to be made, the Company or Sellers will immediately provide Buyer with
notice thereof, including the identity of the prospective purchaser or
soliciting party.

6.7 TITLE INSURANCE, SURVEYS.

(a) With respect to each parcel of Real Estate that the Company
owns, at Buyer's request, Sellers will obtain, at or prior to the Closing, at
Buyer's sole cost and expense, an ALTA Owner's Policy of Title Insurance Form
B-1970 (or equivalent policy acceptable to the Buyer and its lenders in their
sole and absolute discretion) issued as of the Closing Date by a title insurer
satisfactory to the Buyer and its lenders, in such amount as the Buyer and its
lenders determine to be the fair market value of such parcel (including all
improvements located thereon), insuring title to such Real Estate to be in the
Company as of the Closing, subject only to title exceptions which (i) do not
interfere with the operations of the Business, (ii) do not render title to the
property unmarketable, and (iii) are approved by the Buyer and its lenders. To
the extent required by Buyer and its lenders, each such title insurance policy
will (a) insure title to each owned parcel of Real Estate and all recorded
easements benefitting such parcel, (b) contain an "extended coverage
endorsement" insuring over the general exceptions contained customarily in such
policies, (c) contain an ALTA Zoning Endorsement 3.1 with Parking (or
equivalent), (d) contain an endorsement insuring that the parcel described in
such title insurance policy is the parcel shown on the Survey delivered with
respect to such parcel, (e) contain an endorsement insuring that each street
adjacent to such parcel is a public street and that there is direct and
unencumbered pedestrian and vehicular access to such street from such parcel,
(f) if the Real Estate covered by such policy consists of more than one record
parcel, contain a "contiguity" endorsement insuring that all of the record
parcels are contiguous to one another, (g) contain an owner comprehensive
endorsement, (h) contain a survey accuracy endorsement, and (i) contain a tax
parcel endorsement and such other endorsements as the Buyer may request. Any
escrow and/or closing fees, charges or expenses in connection with the
transactions contemplated herein shall be paid by Buyer.

(b) To the extent required by Buyer and its lenders, with respect
to each parcel of Real Estate that the Company owns, Sellers will obtain, at or
prior to the Closing, at Buyer's sole cost and expense, ALTA Lender's Policies
of Title Insurance, Form B-1970 (or equivalent policy acceptable to the Buyer
and its lenders in their sole and absolute discretion) issued as of the Closing
Date by a title insurer satisfactory to the Buyer and its lenders, in such
amount as the Buyer and its lenders determine to be the fair market value of
such parcel (including all

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<PAGE>

improvements located thereon), insuring the Lender's interest in the Real Estate
including the buildings and improvements located thereon, subject only to title
exceptions which (i) do not interfere with the operations of the Business, (ii)
do not render title to the property unmarketable, and (iii) are approved by the
Buyer and its lenders. To the extent required by Buyer and its lenders, each
such title insurance policy will (a) insure title to each owned parcel of Real
Estate and all recorded easements benefitting such parcel, (b) contain an
"extended coverage endorsement" insuring over the general exceptions contained
customarily in such policies, (c) contain an ALTA Zoning Endorsement 3.1 with
Parking (or equivalent), (d) contain an endorsement insuring that the parcel
described in such title insurance policy is the parcel shown on the Survey
delivered with respect to such parcel, (e) contain an endorsement insuring that
each street adjacent to such parcel is a public street and that there is direct
and unencumbered pedestrian and vehicular access to such street from such
parcel, (f) if the Real Estate covered by such policy consists of more than one
record parcel, contain a "contiguity" endorsement insuring that all of the
record parcels are contiguous to one another, (g) contain an owner comprehensive
endorsement, (h) contain a survey accuracy endorsement, and (i) contain a tax
parcel endorsement and such other endorsements as the Buyer may request. Any
escrow and/or closing fees, charges or expenses in connection with the
transactions contemplated herein shall be paid by Buyers.

(c) To the extent required by Buyer and its lenders, with respect
to each parcel of Real Estate that the Company owns, Sellers will procure, at
Buyer's sole cost and expense, in preparation for the Closing a current survey
of such parcel certified to the Buyer and/or its lender and their designees,
prepared by a licensed surveyor and conforming to current ALTA Minimum Detail
Requirements for Land Title Surveys, disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines, and
other matters customarily shown on such surveys, and showing access
affirmatively to public streets and roads (a "Survey"). No Survey will disclose
any survey defect or encroachment from or onto any Real Estate which has not
been cured or insured over prior to the Closing.

6.8 EXPENSES. Except as otherwise provided herein, each of the
Sellers and Buyer shall pay their own expenses incurred in connection with the
transactions contemplated hereby, provided, however that, with respect to the
opinion to be provided by Sellers to Buyer pursuant to Section 8.4 hereof, Buyer
agrees to pay the reasonable attorney's fees incurred by Seller.

ARTICLE VII

CONDITIONS TO SELLERS' OBLIGATIONS

The obligations of Sellers to transfer the Capital Stock to Buyer on
the closing Date are subject, in the reasonable discretion of Sellers, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:

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7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Buyer contained in this Agreement shall be
true and correct at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, and Buyer shall have
performed all agreements and covenants required hereby to be performed by it
prior to or at the Closing Date. There shall be delivered to Sellers a
certificate (signed by the President or a Vice President of Buyer) to the
foregoing effect.

7.2 CONSENTS. All consents, approvals and waivers from
governmental authorities and other Parties necessary to permit Sellers to
transfer the Capital Stock to Buyer as contemplated hereby shall have been
obtained, unless the failure to obtain any such consent, approval or waiver
would not result in a material adverse effect on Sellers.

7.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other Person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated by the Transaction
Documents and which could reasonably be expected to damage Sellers in any
material respect if the transactions contemplated thereunder are consummated.

7.4 CERTIFICATES. Buyer will furnish Sellers with such
certificates of its officers, directors and others to evidence compliance with
the conditions set forth in this Article VII as may be reasonably requested by
Sellers.

7.5 CORPORATE DOCUMENTS. Sellers shall have received from Buyer
resolutions adopted by the board of directors of Buyer approving the Transaction
Documents and the transactions contemplated thereby, certified by Buyer's
corporate secretary.

7.6 HSR ACT. The applicable waiting period, including any
extension thereof, under the HSR Act shall have expired.

7.7 OTHER AGREEMENTS. Buyer and Sellers shall have entered into
an Escrow Agreement, a Junior Preferred Stock Purchase Agreement, a Common Stock
Subscription Agreement and a Stockholders Agreement, each substantially in the
forms of Exhibits 7.7(a), 7.7(b) and 7.7(c) attached hereto.

7.8 OPINION OF COUNSEL. Buyer shall have delivered to Sellers an
opinion of counsel for Buyer acceptable to Sellers and the Company, dated the
Closing Date and substantially in the form set forth on Exhibit 7.8 attached
hereto.

7.9 EMPLOYMENT AGREEMENTS. O'Neill and the Company shall have
entered into an employment agreement substantially in the form of Exhibit 8.12
attached hereto (the "O'Neill Employment Agreement").

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<PAGE>

7.10 DELIVERY OF DOCUMENTS. Buyer shall have delivered to Sellers
all documents required to be delivered by Buyer to Sellers pursuant to Section
3.2 hereof, including without limitation the Escrow Agreement and Common Stock
Subscription Agreement, and all such documents shall be in form and substance,
and shall be executed in a manner, reasonably satisfactory to Sellers.

ARTICLE VIII

CONDITIONS TO BUYER'S OBLIGATIONS

The obligations of Buyer to purchase the Capital Stock as provided
hereby are subject, in the reasonable discretion of Buyer, to the satisfaction,
on or prior to the Closing Date, of each of the following conditions:

8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Sellers and the Company contained in this
Agreement shall be true and correct at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and
Sellers and the Company shall have performed all agreements and covenants,
including without limitation, title insurance, policies and surveys in the forms
contemplated by Section 6.7 hereof, required hereby to be performed by either of
them prior to or at the Closing Date. There shall be delivered to Buyer a
certificate (signed by the General Partner, President or a Vice President of
each of Sellers and the Company, in each case, as applicable) to the foregoing
effect.

8.2 CONSENTS. All consents, approvals and waivers from
governmental authorities and other Parties necessary to permit Sellers to
transfer the Capital Stock to Buyer as contemplated hereby shall have been
obtained.

8.3 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other Person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby.

8.4 OPINION OF COUNSEL. Sellers shall have delivered to Buyer an
opinion of counsel for Sellers and the Company acceptable to Buyer, dated the
Closing Date and substantially in the form set forth on Exhibit 8.4 attached
hereto.

8.5 CERTIFICATES. Sellers and the Company shall furnish Buyer
with such certificates of the respective officers of Sellers and the Company
(without qualification with respect to knowledge) and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by Buyer.

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8.6 CORPORATE DOCUMENTS. Buyer shall have received from Sellers
and the Company resolutions adopted by the respective boards of directors of
Sellers and the Company approving this Agreement and the transactions
contemplated hereby, certified by the corporate secretary of each of Sellers and
the Company. Buyer shall have also received the corporate minute books,
Certificates of Incorporation, bylaws and stock transfer books of the Company
and each of the Subsidiaries.

8.7 HSR ACT. The applicable waiting period, including any
extension thereof, under the HSR Act shall have expired.

8.8 FEDERAL ALCOHOL ADMINISTRATION ACT. Buyer shall have received
notice that Company's application for the "basic permit" (as defined in the
Federal Alcohol Administration Act) shall have been approved by the Secretary of
the Treasury.

8.9 FINANCING. Buyer shall have obtained any and all necessary
financing on terms and conditions satisfactory to Buyer in its sole and absolute
discretion to enable it to consummate the transactions contemplated hereby,
repay Indebtedness of the Company and to provide adequate working capital for
the Company.

8.10 DISCLOSURE SCHEDULES. The Company and Sellers shall deliver
to Buyer on the Closing Date a Disclosure Schedule (the "Closing Disclosure
Schedule") revised to reflect any changes in the information on the Disclosure
Schedule from the date hereof up to and including the Closing Date, which
Closing Disclosure Schedule shall be made a part of this Agreement and
incorporated herein by reference.

8.11 BALANCE SHEET AND FINANCIAL STATEMENTS. Sellers shall deliver
to Buyer each month as available from the Balance Sheet Date through the Closing
Date, in each case, promptly upon completion a monthly balance sheet and
financial statement, in each case in form and substance acceptable to Buyer
(collectively, the "Interim Financial Statements"). Such Interim Financial
Statements need not be audited, but shall be in accordance with generally
accepted accounting principles, consistently applied, subject to the lack of
footnote disclosure and changes resulting from normal year-end adjustments, none
of which changes would if properly presented, alone or in the aggregate, reflect
matters which have had or could be expected to have an Adverse Effect.

8.12 EMPLOYMENT AGREEMENTS. O'Neill and the Company shall have
entered into the O'Neill Employment Agreement substantially in the form of
Exhibit 8.12 attached hereto.

8.13 ESTOPPEL CERTIFICATES. Sellers shall have delivered to Buyer
an estoppel certificate from each lessor of Real Estate of which the Company is
a lessee and such estoppel certificate is necessary in the reasonable discretion
of Buyer to consummate the transactions contemplated hereby, in each case, in
form and substance satisfactory to the Buyer.

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8.14 DUE DILIGENCE. Buyer shall have obtained from Sellers, the
Company and their respective Representatives copies of any and all corporate
documents, securities agreements, purchase contracts, sales contracts,
commercial loan agreements, litigation documents, audit reports, studies,
financial statements, governmental reports, insurance policies, employment
records, employee benefit plans, permits, licenses, applications for permits or
licenses and all other information or documents requested by Buyer and Buyer
shall, upon the review thereof, deem such items and information to Buyer's
reasonable discretion fully meet Buyer's satisfaction.

8.15 DELIVERY OF DOCUMENTS. Sellers shall have delivered to Buyer
all documents required to be delivered by Sellers to Buyer pursuant to Section
3.2 hereof, including without limitation no less than 90% of the shares of
Capital Stock, and all such documents shall be in form and substance, and shall
be executed in a manner, reasonably satisfactory to Buyer.

8.16 FIRPTA CERTIFICATES. Sellers shall have delivered to Buyer
appropriate affidavits for each Seller pursuant to Section 1445(b) of the Code
exempting Buyer from any obligation to withhold pursuant to Section 1445(a) of
the Code.

ARTICLE IX

COVENANT NOT TO COMPETE

Attached hereto as Schedule IXA is a list of transactions contemplated
or proposed by the Company as of the Closing which involve in excess of
$1,000,000 (the "Schedule IXA Transactions"). Attached hereto as Schedule IXB
is a complete list of all of the Seller's business interests that may be in
competition with or are substantially similar to the Business (the "Schedule IXB
Interests").

Sellers acknowledge and agree that the Business is conducted in the
State of California and that its reputation and goodwill are an integral part of
its business success throughout the areas where it conducts its business. If
Sellers deprive Buyer of any of the Company's goodwill or in any manner utilize
its reputation and goodwill in competition with the Company, Buyer will be
deprived of the benefits it has bargained for pursuant to this Agreement. This
covenant is necessary to transfer the Business and goodwill of the Company to
Buyer effectively. Accordingly, as an inducement for Buyer to enter into this
Agreement, Sellers agree that, for a period of five (5) years after the Closing,
no Seller shall, without Buyer's prior written consent, directly or indirectly,
(i) use or distribute any of the Company's financial information or information
relating to the purchase, supply or processing of grapes or the supply of wine
to customers; (ii) except for the Schedule IXB Interests, own, manage, operate,
join, control or participate in the ownership, management, operation or control
of, or be connected as a director, officer, employee, partner, consultant or
otherwise with any business entity that competes with the Company for the
Schedule IXA Transactions or (iii) in any manner induce or attempt to induce
O'Neill, Ronald Foster or Larry Brink to leave the Company or in any way
interfere with

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the relationship between the Company and any of them, provided, however, if at
any time within the aforementioned five (5) year period, Buyer terminates the
employment of O'Neill, Ronald Foster or Larry Brink for any reason other than
cause or violation of any similar confidentiality or non-compete arrangements,
Seller may hire any such terminated employee no sooner than six (6) months from
the date of such termination. The Sellers further agree that for a period of
two (2) years after the Closing, no Seller shall, without Buyer's prior written
consent, directly or indirectly, (i) in any manner induce or attempt to induce
any employee, customer, supplier, licensee or other business relation of the
Company to leave or cease doing business with the Company or in any way (other
than participation in the bulk wine industry generally) interfere with the
relationship between the Company and any employee, customer, supplier, licensee
or other business relation thereof or (ii) offer employment to or hire any
person who was an employee of the Company at any time within 6 months prior to
the Closing Date, provided, however, if at any time within the aforementioned
two (2) year period, Buyer terminates the employment of such employees for any
reason other than cause or violation of any similar confidentiality or
non-compete arrangements, Seller may hire any such terminated employees no
sooner than six (6) months from the date of such termination, PROVIDED, HOWEVER,
that this Article IX shall not apply to any Sellers other than CGW Associates
Limited Partnership and Mid-State Horticultural Company.

Additionally, as consideration for the sale of shares of Common Stock
hereunder, O'Neill shall have entered into the O'Neill Employment Agreement with
the Company which agreement, including the applicable covenant not to compete
contained therein, is incorporated herein in by reference.

Sellers and O'Neill acknowledge that a breach of the covenants
contained in this Article IX will cause irreparable damage to Buyer and the
Company, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, Sellers
and O'Neill agree that, if any Seller or O'Neill breaches any of the covenants
contained in this Article IX in addition to any other remedy which may be
available at law or in equity, Buyer or the Company shall be entitled to
specific performance and injunctive relief, without posting bond or other
security.

ARTICLE X

ACTIONS BY SELLERS, THE COMPANY
AND BUYER AFTER THE CLOSING

10.1 BOOKS AND RECORDS. Sellers and Buyer agree that, so long as
any books, records and files relating to the Business, properties, Assets or
operations of the Company, to the extent that they pertain to the Business prior
to the Closing Date, remain in existence and available, Buyer shall have the
right to inspect and to make copies of the same at any time during business
hours for any proper purpose.

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10.2 FURTHER ASSURANCES. On and after the Closing Date, Sellers,
the Company and Buyer will take all appropriate action and execute all
documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the provisions hereof, including
without limitation, putting Buyer in possession and operating control of the
Business.

10.3 COMPLIANCE WITH LEGISLATION REGULATING ENVIRONMENTAL QUALITY.
Buyer shall, from and after the Closing Date, maintain the Facilities in
substantial compliance with all federal, state, local and foreign environmental
protection, occupational, health and safety or similar laws, statutes,
ordinances, restrictions, licenses and local environmental protection,
occupational, health and safety or similar laws, statutes, ordinances,
restrictions, licenses and regulations, including those relating to the
presence, use, production, generation, handling, transport, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous or otherwise regulated
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, and also including, but
not limited to, the Federal Water Pollution Control Act (33 U.S.C. Section 1251
ET SEQ.), Resource Conservation & Recovery Act (42 U.S.C. Section 6901 ET SEQ.),
Safe Drinking Water Act (21 U.S.C. Section 349, 42 U.S.C. Sections 201, 300f),
Toxic Substances Control Act (15 U.S.C. Section 2601 ET SEQ.), Clean Air Act (42
U.S.C. Section 7401 ET SEQ.), Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. Section 9601 ET SEQ.), California Health & Safety
Code (Section 25100 ET SEQ., & 39000 ET SEQ.), and California Water Code
(Section 13000 ET SEQ.).

ARTICLE XI

INDEMNIFICATION

11.1 SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in
the Disclosure Schedule or in any certificate or instrument of conveyance
delivered by or on behalf of the Parties pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Parties hereunder. The representations
and warranties of Sellers, the Company and Buyer contained herein shall survive
the Closing Date until the date that is the third anniversary of the Closing
Date, without regard to any investigation made by any of the Parties hereto.

11.2 INDEMNIFICATION. (a) Except with respect to Sections 4A.1 and
4A.3 hereof (for which sections Sellers shall severally, but not jointly
indemnify Buyer and Buyer's Indemnitees (as hereinafter defined)) Sellers shall,
jointly and severally, indemnify Buyer and the Company and their respective
affiliates, stockholders, officers, directors, partners, employees, agents,
Representatives and permitted successors and assigns (collectively, the "Buyer's
Indemnitees") against, and hold each Buyer Indemnitee harmless from, any damage,
claim, liability or expense, including without limitation, interest, penalties
and reasonable attorneys'

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fees and expenses (collectively "Damages"), arising out of a misrepresentation
or the breach of any warranty, covenant or agreement of Sellers or the Company
contained in this Agreement or, provided Buyer complies with applicable
statutory requirements and offers all shareholders of the Company a price per
share at least equal to the price per share payable to the Sellers pursuant to
Section 2.2 hereof, Damages arising out of any shareholder's dissenters rights
action or similar claim; PROVIDED, HOWEVER, that in all cases except for Damages
arising from or in connection with any of Sellers' fraud, Sellers' obligation
hereunder with respect to breaches of the Sellers' representations and
warranties contained in Article IVA herein shall not exceed in the aggregate
$2,619,900 and such indemnification obligation shall be offset dollar for dollar
against the Exchangeable Preferred Stock. Notwithstanding the foregoing,
Sellers will not be required to indemnify Buyer Indemnitees in respect of any
Damages except to the extent that the aggregate amount of all Damages exceeds
$145,000, in which case Seller will be required to indemnify Buyer Indemnitees
for the entire amount of such Damages, including the amounts up to $145,000.

(b) In addition to any other right or remedy available to Sellers
at law or in equity, Buyer shall indemnify and hold Sellers and its affiliates,
stockholders, policyholders, officers, directors, partner, employees, agents,
representatives and permitted successors and assigns, as applicable
(collectively, the "Sellers' Indemnitees") against, and hold each Sellers'
Indemnitee harmless from any Damages arising out of a misrepresentation or the
breach of any warranty, covenant or agreement of Buyer contained in this
Agreement; PROVIDED, however that Buyer's obligation hereunder with respect to
breaches of the Buyer's representations and warranties contained herein shall
not exceed in the aggregate $2,619,900. Notwithstanding the foregoing, Buyer
will not be required to indemnify Sellers' Indemnitees in respect of any Damages
except to the extent that the aggregate amount of all Damages exceeds $170,000,
in which case Buyer will be required to indemnify Sellers' Indemnitees for the
entire amount of such Damages, including the amounts up to $170,000.

The term "Damages" as used in this Section 11.2 is not limited to
matters asserted by third parties against Sellers, the Company or Buyer, but
includes Damages incurred or sustained by Sellers, the Company or Buyer in the
absence of third party claims.

11.3 INDEMNIFICATION PROCEDURES.

(a) NOTICE OF CLAIM. Any Person making a claim for
indemnification pursuant to Section 11.2 (an "Indemnified Party") must give any
Party hereto from whom indemnification is sought (an "Indemnifying Party")
written notice of such claim (an "Indemnification Claim Notice") promptly after
the Indemnified Party receives any written notice of any action, lawsuit,
proceeding, investigation or other claim (a "Proceeding") against or involving
the Indemnified Party by a government entity or other third party or otherwise
discovers the liability, obligation or facts giving rise to such claim for
indemnification; PROVIDED that the failure to notify or delay in notifying an
Indemnifying Party will not relieve any Indemnifying Party of its obligations

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<PAGE>

pursuant to Section 11.2, except to the extent that such failure actually harms
the Indemnifying Party.

(b) CONTROL OF DEFENSE. With respect to the defense of any
Proceeding against or involving an Indemnified Party in which a government
entity or other third party in question seeks only the recovery of a sum of
money for which indemnification is provided, at its option an Indemnifying Party
may appoint as lead counsel of such defense any legal counsel selected by the
Indemnifying Party; PROVIDED that before the Indemnifying Party assumes control
of such defense it must first:

(i) enter into an agreement with the Indemnified Party (in form
and substance satisfactory to the Indemnified Party) pursuant
to which the Indemnifying Party agrees to be fully responsible
(with no reservation of any rights other than the right to be
subrogated to the rights of the Indemnified Party) for all
Damages relating to such Proceeding and unconditionally
guarantees the payment and performance of any liability or
obligation which may arise with respect to such Proceeding or
the facts giving rise to such claim for indemnification; and

(ii) furnish the Indemnified Party with evidence that the
Indemnified Party, in the Indemnified Party's sole judgment,
is and will be able to satisfy any such liability.

(c) CONTROL OF DEFENSE: EXCEPTIONS, ETC. Notwithstanding the
provisions of Section 11.3(b): (i) the Indemnified Party will be entitled to
participate in the defense of such claim and to employ counsel of its choice for
such purpose at its own expense (PROVIDED that the Indemnifying Party will bear
the reasonable fees and expenses of such separate counsel incurred prior to the
date upon which the Indemnifying Party effectively assumes control of such
defense), (ii) the Indemnifying Party will not be entitled to assume control of
the defense of such claim, and will pay the reasonable fees and expenses of
legal counsel retained by the Indemnified Party, if:

(A) the Indemnified Party reasonably believes that an adverse
determination of such Proceeding could be materially
detrimental or injurious to the Indemnified Party's reputation
or future business prospects,

(B) the Indemnified Party obtains an opinion of counsel to the
effect that there exists or could arise a conflict of interest
which, under applicable principles of legal ethics, could
prohibit a single legal counsel from representing both the
Indemnified Party and the Indemnifying Party in such
Proceeding, or

(C) a court of competent jurisdiction rules that the Indemnifying
Party has failed or is failing to prosecute or defend
vigorously such claim; and

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<PAGE>

(iii) the Indemnifying Party must obtain the prior written consent
of the Indemnified Party (which the Indemnified Party will not
unreasonably withhold) prior to entering into any settlement
of such claim or Proceeding or ceasing to defend such claim or
Proceeding.

11.4 NO RIGHT OF CONTRIBUTION. After the Closing, the Company
shall have no liability to indemnify either Buyer or Sellers on account of a
misrepresentation or the breach of any warranty or the nonfulfillment of any
covenant or agreement of Sellers or the Company; and Sellers shall have no right
of contribution against the Company. In addition to any other remedy which may
be available at law or in equity, Buyer or the Company shall be entitled to
specific performance and injunctive relief, without posting bond or other
security.

11.5 CHARACTERIZATION; TAXES. The Parties hereto intend that any
amount paid pursuant to the provisions of this Article XI be treated as an
adjustment of the Purchase Price prior to entering into any settlement of such
claim or proceeding or ceasing to defend such claim or proceeding.

ARTICLE XII

SECURITIES LAWS

12.1 ACQUISITION FOR INVESTMENT. Buyer hereby acknowledges that
the shares of Capital Stock to be purchased pursuant to the terms of this
Agreement shall be acquired in good faith for investment for its own account and
not with a view to a distribution or resale of any of such Capital Stock in
violation of applicable securities laws.

12.2 LEGEND. Each certificate representing shares of Capital Stock
sold pursuant to the provisions hereof, if deemed advisable by the Company,
shall bear the following legends:

"THE SECURITIES REPRESENTED HEREBY (A) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF AN AVAILABLE EXEMPTION THEREFROM UNDER SAID ACT OR THE
RULES AND REGULATIONS PROMULGATED THEREUNDER, AND (B) ARE SUBJECT TO THE
PROVISIONS, INCLUDING THE LIMITATIONS ON TRANSFER, SET FORTH IN THAT
CERTAIN STOCKHOLDER AGREEMENT BY AND AMONG THE COMPANY AND THE SIGNATORIES
THERETO, AS AMENDED AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH
STOCKHOLDER AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO
THE HOLDER HEREOF UPON WRITTEN REQUEST."

-and-

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"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."

ARTICLE XIII

13.1 TAX MATTERS. Sellers shall, jointly and severally, pay and be
responsible for all Taxes imposed on Sellers or the Company regardless of when
imposed for any period prior to and including June 30, 1994, including any Taxes
arising from the Sale and any Transfer Taxes. Sellers shall indemnify and hold
harmless Buyer and the Company from and against any liability with respect to
such Taxes, PROVIDED, HOWEVER, that Sellers' indemnification obligations
hereunder shall be subject to the limitations set forth in Sections 11.1 and
11.2 herein; PROVIDED, HOWEVER, that the three year period referred to in
Section 11.1 hereof shall be automatically extended for any periods coterminous
with any audits outstanding, pending or threatened on or prior to the third
anniversary of the Closing Date. Any Taxes of the Company in respect of the
period commencing after June 30, 1994 shall not be a liability of the Sellers.

ARTICLE XIV

MISCELLANEOUS

14.1 TERMINATION. This Agreement may be terminated:

(a) at any time prior to the Closing by written agreement of the
Buyer and Sellers,

(b) by the Buyer, at any time when Sellers are in breach of any of
their obligations pursuant to the Transaction Documents or if any representation
or warranty of Sellers contained therein is false or misleading (provided that
such condition is not the result of any breach of any covenant, representation
or warranty of the Buyer set forth in this Agreement or in any document executed
in connection with this Agreement),

(c) by Sellers, at any time when the Buyer is in breach of any of
its obligations pursuant to the Transaction Documents or if any representation
or warranty of the Buyer contained therein is false or misleading (provided that
such condition is not the result of any breach of any covenant, representation
or warranty of Sellers set forth in this Agreement or in any document executed
in connection with this Agreement), or

(d) by the Buyer or Sellers, at any time after May 1, 1995 or such
other date as is agreed to by Buyer and Sellers in writing.

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<PAGE>

Any termination of this Agreement pursuant to any of clauses (b) through (d)
will be effected by written notice from the terminating party to the Buyer (if
Sellers are the terminating party) or the Sellers (if the Buyer is the
terminating party). Any termination of this Agreement pursuant to clause (b),
(c) or (d) will not terminate the liability of any Party hereto for any breach
or default of any representation, warranty, covenant or other agreement set
forth in this Agreement or any Transaction Document which exists at the time of
such termination.

If this Agreement is terminated in accordance with clause (b) of this
Section 14.1, then Sellers will be, jointly and severally, responsible for (and,
in the case of the Buyer's Expenses, will reimburse Buyer for) all Buyer's
Expenses and Sellers' Expenses. If this Agreement is terminated in accordance
with clause (c) of this Section 14.1, then Buyer will be responsible for (and,
in the case of the Sellers' Expenses, will reimburse Sellers for) all Buyer's
Expenses and Sellers' Expenses.

14.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Sellers without the prior written
consent of Buyer. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their respective
successors and assigns, and no other Person shall have any right, benefit or
obligation hereunder.

14.3 NOTICES; TRANSFER OF FUNDS. Unless otherwise provided herein,
any notice, request, instruction or other document to be given hereunder by any
Party to the others shall be in writing and delivered in person or by courier,
telegraphed, telexed or by facsimile transmission or mailed by certified mail,
postage prepaid, return receipt requested (such mailed notice to be effective on
the date of such receipt is acknowledged), as follows:

If to Bank of America Illinois:

Bank of America Illinois
231 South LaSalle Street
Chicago, IL 60697
Attention: Jeffrey Mann

with a copy to:

McDermott, Will & Emery
227 West Monroe Street
Chicago, IL 60606
Attention: Nancy Mitchell
Telephone: (312) 984-6499
Facsimile: (312) 984-7700

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<PAGE>

If to Massachusetts Mutual Life Insurance Company:

Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111-0001
Attention: Wallace Rodger
Telephone: (413) 744-6055
Facsimile: (413) 744-6210

If to MassMutual Participation Investors:

MassMutual Participation Investors
1295 State Street
Springfield, Massachusetts 01111-0001
Attention: John Joyce
Telephone: (413) 744-6075
Facsimile: (413) 744-6127

If to MassMutual Corporate Investors:

MassMutual Participation Investors
1295 State Street
Springfield, Massachusetts 01111-0001
Attention: John Joyce
Telephone: (413) 744-6075
Facsimile: (413) 744-6127

If to other Sellers, to:

c/o Ardshiel, Inc.
230 Park Avenue - Suite 2527
New York, NY 10169
Attention: Geoffrey J.F. Gorman
Telephone: (212) 697-8570
Facsimile: (212) 972-1809

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<PAGE>

If to the Company, to:

Golden State Vintners
38558 Road 128
P.O. Box 39
Cutler, CA 93615
Attention: Jeffrey B. O'Neill
Telephone: (209) 528-3033
Facsimile: (209) 528-2627

If to Buyer, to:

Smith McDonnell Stone & Co., Inc.
450 Park Avenue
Suite 2102
New York, New York 10022
Attention: Mark D. McDonnell
Telephone: (212) 750-7780
Facsimile: (212) 754-3362

with a copy to:

Anderson Kill Olick & Oshinsky, P.C.
1251 Avenue of the Americas
New York, New York 10023
Attention: Ronald S. Brody, Esq.
Telephone: (212) 278-1258
Facsimile: (212) 278-1733

or to such other place and with such other copies as either Party may designate
as to itself by written notice to the others.

Payments to be made to Sellers hereunder shall be made by wire
transferred funds to be delivered to Sellers' in accordance with the
instructions to be delivered at Closing.

14.4 CHOICE OF LAW. This Agreement shall be construed, interpreted
and the rights of the Parties determined in accordance with the laws of the
State of New York, without regard to principles of conflicts of laws, except
with respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a Party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.

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Sellers irrevocably agree that any legal action or proceeding arising
out of or in connection with the Transaction Documents, or the transactions
contemplated thereby, shall be brought in the United States District Court for
the Southern District of New York. Any and all service of process and any other
notice in any such action, suit or proceeding shall be effective against any
Party if given personally or by registered or certified mail, return receipt
requested, or by any other means of mail that requires a signed receipt, postage
prepaid, mailed to such Party as herein provided.

14.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement,
together with all exhibits and schedules hereto, constitutes the entire
agreement among the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. No supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by the Party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.

14.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

14.7 INVALIDITY. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any other such instrument.

14.8 HEADINGS. The headings of the Articles and Sections herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.

14.9 EXPENSES. Except as otherwise provided herein, Sellers and
Buyer will each be liable for its own, and Sellers shall be liable for the
Company's, costs and expenses incurred in connection with the negotiation,
preparation, execution and performance of the Transaction Documents.

14.10 PUBLICITY. Neither Party shall issue any press release or
make any public statement regarding the transactions contemplated hereby,
without the prior approval of the other Party.

14.11 REMEDIES. Except for the limitations set forth under Article
11 and Section 14.14 hereof with respect to the representations and warranties
contained in Article IVA and IVB hereof, Buyer, Sellers and the Company
expressly reserve any and all rights and remedies available to either of them
relating to any actions, whether at law or in equity, with

46
<PAGE>

respect to any provision, covenant, warranty, or agreement contained in this
Agreement. No failure to exercise, and no delay in exercising, any right,
remedy, power or privilege under this Agreement by any Party hereto will operate
as a waiver of such right, remedy, power or privilege, nor will any single or
partial exercise of any right, remedy, power or privilege under this Agreement
preclude any other or further exercise of such right, remedy, power or privilege
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges provided pursuant to this Agreement are
cumulative and not exhaustive of any other rights, remedies, powers and
privileges which may be provided by law.

14.12 RISK OF LOSS. Until the Closing, all risk of loss with
respect to the Assets will remain with the Sellers. If prior to the Closing any
Asset is damaged, destroyed or lost, and the diminution in value to said Asset
is less than $500,000 then Buyer shall remain obligated to consummate the
transaction herein contemplated with a reduction in the Purchase Price by an
amount equal to the diminution in the fair market value (determined at the time
of the Closing) of such Asset by reason of such damage, destruction or loss. If
the diminution in value to any Asset exceeds $500,000 then at its option, the
Buyer may waive the failure of any condition set forth in Article VIII with
respect to such damage, destruction or loss and either

(a) reduce the Purchase Price by an amount equal to the diminution
in the fair market value (determined at the time of the Closing) of such
Asset by reason of such damage, destruction or loss or

(b) elect to have the Sellers retain such damaged, destroyed or
lost Asset and reduce the Purchase Price by the greater of the fair market
value or the net book value of such Asset (in each case determined
immediately prior to such damage, destruction or loss).

14.13 CONFIDENTIAL INFORMATION. The Parties acknowledge that the
transactions described herein are of a confidential nature and shall not be
disclosed except to consultants, advisors and affiliates, or as required by
applicable law, until such time as the Parties make a public announcement
regarding the transaction as provided in Section 14-10 or, if no such public
announcement is to be made, after the Closing Date. Neither Sellers nor Buyer
shall make any public disclosure of the specific terms of this Agreement, except
as required by applicable law or legal process. In connection with the
negotiation of the Transaction Documents and the preparation for the
consummation of the transactions contemplated thereby, each Party acknowledges
that it will have access to confidential information relating to the other
Party. Each Party shall treat such information as confidential, preserve the
confidentiality thereof and not duplicate or use such information, except to
Representatives, advisors, consultants and affiliates in connection with the
transactions contemplated thereby. Sellers, at a time and in a manner which it
reasonably determines and after prior notice to and consultation with and
consent of Buyer, may notify employees, unions and bargaining agents of the fact
of the subject transaction.

47
<PAGE>

14.14 LIABILITY OF LENDER SELLERS. Notwithstanding any provision to
the contrary in any of the Transaction Documents, each of the Lender Sellers (i)
shall not be deemed a Seller for the purposes of Articles IVA, VI and IX hereof
(ii) acknowledge and agree to make the representations and warranties to the
Buyer as set forth in Article IVB, (iii) shall, jointly and severally, indemnify
Buyer and Buyer's Indemnitees against, and hold each Buyer Indemnitee harmless
from, (x) Damages arising out of a misrepresentation or the breach of any
warranty, covenant or agreement of Lender Sellers contained in Article IVB
herein and, provided Buyer complies with applicable statutory requirements and
offers all shareholders of the Company a price per share at least equal to the
price per share payable to the Lender Sellers pursuant to Section 2.2 hereof,
(y) Damages arising out of any shareholder's dissenters rights action or similar
claim; PROVIDED, HOWEVER, that in all cases except for Damages arising from or
in connection with such Lender Seller's fraud (with respect to which the
limitations on liability set forth in this Section 14.14 shall not apply), each
Lender Seller's obligation hereunder with respect to Damages shall not exceed
such Lender Seller's aggregate pro-rata share of the face value of the
Exchangeable Preferred Stock as of the date hereof and such indemnification
obligation shall be offset dollar for dollar against the Exchangeable Preferred
Stock held by such Lender Sellers, and (iv) acknowledges and agrees that its
indemnification obligation to Buyers pursuant to Article XI of this Agreement
extends to breaches of representations, warranties and covenants of the Company
or any other Seller, in each case, subject to the limitation on the
indemnification obligation amount set forth in clause (iii) of this sentence
above.

48
<PAGE>

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement,
or have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.

/s/ JEFFREY B. O'NEILL
------------------------------------
Jeffrey B. O'Neill

ARDSHIEL, INC.

BY: /s/ JAMES G.
-------------------------------
Name: James G.
Its:

ARDSHIEL, INC., as attorney-in-fact for each of
the parties listed on Schedule A hereto

BY: /s/ JAMES G.
-------------------------------
Name: James G.
Its: Attorney-in-Fact

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

BY: /s/ JOHN B. JOYCE
-------------------------------
Name: John B. Joyce
Its: VICE PRESIDENT

The foregoing is executed on
behalf of MassMutual Participation
Investors, organized under a
Declaration of Trust, dated
April 7, 1998, as amended from
time to time. The obligations
of such Trust are not binding
upon, nor shall resort be had to
the property of, any of the
Trustees, shareholders, officers,
employees or agents of such Trust
individually, but the Trust's assets
and property only shall be bound.

49
<PAGE>

The foregoing is executed on
behalf of MassMutual Corporate
Investors, organized under
Declaration of Trust, dated
September 10, 1985, as amended
from time to time. The obligations
of such Trust are not personally
binding upon, nor shall resort be
had to the property of, any of the
Trustees, shareholders, officers,
employees or agents of such Trust,
the Trust's property only shall be
bound.

MASSMUTUAL PARTICIPATION INVESTORS

BY: /s/ JOHN B. JOYCE
-------------------------------
Name: John B. Joyce
Its: VICE PRESIDENT

MASSMUTUAL CORPORATE INVESTORS

By: /s/ JOHN B. JOYCE
-------------------------------
Name: John B. Joyce
Its: VICE PRESIDENT

BANK OF AMERICA ILLINOIS

By: /s/ JEFFREY M. MANN
-------------------------------
Name: Jeffrey Mann
Its: Principal

MID-STATE HORTICULTURAL COMPANY

By: /s/ ROBERT SETRAKIAN
-------------------------------
Name: Robert Setrakian
Its: President

CGW ASSOCIATES LIMITED PARTNERSHIP
By: Ardshiel, Inc., its general partner

By: /s/ JAMES G.
-------------------------------
Name: James G.
Its: Attorney-in-Fact

50
<PAGE>

CHRISTOPHER J. PERRY

By: /s/
-------------------------------
Christopher Perry

ROBERT F. PERILLE

By: /s/
-------------------------------
Robert F. Perille

ANN O'BRIEN

By: /s/
-------------------------------
Ann O'Brien

FORD S. BARTHOLOW

By: /s/ FORD S. BARTHOLOW
-------------------------------
Ford S. Bartholow

JEFFREY M. MANN

By: /s/ JEFFREY M. MANN
-------------------------------
Jeffrey M. Mann

MATTHEW W. CLARY

By: /s/ MATTHEW W. CLARY
-------------------------------
Matthew W. Clary

THOMAS E. VAN PELT, JR.

By: /s/ THOMAS E. VAN PELT, JR.
-------------------------------
Thomas E. Van Pelt, Jr.

51
<PAGE>

GOLDEN STATE VINTNERS

By:
-------------------------------
Name:
Its:

GOLDEN STATE ACQUISITION CORP.

By: /s/ MARK A. MCDONNELL
-------------------------------
Name: Mark A. McDonnell
Its:

<PAGE>

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

GOLDEN STATE ACQUISITION CORPORATION

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

PREFERRED STOCK EXCHANGE AGREEMENT

6% CUMULATIVE EXCHANGEABLE PREFERRED STOCK

DATED AS OF APRIL 27, 1995

<PAGE>

PREFERRED STOCK EXCHANGE AGREEMENT

This Preferred Stock Exchange Agreement (this "Agreement") is entered into
as of April 27, 1995 by and among Golden State Acquisition Corp., a Delaware
corporation (the "Company"), and the parties signatory hereto (collectively, the
"Junior Investors").

WHEREAS, concurrently herewith, pursuant to that certain Stock Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), the Company
is acquiring up to 100% of the issued and outstanding capital stock (the "GSV
Shares") of Golden State Vintners, a California corporation ("GSV"); and

WHEREAS, pursuant to the Purchase Agreement, the Junior Investors have
agreed that the Company may pay a portion of the purchase price through the
issuance of Junior Preferred Stock (as hereinafter defined);

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:

1. DEFINITIONS. Capitalized terms not otherwise defined herein shall
have the respective meanings assigned to such terms in the Purchase Agreement.

"CERTIFICATE OF INCORPORATION" shall mean the Certificate of
Incorporation of the Company, as amended, modified or restated from time to
time.

"COMMON STOCK" shall mean the issued and outstanding Class A Common
Stock, Class B Common Stock, Class D Common Stock and Class E Common Stock.

"ESCROW AGREEMENT" shall mean that certain escrow agreement entered by
and among the Junior Investors, the Company and Anderson Kill Olick & Oshinsky,
P.C., as escrow agent, dated the date hereof.

"EXCHANGE STOCK" shall mean the unissued Class B Common Stock into
which the Junior Preferred Stock is exchangeable and the Class B Common Stock
issued upon such exchange.

"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, business trust, unincorporated
organization or government or other agency or political subdivision thereof or
other entity of any kind.

1
<PAGE>

"REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration
Rights Agreement by and among the Company and the Stockholders (as defined
therein), dated the date hereof.

"SECURITIES" shall mean, collectively, the Junior Preferred Stock and
the Exchange Stock.

"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

"SECURITIES PURCHASE AGREEMENT" shall mean that certain Securities
Purchase Agreement by and among the Company, Golden State Vintners and John
Hancock Mutual Life Insurance Company, dated the date hereof.

"STOCK APPRECIATION RIGHTS AGREEMENT" shall mean that certain Stock
Appreciation Rights Agreement by and among the Company and Jeffrey B. O'Neill,
dated the date hereof.

"STOCKHOLDER AGREEMENT" shall mean that certain agreement, dated the
date hereof, among the Company, FAC, Ltd., a Cayman Islands corporation, and the
Investors (as defined therein).

2. AUTHORIZATION OF SECURITIES. On the terms and subject to the
conditions of this Agreement, the Company proposes to issue 523,980 shares of
its six percent (6%) Junior Exchangeable Preferred Stock (the "Junior Preferred
Stock"), having the rights, preferences and privileges set forth in the
Company's Certificate of Powers, Designations, Preferences and Relative,
Participating, Optional and other Special Rights of Junior Preferred Stock and
Qualifications, Limitations and Restrictions thereof (the "Junior Preferred
Stock Certificate of Designations"), attached hereto as ANNEX A, and the Company
has authorized the sale of the Junior Preferred Stock to the Junior Investors.
The Company has also authorized the issuance of 200,000 shares of its 12%
Cumulative Convertible Senior Preferred Stock (the "Senior Preferred Stock"),
having the rights, preferences and privileges set forth in the Company's
Certificate of Powers, Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of Senior Preferred Stock and Qualifications,
Limitations and Restrictions Thereof (the "Senior Preferred Stock Certificate of
Designations"). Under the terms and subject to the conditions set forth herein
and in the Junior Preferred Stock Certificate of Designations, the Junior
Preferred Stock is exchangeable at any time by the Junior Investors into 136,278
shares of the Company's Class B common stock, par value $.0l per share (the
"Class B Common Stock").

3. SALE AND PURCHASE OF PREFERRED STOCK. Upon the terms and subject to
the conditions contained herein, on the Closing Date (as hereinafter defined)
the Company agrees to issue 523,980 shares of Junior Preferred Stock in partial
payment of the purchase price to be paid by the Company to the Junior Investors
for the GSV Shares pursuant to the Purchase Agreement,

2
<PAGE>

which shares of Junior Preferred Stock shall be held in escrow for the Junior
Investors pursuant to the terms of the Escrow Agreement, a copy of which is
attached hereto as ANNEX B.

4. CLOSING. The closing of the issuance to the Junior Investors of the
Junior Preferred Stock (the "Closing") shall take place at the offices of
Anderson, Kill, Olick & Oshinsky, P.C., 1251 Avenue of the Americas, New York,
New York 10020, at 10:00 a.m., New York City time, on April 27, 1995, or at such
other time or day as the parties hereto shall agree (the "Closing Date"). At
the Closing, the Company shall deliver to the Escrow Agent (as defined in the
Escrow Agreement) a certificate evidencing the number of shares of Junior
Preferred Stock set forth below each such Junior Investor's name on the
signature pages hereto. Each certificate shall be registered in each such
Junior Investor's name to be held by the Escrow Agent for such Investor's
benefit.

5. RESTRICTIONS ON TRANSFER.

5.1. REGISTRATION. Each Junior Investor understands and agrees
that the Securities it will be acquiring have not been registered under the
Securities Act and that, accordingly, will not be transferable except as
permitted under exemptions available under the Securities Act, or upon
satisfaction of the registration and prospectus delivery requirements thereof.
Each Junior Investor acknowledges and agrees that it must bear the economic risk
of its investment in the Securities for an indefinite period of time, since the
Securities have not been registered under the Securities Act and, therefore,
cannot be sold unless they are subsequently registered or an exemption from
registration is available.

5.2. LEGEND. Each Junior Investor agrees with the Company that the
certificate or certificates evidencing the Securities, and each certificate
issued in any transfer thereof, will bear the following legends:

"THE SECURITIES REPRESENTED HEREBY (A) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN AVAILABLE EXEMPTION THEREFROM UNDER SAID ACT OR THE RULES
AND REGULATIONS PROMULGATED THEREUNDER, AND (B) ARE SUBJECT TO THE
PROVISIONS, INCLUDING THE LIMITATIONS ON TRANSFER, SET FORTH IN THAT
CERTAIN STOCKHOLDER AGREEMENT BY AND AMONG THE COMPANY AND THE SIGNATORIES
THERETO, AS AMENDED AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH
STOCKHOLDER AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO
THE HOLDER HEREOF UPON WRITTEN REQUEST."

and

3
<PAGE>

"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."

6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Junior Investors that, as of the Closing Date:

6.1. CORPORATE EXISTENCE, POWER, ETC. The Company has been duly
incorporated and is validly existing and in good standing under the laws of the
State of Delaware and is duly qualified as a foreign corporation in good
standing in each jurisdiction where the nature of its activities or of its owned
or leased properties makes such qualification necessary, except where the
failure to so qualify would not have a material adverse effect on the Company.
The Company has all requisite power and authority to carry on its business, to
own and hold its properties and assets, to enter into this Agreement, to issue
the Securities and to carry out the provisions of this Agreement and the terms
and conditions of the Securities. The Company has taken all actions necessary
to authorize it to enter into and perform its obligations under this Agreement,
to issue the Securities and to consummate the transactions contemplated hereby.
This Agreement is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject (i) to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors, rights, (ii) to general
equitable principles and (iii) to the discretion of the court before which any
proceeding therefor may be brought.

6.2. NO VIOLATION. The execution and delivery by the Company of
this Agreement and the performance hereof and the consummation of the
transactions contemplated hereby do not and will not result in a material breach
or violation of any of the terms and provisions of, or constitute a default
under (i) any material agreement or instrument to which the Company is a party
or by which it is bound or (ii) the charter or by-laws of the Company.

6.3. CAPITAL STOCK. After the Closing, the authorized capital
stock of the Company will consist of: (i) 1,000,000 shares of Class A Common
Stock, par value $0.01 per share (the "Class A Common Stock"), 650,000 shares of
which will be issued and outstanding pursuant to the Common Stock Subscription
Agreement; (ii) 2,000,000 shares of Class B Common Stock, 1,300,000 shares of
which will be issued and outstanding pursuant to the Common Stock Subscription
Agreement and 136,210 shares of which will be reserved for exchange pursuant to
this Agreement; (iii) 3,500,000 shares of Class D Common Stock, par value $0.01
per share (the "Class D Common Stock"), none of which will be issued and
outstanding, but 2,086,210 shares of which will be reserved for issuance upon
conversion of the Class A Common Stock and Class B Common Stock pursuant to the
Corporation's Certificate of Incorporation; (iv) 200,000 shares of Senior
Preferred Stock, 100,000 shares of which shall be issued and outstanding
pursuant to the terms of the Securities Purchase Agreement; (v) 750,000

4
<PAGE>

shares of Junior Preferred Stock, 523,980 shares of which shall be issued and
outstanding pursuant to the terms hereof; and (vi) 1,000,000 shares of Class E
Common Stock, par value $0.01 per share (the "Class E Common Stock"), 414,079
shares of which will be issued and outstanding pursuant to the Securities
Purchase Agreement. After the Closing, all of the outstanding shares of capital
stock of the Company will upon their issuance be duly authorized, validly
issued, fully paid and nonassessable.

6.4 PRIVATE OFFERING.

(i) The offer and sale of the Junior Preferred Stock
hereunder are exempt from the registration and prospectus delivery requirements
of the Securities Act. The Company has not sold any shares of the Junior
Preferred Stock to anyone other than the Junior Investors. The Company agrees
that it, or anyone acting on its behalf, will neither offer any of the Junior
Preferred Stock so as to bring the issuance and sale thereof within the
provisions of Section 5 of the Securities Act, nor offer any similar securities
for issuance of sale to, or solicit any offer to acquire any of the same from,
or otherwise approach or negotiate with respect thereto with, anyone if the sale
of any of the Junior Preferred Stock and any such securities would be integrated
as a single offering for the purposes of the Securities Act, including, without
limitation, Regulation D promulgated thereunder. Each share of Junior Preferred
Stock shall have a legend or legends setting forth the restrictions on
transferability and sale set forth in Section 5.2 hereof for at least so long as
such restrictions apply. Notwithstanding any provision to the contrary
contained herein, any representations and warranties of the Company in this
Agreement are based upon and subject to the accuracy of the representations and
warranties of the Junior Investors contained in Section 7 hereof.

(ii) In the case of the offer and sale of the Junior
Preferred Stock, no form of general solicitation or general advertising was used
by the Company, including, but not limited to, advertisements, articles, notices
or other communications published in any newspaper, magazine or similar medium
or broadcast over television or radio, or any seminar or meeting whose attendees
were invited by any general solicitation or general advertising.

7. REPRESENTATIONS AND AGREEMENTS OF THE JUNIOR INVESTORS. Each Junior
Investor represents, warrants and agrees for the benefit of the Company as of
the Closing Date as follows:

7.1 The Junior Investor has had an opportunity to discuss the
business, management and financial affairs of the Company, and the terms and
conditions of the proposed purchase, with the management of the Company.

7.2 The Junior Investor qualifies as an "accredited investor"
within the meaning of Rule 501(a) of Regulation D under the Securities Act, and
has such knowledge and experience in financial and business matters that such
Junior Investor is capable of evaluating the merits and risks of its purchase of
the Junior Preferred Stock.

5
<PAGE>

7.3 The Junior Investor is acquiring the Junior Preferred Stock
for its own account and not with a view to any resale or distribution of the
Junior Preferred Stock that would violate the Securities Act, and acknowledges
that there are substantial restrictions on the transferability of the Junior
Preferred Stock; and the Junior Investor understands that the Securities have
not been registered under the Securities Act and that certificates representing
the Securities initially will bear the legend and be subject to the restrictions
on transfer and sale set forth in Section 5.2 of this Agreement.

8. DOCUMENTS DELIVERED AT THE CLOSING. On the Closing Date, the Company
will deliver to the Junior Investors a certificate from the Company signed by an
appropriate officer of the Company, dated the Closing Date, to the effect that,
to the best of such officer's knowledge, the representations and warranties of
the Company in this Agreement are true and correct as of the Closing Date and
that Company has complied in all material respects with all the agreements and
satisfied all the material conditions on its part to be performed or satisfied
at or prior to the Closing Date.

9. TAX TREATMENT. The issuance of 523,980 shares of Junior Preferred
Stock pursuant to this Agreement is part of an integrated series of transactions
constituting the initial funding and capitalization of the Company. As such,
the transfer of property by the Junior Investors to the Company and the transfer
of the Junior Preferred Stock by the Company to the Junior Investors will be
subject to the provisions of Section 351 ET. SEQ. of the Internal Revenue Code
of 1986, as amended, and corresponding applicable state statutes. The Company
and the Junior Investors will report the issuance of the Junior Preferred Stock
hereunder in proper conformity with this tax treatment.

10. FINANCIAL STATEMENTS. At the written request of any Junior Investor,
the Company shall deliver, at no expense to such Junior Investor, a copy of the
Company's most recent (a) quarterly unaudited financial statements and (b)
annual audited financial statements, in each case, substantially in the form as
required to be delivered by the Company under the Securities Purchase Agreement.

11. MISCELLANEOUS.

11.1. NOTICES. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
hand delivered or mailed postage prepaid by registered or certified mail,

(a) if to any Junior Investor, addressed to such
Junior Investor at its address shown on the applicable signature pages
hereof, or at such other address as such Junior Investor may specify by
written notice to the Company, or

6
<PAGE>

(b) if to the Company, at the address first above
written or at such other address as the Company may specify by written
notice to the Junior Investors, and each such notice, request, consent and
other communication shall for all purposes of the Agreement be treated as
being effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or 4 days
after the same has been deposited in a regularly maintained receptacle for
the deposit of United States mail, addressed and postage prepaid as
aforesaid.

11.2. SEVERABILITY. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to or in connection
with this Agreement or any of the transactions contemplated hereby shall be
given effect separately from the provision or provisions determined to be
illegal or unenforceable and shall not be affected thereby.

11.3. PARTIES IN INTEREST. Except as otherwise set forth herein, all the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto. This Agreement shall not run to the benefit of or be
enforceable by any Person other than a party to this Agreement and its
successors and assigns.

11.4. HEADINGS. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.

11.5. CHOICE OF LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without regard to
conflict of law provisions thereof.

11.6. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.

7
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed and accepted this
Agreement on the day and year first above written.

GOLDEN STATE ACQUISITION CORP.

By:
-----------------------------
Name:
Title:

[ADDITIONAL SIGNATURE PAGES TO FOLLOW]

8
<PAGE>

as if all parties had signed the same document. All such counterparts shall be
deemed an original, shall be construed together and shall constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties hereto have executed and accepted this
Agreement on the day and year first above written.

GOLDEN STATE ACQUISITION CORP.

By: /s/ MARK D. MCDONNELL
-----------------------------
Name: Mark D. McDonnell
Title:

9
<PAGE>

CGW ASSOCIATES LIMITED PARTNERSHIP

By: ARDSHIEL, INC.
---------------------------------
Its General Partner

By: /s/ JAMES G.
---------------------------------
Name: James G.
Title: Attorney-in-Fact

Number of shares of Junior Preferred Stock to be issued to Junior Investor by
the Company: 219,229
-------

Exact name of Junior Investor or Junior Investor's nominee as it should appear
on Junior Preferred Stock certificate: CGW ASSOCIATES, L.P.
----------------------------------------

Address for notices:

CGW Associates Limited Partnership
c/o Ardshiel, Inc.
230 Park Avenue - Suite 2527
New York, NY 10169

with a copy, which will not constitute notice to CGW Associates Limited
Partnership, to:

Farella Braun & Martel
235 Montgomery Street
San Francisco, CA 94104
Attention: Frank Farella, Esq.

Junior Investor is organized or incorporated under the laws of the State of:

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

Junior Investor's principal place of business is in the State of:

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

10
<PAGE>

MID-STATE HORTICULTURAL COMPANY

By: /s/ ROBERT SETRAKIAN
---------------------------------
Name: Robert Setrakian
Title: President

Number of shares of Junior Preferred Stock to be issued to Junior Investor by
the Company: 137,384
-------

Exact name of Junior Investor or Junior Investor's nominee as it should appear
on Junior Preferred Stock certificate: MID-STATE HORTICULTURAL COMPANY
----------------------------------------

Address for notices:

1905 Baker Street
San Francisco, California 94115

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

-------------------------------
Attention: Robert Setrakian
Telephone: 415-563-4444
Telecopier: 415-921-7872
Telex:
-------------------------

Junior Investor is organized or incorporated under the laws of the State of:
CALIFORNIA
- -------------------------------------------

Junior Investor's principal place of business is in the State of:
CALIFORNIA
- -------------------------------------------

11
<PAGE>

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

By: /s/ JOHN B. JOYCE
---------------------------------
Name: John B. Joyce
Title: VICE PRESIDENT

Number of shares of Junior Preferred Stock to be issued to Junior Investor by
the Company: TWO CERTIFICATES TOTALING 43,823
--------------------------------

Exact name of Junior Investor or Junior Investor's nominee as it should appear
on Junior Preferred Stock certificate: MASSMUTUAL LIFE INSURANCE COMPANY
---------------------------------

Address for notices:

Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111

Junior Investor is organized or incorporated under the laws of the State of:
MASSACHUSETTS
- -------------

Junior Investor's principal place of business is in the State of:
MASSACHUSETTS
- -------------

12
<PAGE>

MASSMUTUAL PARTICIPATION INVESTORS

By: /s/ JOHN B. JOYCE
---------------------------------
Name: John B. Joyce
Title: Vice President
The foregoing is executed on behalf of
MassMutual Participation Investors,
organized under a Declaration of Trust,
dated April 7, 1988, as amended from
time to time. The obligations of such
Trust are not binding upon, nor shall
resort be had to the property of any of
the Trustees, shareholders, officers,
employees or agents of such Trust
individually, but the Trust's assets and
property only shall be bound.

Number of shares of Junior Preferred Stock to be issued to
Junior Investor by the Company: 5,056
-----

Exact name of Junior Investor or Junior Investor's nominee
as it should appear on Junior Preferred Stock Certificate:
MASSMUTUAL PARTICIPATION INVESTORS
- ----------------------------------

Address for notices:

c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111

Junior Investor is organized or incorporated under the laws of the State of:
MASSACHUSETTS
- -------------

Junior Investor's principal place of business is in the State of:
MASSACHUSETTS
- -------------

13
<PAGE>

MASSMUTUAL CORPORATE INVESTORS

By: /s/ JOHN B. JOYCE
---------------------------------
Name: John B. Joyce
Title: Vice President

The foregoing is executed on behalf of
MassMutual Corporate Investors,
organized under a Declaration of Trust,
dated September 13, 1985, as amended
from time to time. The obligations of
such Trust are not personally binding
upon, nor shall resort be had to the
property of, any of the Trustees,
shareholders, officers, employees or
agents of such Trust, but the Trust's
property only shall be bound.

Number of shares of Junior Preferred Stock to be issued to
Junior Investor by the Company: 10,113
------

Exact name of Junior Investor or Junior Investor's nominee
as it should appear on Junior Preferred Stock Certificate:
MASSMUTUAL CORPORATE INVESTORS
- ------------------------------

Address for notices:

c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111

Junior Investor is organized or incorporated under the laws of the State of:
MASSACHUSETTS
- -------------

Junior Investor's principal place of business is in the State of:
MASSACHUSETTS
- -------------

14
<PAGE>

ARDSHIEL, INC.

By: /s/ JAMES G.
---------------------------------
Name: James G.
Title: Attorney-in-Fact

Number of shares of Junior Preferred Stock to be issued to
Junior Investor by the Company: 12,961
------

Exact name of Junior Investor or Junior Investor's nominee
as it should appear on Junior Preferred Stock Certificate:
ARDSHIEL, INC.
- --------------

Address for notices:

Ardshiel, Inc.
230 Park Avenue, Suite 2527
New York, NY 10169
Attn: Geoffrey J.F. Gorman

Junior Investor is organized or incorporated under the laws of the State of:

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

Junior Investor's principal place of business is in the State of:

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

15
<PAGE>

BANK OF AMERICA ILLINOIS

By: /s/ JEFFREY M. MANN
---------------------------------
Name: Jeffrey M. Mann
Title: Principal

Number of shares of Junior Preferred Stock to be issued to
Junior Investor by the Company: TWO CERTIFICATES TOTALING 52,621
--------------------------------

Exact name of Junior Investor or Junior Investor's nominee
as it should appear on Junior Preferred Stock Certificate:
CONTINENTAL ILLINOIS COMMERCIAL CORPORATION
- -------------------------------------------

Address for notices:

Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Jeffrey M. Mann

Junior Investor is organized or incorporated under the laws of the State of:

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

Junior Investor's principal place of business is in the State of:

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

16
<PAGE>

/s/ JEFFREY B. O'NEILL
- ------------------------------
Jeffrey B. O'Neill

Number of shares of Junior Preferred Stock to be issued to
Junior Investor by the Company: 42,793
------

Exact name of Junior Investor or Junior Investor's nominee
as it should appear on Junior Preferred Stock Certificate:
JEFFREY B. O'NEILL
- ------------------

Address for notices:

Golden State Vintners
60 East Sir Francis Drake Boulevard
Suite 302
Larkspur, CA 94939

<PAGE>
AGREEMENT FOR PURCHASE AND SALE
OF
REEDLEY FACILITY

TABLE OF CONTENTS

Page
----

ARTICLE I BASIC DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . 3

ARTICLE III CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE IV COVENANTS, WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . .12

ARTICLE V INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

ARTICLE VI ESCROW AND CLOSING . . . . . . . . . . . . . . . . . . . . . . .16

ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .20

Exhibit A - Legal Description
Exhibit B - List of Service Contracts
Exhibit C-1 - List of Personal Property
Exhibit C-2 - List of Items Excluded From Personal Property
Exhibit D - Deed
Exhibit E - Bill of Sale
Exhibit F - Assignment of Intangible Property
Exhibit G - Assignment of Leases
Exhibit H - Processing Agreements
Exhibit I - Note
Exhibit J - Deed of Trust
Exhibit K - Schedule of Seller's Exceptions
Exhibit L - Environmental Items

<PAGE>

AGREEMENT FOR PURCHASE AND SALE
OF
REEDLEY FACILITY

THIS AGREEMENT FOR PURCHASE AND SALE is made and entered into as of March
15, 1995 by and between HEUBLEIN, INC., a Connecticut corporation ("Seller"),
and GOLDEN STATE VINTNERS, a California corporation ("Buyer").

ARTICLE I
BASIC DEFINITIONS

Section 1.1 BUSINESS. The term "Business" shall mean the business of
producing brandy and dessert wines, as such business is presently conducted on
the Real Property.

Section 1.2 CLOSING DATE. The term "Closing Date" shall mean May 1,
1995, or any earlier date approved in writing by Buyer and Seller for the close
of escrow with respect to the purchase and sale of the Property; provided that
Buyer may extend the Closing Date to a date no later than May 5, 1995, by giving
Seller a written extension notice no later than April 28, 1995 (which notice
shall specify the new Closing Date).

Section 1.3 CONTRACT PERIOD. The term "Contract Period" shall mean the
period from the date of this Agreement through and including the Closing Date.

Section 1.4 DUE DILIGENCE PERIOD. The term "Due Diligence Period" shall
mean the period beginning on the date of this Agreement and ending on May 1,
1995.

Section 1.5 INTANGIBLE PROPERTY. The term "Intangible Property" shall
mean any and all unexpired governmental and quasi-governmental licenses,
permits, waivers, variances, consents and approvals held by Seller primarily
relating to the occupancy of the Real Property or the operation of the Business
(the "Approvals"), any and all existing warranties held by Seller and given by
third parties primarily relating to the Real Property (the "Warranties"),
Seller's rights and interests in the service and equipment contracts primarily
relating to the Real Property which are described in EXHIBIT B to this
Agreement, and all material operating data and records and reports owned by and
in the possession of Seller and used exclusively in Seller's production and
storage of brandy and dessert wines on the Real Property. Notwithstanding the
foregoing, the term "Intangible Property" shall not include (i) any of the
foregoing items that are, by their nature or in accordance with their terms,
non-transferable, (ii) any of the foregoing items that require third party
consent prior to transfer which consent Seller is unable to obtain
notwithstanding its reasonable efforts to do so, and (iii) any trademarks,
tradenames, service marks and any intangible property relating to Seller's
brands.

<PAGE>

Section 1.6 INVENTORY. The term "Inventory" shall mean all bulk or
barreled brandy or wine inventory, all pallets, all barrels, all bungs and all
other Heublein Materials (as defined in the Production Agreements attached
hereto as EXHIBIT H) located on the Real Property on the Closing Date.

Section 1.7 PERMITTED EXCEPTIONS. The term "Permitted Exceptions" shall
mean real property taxes and assessments which are not delinquent and those
exceptions to title accepted or approved by Buyer pursuant to Section 3.4.

Section 1.8 PERSONAL PROPERTY. The term "Personal Property" shall mean
those items of personal property owned by Seller and located on the Real
Property and used in connection with the operation of the Business, including
without limitation (i) those assets listed in EXHIBIT C-1 to this Agreement, and
(ii) all final and most recent architectural, mechanical, engineering and
as-built plans and specifications relating to the structures that currently
exist on the Real Property (as such structures currently exist) that are in
Seller's possession (the "Plans"). Notwithstanding the foregoing, the term
"Personal Property" shall not include any of the Inventory or any of the
property listed on EXHIBIT C-2 to this Agreement.

Section 1.9 PRELIMINARY REPORT. The term "Preliminary Report" shall
mean the preliminary title report issued by Title Company on January 12, 1995
under its Order No. 455171.

Section 1.10 PROPERTY. The term "Property" shall mean the Real Property,
the Personal Property and the Intangible Property. In no event will the
Property, or any portion thereof, include the Inventory.

Section 1.11 REAL PROPERTY. The term "Real Property" shall mean that
certain real property (including, without limitation, (i) all easements, rights
of way, privileges, licenses, appurtenances, mineral and other rights and
benefits of or held by Seller to the extent that the same are appurtenant to
such real property, (ii) any and all improvements thereon owned by Seller
("Improvements"), and (iii) any and all fixtures, parking areas and landscaping
located upon such real property and owned by Seller) commonly known as the
Reedley facility, located in Fresno County, California. The land component of
the Real Property is described with precision in EXHIBIT A to this Agreement,
subject to adjustment as provided in Section 2.2(c) below.

Section 1.12 TITLE COMPANY. The term "Title Company" shall mean Chicago
Title Company, 2425 W. Shaw Avenue, Fresno, California 93711.

2
<PAGE>

ARTICLE II
PURCHASE AND SALE

Section 2.1 PURCHASE AND SALE. Seller agrees to sell the Property to
Buyer, and Buyer agrees to purchase the Property from Seller upon all of the
terms, covenants and conditions set forth in this Agreement.

Section 2.2 PURCHASE PRICE AND CASH LEASE.

(a) The purchase price for the Property (the "Purchase Price")
shall be Six Million Five Hundred Thousand and 00/100 Dollars ($6,500,000.00)
and shall be allocated to the land, to the Improvements, to the Personal
Property and to the Intangible Property in accordance with the mutual agreement
of the parties hereto.

(b) The Purchase Price shall be payable as follows on the
Closing Date through the escrow established pursuant to Section 6.1:

(i) Six Million and 00/100 Dollars ($6,000,000.00) shall be
payable in cash; and

(ii) Five Hundred Thousand and 00/100 Dollars ($500,000.00)
shall be payable in accordance with a promissory note in the form attached to
this Agreement as EXHIBIT I (the "Note"). The Note will have a five (5) year
term, accrue interest at a rate of ten percent (10%) per annum, and be payable
in equal semi-annual installments of interest only due on each May 1 and
November 1 during the term of the Note, with all outstanding amounts due at
maturity. The Note shall be secured by a second deed of trust encumbering the
fee interest in the Real Property in the form attached hereto as EXHIBIT J (the
"Deed of Trust").

(c) Buyer acknowledges and agrees that a portion of the Real
Property is encumbered by that certain Cash Farm Lease dated June 1, 1988 by and
between Kash, Inc. ("Kash") and Seller (as successor-in-interest to Mont LaSalle
Vineyards) (the "Cash Lease"). Buyer further acknowledges and agrees that Kash,
as the lessee under the Cash Lease, has a right of first refusal to purchase the
property described therein (the "Right of First Refusal Property"). Buyer and
Seller agree that the value of the Right of First Refusal Property is One
Million, Eighty-Seven Thousand, Five Hundred and 00/100 Dollars ($1,087,500.00),
which value takes into account the value of similar orchard land and the
additional value of the Right of First Refusal Property to the owner of the Real
Property as a potential waste water discharge site or expansion site for the
Business. In the event Kash exercises such right of first refusal, the Right of
First Refusal Property shall be excised from the Real Property and shall not be
conveyed to Buyer, and the Purchase Price shall be reduced by One Million,
Eighty-Seven Thousand, Five Hundred and 00/100 Dollars ($1,087,500.00). In
addition, in the event Kash exercises such right of first refusal and Seller is
not legally able to convey to Kash the Right of First Refusal Property without
effecting a subdivision or lot split and such subdivision or lot split cannot be
Completed

3
<PAGE>

(as defined below) prior to the Closing Date, then (i) on the Closing Date,
Buyer shall purchase the Property LESS Parcels 4, 6, 8 and 9, as shown on the
Preliminary Report (i.e., the legal parcels that include the Right of First
Refusal Property) for the Purchase Price (less the reduction described above in
this Section 2.2(c)), and (ii) as soon as reasonably practicable after Seller
has completed the subject subdivision or lot split, Seller shall transfer to
Buyer for no additional consideration that portion of said Parcels 4, 6, 8 and 9
other than the Right of First Refusal Property (the "Remaining Property") by
executing and recording in the Fresno County records a grant deed for the
Remaining Property, which grant deed shall be substantially in the form attached
to this Agreement as EXHIBIT D. In the event of such a delayed transfer of the
Remaining Property, the costs, expenses and income of the Remaining Property
shall be pro-rated between Buyer and Seller as of the date on which the deed for
the Remaining Property is recorded in the Official Records of Fresno County,
Buyer shall execute all documents reasonably required to insure that the lien of
the Deed of Trust encumbers the Remaining Property, and notwithstanding anything
to the contrary in Section 7.1, damage or destruction of the Remaining Property
after the Closing Date shall not give either party the right to terminate or
rescind this Agreement under said Section 7.1 or otherwise. For purposes of
this Section 2.2(c), the subdivision or lot split shall be deemed "Completed"
when the approval by the appropriate governmental authorities of the final map
or lot line adjustment relating to the subject subdivision or lot split has been
obtained, and the passage of any applicable appeal periods has occurred. If
Seller pursues the subdivision or lot split described in this Section 2.2(c),
Seller will use reasonable efforts to complete the subdivision or lot split, and
will consult Buyer with respect to the configuration and terms of the
subdivision or lot split and permit Buyer to participate in the process of
effecting such subdivision or lot split so as to avoid a subdivision or lot
split that will materially and adversely affect the Business. Buyer shall have
no liability for any of the costs and fees required to complete any subdivision
or lot split required in order to convey the Right of First Refusal Property to
Kash, and/or any of the costs and fees of any parcel maps, variances or
conditional use permits required by such subdivision or lot split. If the
Purchase Price is reduced pursuant to this Section 2.2(c), then such reduction
shall be allocated to the land, to the Improvements, to the Personal Property
and to the Intangible Property in accordance with the mutual agreement of the
parties hereto.

Section 2.3 SELLER'S DISCLAIMER.

(a) Except as otherwise expressly provided in Section 4.1 below,
Seller disclaims the making of any representations or warranties, express or
implied, regarding the Property or matters affecting the Property, including,
without limitation, the physical condition of the Property, title to or the
boundaries of the Real Property, pest control matters, soil condition, hazardous
waste, toxic substance or other environmental matters, compliance with any laws,
regulations and orders (including without limitation any and all building,
health, safety, land use and zoning laws, regulations and orders), structural
and other engineering characteristics, traffic patterns and all other
information pertaining to the Property. Buyer, moreover, acknowledges (i) that
Buyer has entered into this Agreement with the intention of making and relying
upon its own inspection and investigation of the physical, environmental,

4
<PAGE>

economic, legal or other condition or status of the Property and those
representations and warranties of Seller specifically set forth in Section 4.1
below and (ii) that Buyer is not relying upon any representations and
warranties, other than those specifically set forth in Section 4.1 below, made
by Seller or anyone acting or claiming to act on Seller's behalf concerning the
Property or its value or on any documentation or information provided to Buyer
by or on behalf of Seller. Buyer further acknowledges that it has not received
from Seller any accounting, tax, legal, architectural, engineering,
environmental, property management or other advice with respect to this
transaction and is relying solely upon the advice of its own accounting, tax,
legal, architectural, engineering, environmental, property management and other
advisors. Buyer agrees that, except as otherwise expressly provided in Sections
3.3(b), 3.3(f), 4.1, 4.2 and 7.1 of this Agreement, the Property is to be sold
to and accepted by Buyer in its "AS IS" condition and WITH ALL FAULTS on the
Closing Date and assumes the risk that adverse physical, environmental,
economic, legal or other conditions may not have been revealed by its inspection
or investigation.

(b) Except with respect to any claims arising out of any breach
of covenants, representations or warranties set forth in section 4.1 or 4.2
below, Buyer, for itself and its agents, affiliates, successors and assigns,
hereby releases and forever discharges Seller, its agents, affiliates,
successors and assigns from any and all rights, claims and demands at law or in
equity, whether known or unknown at the time of this Agreement, which Buyer has
or may have in the future. arising out of the physical, environmental, economic,
legal or other condition of the Property, including, without limitation, any
rights, claims or demands for indemnification or contribution arising under the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
Section 9601, et. seq.) or any similar federal, state or local statute, rule or
ordinance relating to liability of property owners. Buyer hereby specifically
waives the provisions of section 1542 of the California Civil Code ("Section
1542") and any similar law of any other state, territory or jurisdiction.
Section 1542 provides:

A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his
settlement with the debtor.

Buyer hereby specifically acknowledges that Buyer has carefully reviewed this
subsection and discussed its import with its legal counsel and that the
provisions of this subsection are a material part of this Agreement.

-------------------------------------------
Buyer

5
<PAGE>

ARTICLE III
CONDITIONS PRECEDENT

Section 3.1 CONDITIONS.

(a) Notwithstanding anything in this Agreement to the contrary,
Buyer's obligation to purchase the Property shall be subject to and contingent
upon the satisfaction or waiver of the following conditions precedent:

(i) Seller's performance or tender of performance of its
obligations pursuant to the terms and conditions of this Agreement and the truth
in all material respects of each representation and warranty made in this
Agreement by Seller at the time the representation and warranty was made, except
to the extent that (A) the truth or correctness of any such representation or
warranty is affected as a result of the transactions contemplated hereby or the
disclosure thereof or any action by Buyer, or (B) Seller shall agree to
indemnify Buyer, to Buyer's reasonable satisfaction against any resulting loss,
liability or expense;

(ii) the willingness of Title Company or some other reputable
title insurer to issue, upon the sole condition of the payment of its regularly
scheduled premium, the Title Policy described in Section 3.4 below, insuring
Buyer in the amount of the Purchase Price that title to the Real Property is
vested of record in Buyer on the Closing Date, subject only to the Permitted
Exceptions and to the printed conditions and exceptions of such policy other
than such printed conditions and exceptions which Title Company is permitted by
applicable law to remove or modify, including: (A) unrecorded mechanic's lien
claims, (B) rights of parties in possession (other than tenants under leases as
tenants only), (C) unrecorded easements, and (D) if Buyer obtains an ALTA survey
satisfactory to Title Company, any state of facts which a current survey would
disclose (other than survey matters shown on such survey and accepted by Buyer);

(iii) there having been no material adverse change in the
Property from the date of this Agreement through the Closing Date, except for
changes (A) contemplated or permitted by this Agreement or otherwise occurring
as a result of the transactions contemplated hereby or thereby, or (B) the
disclosure thereof or any action by Buyer;

(iv) Buyer's approval prior to the expiration of the Due
Diligence Period of the condition and status of the Property and related matters
pursuant to Section 3.3 below;

(v) on or before the date which is fourteen (14) business
days after the date of this Agreement, (i) the delivery to Buyer of all of the
items listed in clauses (i)-(iii) and (vi)-(xi) of Section 3.3(b) below, and
(ii) the availability in Seller's offices located on the Real Property of all of
the items listed in clauses (iv) and (v) of Section 3.3(b) below;

6
<PAGE>

(vi) on or before the Closing Date, the delivery to Buyer of
the certificate described in Section 6.1(a)(viii);

(vii) on or before the expiration of the Due Diligence Period,
the receipt by Buyer of an A.L.T.A. survey satisfactory to Buyer (the "Survey");

(viii) on or before the Closing Date, the funding by Sanwa Bank
California ("Sanwa") of the Sanwa Loan (as defined in Section 4.3 below), or the
obtaining by Buyer of alternative financing satisfactory to Buyer; provided that
Buyer shall not be excused from its obligations under this Agreement if the
failure to obtain the funding described in this Section 3.1(a)(viii) is due to
any failure of Buyer to perform its obligations under Section 4.4(c) below or
any other provision of this Agreement;

(ix) Buyer's receipt on or before the Closing Date of all
consents, authorizations, permits, licenses, orders and approvals of third
parties necessary for the operation of the Business; provided that Buyer shall
not be excused from its obligations under this Agreement if the failure to
obtain any of the foregoing is due to any failure of Buyer to perform its
obligations under Section 4.4(d) below or any other provision of this Agreement;
and

(x) on or before the date which is fourteen (14) days after
the Effective Date, the approval by Buyer's board of directors of this Agreement
and the transactions contemplated hereby (including without limitation the
transactions contemplated by the Processing Agreements (as defined in Section
6.1(a) below)).

(b) Notwithstanding anything in this Agreement to the contrary,
Seller's obligation to sell the Property shall be subject to and contingent upon
the satisfaction or waiver of the following conditions precedent:

(i) Buyer's performance or tender of performance of its
obligations pursuant to the terms and conditions of this Agreement and the truth
in all material respects of each representation and warranty made in this
Agreement by Buyer at the time the representation and warranty was made and as
of the Closing Date, except to the extent that the truth or correctness of any
such representation or warranty is affected as a result of the transactions
contemplated hereby or the disclosure thereof or any action by Seller;

(ii) the willingness of Title Company to issue on the Closing
Date (A) the Owner's Title Policy to Buyer in the form described in Section
3.1(a)(ii), and (B) an A.L.T.A. Lender's Policy of Title Insurance with extended
coverage (including such endorsements as Seller may reasonably request),
insuring Seller in the face amount of the Note that the lien of the Deed of
Trust constitutes a valid lien on and security interest in the Real Property
subject only to (x) those exceptions to title referenced in the Preliminary
Report as of the date hereof, (y) the lien of a deed of trust naming Sanwa as
beneficiary, in an amount not to exceed seventy-five percent (75%) of the value
of the Real Property, as such value is established pursuant to an appraisal

7
<PAGE>

prepared by or at the request of Sanwa, and (z) any other exceptions approved by
Seller in its sole discretion ("Seller's Title Policy"); and

(iii) on or before the date which is fourteen (14) days after
the date of this Agreement, the approval by Seller's board of directors of this
Agreement and the transactions contemplated hereby (including without limitation
the transactions contemplated by the Processing Agreements (as defined in
Section 6.1(a) below)).

Section 3.2 FAILURE OR WAIVER OF CONDITIONS PRECEDENT. In the event any
of the conditions set forth in Section 3.1 are not fulfilled or waived pursuant
to this Section 3.2, this Agreement shall terminate. Buyer may, at its
election, at any time or times on or before the date specified for the
satisfaction of the condition, waive in writing the benefit of any of the
conditions set forth in Section 3.1(a) above without affecting its rights and
remedies with respect to any remaining conditions, and Seller, at its election,
at any time or times on or before the date specified for the satisfaction of the
condition, waive in writing the benefit of any of the conditions set forth in
Section 3.1(b) above without affecting its rights and remedies with respect to
any remaining conditions. Buyer's failure to notify Seller in writing of the
failure of any of the conditions set forth in Section 3.1(a) on or before the
date specified for satisfaction shall constitute a waiver of such condition. In
any event, a party's consent to the close of escrow pursuant to this Agreement
shall waive any remaining unfulfilled conditions for the benefit of such party.

Section 3.3 DUE DILIGENCE INVESTIGATION AND ITEMS TO BE DELIVERED TO
BUYER.

(a) During the Due Diligence Period Buyer shall have the right
to inspect and review to its satisfaction the physical, environmental, economic,
legal and other condition of the Property and all files and information in
Seller's possession which Buyer deems material to the purchase of the Property
and which primarily relates to the operation of the Business; provided that in
no event shall Seller be obligated to provide or make available to Buyer any
files or information that Seller is obligated by agreement or court order to
keep confidential. At Buyer's request, with respect to all such confidential
information (if any) other than that obtained by Seller from the previous owner
of the Business and the Property, Seller shall use reasonable efforts to obtain
all consents necessary to enable Seller to release such information.

(b) On the Closing Date, Seller shall represent and warrant to
Buyer that Seller has delivered true and complete copies of each of the
following items:

(i) The Preliminary Report;

(ii) That certain A.L.T.A. Survey of the Real Property
prepared by Hanna & Hanna, Inc. as Drawing No. E-1962a dated June 8, 1989 (the
"1989 Survey");
8
<PAGE>

(iii) All existing leases covering any portion of the Real
Property that were previously entered into by Seller and that will survive the
Closing Date, any guarantees of such leases, and all amendments thereto;
provided that Seller's copy of the Cash Lease (and therefore the copy given to
Buyer) is missing the exhibits thereto;

(iv) All material Plans in Seller's possession;

(v) All material Warranties and Approvals in Seller's
possession that are transferable and that will survive the Closing Date;

(vi) All unexpired service, maintenance, management and other
similar contracts and agreements primarily relating to the operation and
management of the Property (A) which will be binding on Buyer on the Closing
Date, and (B) for which the Property owner's liability is material and which are
not cancellable within thirty (30) days after notice from the owner of the
Property;

(vii) The most recent real and personal property tax bills and
utility bills relating to the Property and in Seller's possession;

(viii) That certain Preliminary Hazardous Materials Site
Assessment Mont La Salle Vineyards, 8418 Lac Jac Avenue, Reedley, California,
prepared by Harding Lawson Associates dated June 28, 1989, that certain
Supplemental Site Activities, Mont La Salle Vineyards, Reedley and St. Helena,
California, prepared by Harding Lawson Associates dated July 28, 1989, that
certain report prepared by Krazan & Associates addressed to County of Fresno,
Department of Health, Environmental Health Services, re: Heublein, Inc., Mont La
Salle Vineyards, Reedley, California, dated June 14, 1990 (collectively, the
"Harding Lawson Environmental Materials");

(ix) Those certain Waste Discharge Requirements for Heublein,
Inc., Reedley Winery, Fresno County, Order No. 95-014 of the California Regional
Water Quality Control Board, Central Valley Region (the "Order"), and that
certain Monitoring and Reporting Program No. 95-014 for Heublein, Inc., Reedley
Winery, Fresno County, ordered by the California Regional Water Quality Control
Board, Central Valley Region (which document, together with the Order, is
referred to herein as the "Waste Discharge Permit");

(x) All written notices (if any) previously received by
Seller from any governmental agency specifying that hazardous materials on,
under or over the Real Property are in material violation of any Environmental
Law (as defined in Section 4.1 below), where such violation has not been
remedied or remediated as of the date of this Agreement; and

(xi) The Collective Bargaining Agreement (as defined in
Section 6.7 below).

9
<PAGE>

The representations and warranties set forth in this Section 3.3(b) shall
be made as of the Closing Date. Seller will permit and, at Buyer's request,
will instruct, all persons under Seller's control who prepared the Harding
Lawson Environmental Materials or any Plans to divulge any other information
they have about the Property to Buyer so long as Buyer pays any and all
additional costs incurred.

(c) Buyer agrees (i) to make all necessary physical,
environmental, economic, legal or other inspections and investigations of the
Property and the Business during the Due Diligence Period, (ii) to provide to
Seller twenty-four (24) hours notice prior to Buyer's or Buyer's agent's entry
onto the Property, (iii) to perform all tests, inspections and investigations on
the Property in the least disruptive manner possible, (iv) to keep the Property
free and clear of any and all liens of any nature whatsoever arising from
Buyer's or Buyer's agent's entry on or inspections or investigations of the
Property, (v) to return the Property to the same condition it was in prior to
Buyer's or Buyer's agent's entry or inspection or investigation, and (vi) to
indemnify and hold Seller harmless from any and all claims, damages, losses,
expenses and liabilities (including reasonable attorneys fees and expenses)
resulting from any act or omission of Buyer or Buyer's agents on the Property.
Buyer's obligations under clause (vi) of the immediately preceding sentence
shall survive the Closing Date or, if the transaction contemplated by this
Agreement is not consummated, the termination of this Agreement.

(d) If Buyer is not satisfied with the physical, environmental,
economic, legal and other condition or status of the Property and Business at
the end of the Due Diligence Period, Buyer may terminate this Agreement by
sending Seller written notice of such termination no later than the last day of
the Due Diligence Period at which point this Agreement shall terminate. If
Buyer does not so terminate this Agreement on or before the last date of the Due
Diligence Period, Buyer shall waive any right to terminate based on the
condition of the Property, including its rights under Section 3.1(a)(iv) above.

(e) Buyer acknowledges that if Buyer proceeds to closing after
the Due Diligence Period, (i) Buyer will have purchased the Property after
making, and with the intention of relying upon, its own inspection and
investigation of the physical, environmental, economic, legal and other
condition or status of the Property, (ii) that Buyer is not relying upon any
representations and warranties, other than those specifically set forth in
Section 4.1 below, made by Seller or anyone acting or claiming to act on
Seller's behalf concerning the Property or its value or on any documentation or
information provided to Buyer by or on behalf of Seller, and (iii) that it has
not received from Seller any accounting, tax, legal, architectural, engineering,
environmental, property management or other advice with respect to such purchase
and has relied solely upon the advice of its own accounting, tax, legal,
architectural, engineering, environmental, property management and other
advisors. Subject to the provisions of Sections 3.3(b), 3.3(f), 4.1, 4.2 and
7.1 of this Agreement, Buyer shall purchase the Property in its "AS IS"
condition and WITH ALL FAULTS on the Closing Date and assumes the risk that
adverse physical, environmental, economic, legal or other conditions may not
have been revealed by its inspection or investigation.

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(f) Buyer's approval of the condition and status of the Property
shall not alter or diminish Seller's representations and warranties under this
Agreement, and Seller acknowledges and agrees that Buyer is nonetheless relying
on Seller's representations and warranties made herein, except to the extent any
such representation or warranty is specifically waived in whole or in part by
Buyer; provided that the representations and warranties of Seller shall not
extend to, and shall exclude, any and all information actually known to Buyer on
or prior to the Closing Date.

Section 3.4 EXCEPTIONS TO TITLE. Evidence of title shall be the
issuance by Title Company of its A.L.T.A. Owner's Policy of Title Insurance with
extended coverage (including such endorsements as Buyer may reasonably request),
insuring that fee title in the Real Property is vested in Buyer as of the
Closing Date, subject only to the Permitted Exceptions (the "Owner's Title
Policy"). Buyer shall notify Seller in writing of any objections Buyer has to
the Preliminary Report and the title exceptions referenced therein and to any
subsequent amendments or additional exceptions to the Preliminary Report (A)
within ten (10) days of the latest to occur of (x) Buyer's receipt of the
subject exception document, (y) the date of this Agreement, and (z) in the case
of plotable easements, Buyer's receipt of the 1989 Survey or, if the subject
easement is not shown on the 1989 Survey, Buyer's receipt of another survey
reflecting the location of such easement, or (B) prior to the Closing Date,
whichever is earlier. Buyer's failure to disapprove such exception, amendment
or addition within the period specified in the immediately preceding sentence
shall be deemed to be approval. All such exceptions, amendments and additions
that are approved by Buyer (including without limitation those deemed approved
by Buyer pursuant to the immediately preceding sentence) shall be deemed
"Permitted Exceptions." Seller shall use reasonable efforts to remove as matters
affecting title any such disapproved exceptions, amendments or additions prior
to the Closing Date, but (a) in the case of disapproved exceptions that are
referenced in the Preliminary Report, Seller shall not be required to institute
any litigation or incur any cost to do so, and (b) in the case of disapproved
amendments or additions to the Preliminary Report, Seller shall not be required
to institute any litigation or incur any cost in excess of $10,000 to do so.
If, prior to the Closing Date, Seller notifies Buyer that Seller will not be
able to remove any such disapproved exceptions, amendments or additions, then,
within five (5) days after the giving of such notice by Seller, or prior to the
Closing Date, whichever is earlier, Buyer shall give Seller and Title Company
written notice, either that Buyer (i) waives its prior disapproval of the
disapproved exceptions, amendments and additions and accepts such exceptions,
amendments and additions and such title as Seller is able to convey (in which
case such disapproved exceptions, amendments and additions shall be deemed
Permitted Exceptions), or (ii) terminates this Agreement. If no such notice is
given by Buyer within such five (5) day period or prior to the Closing Date,
whichever is earlier, then Buyer shall be deemed to have waived its prior
disapproval of the disapproved exceptions, amendments and additions and accepted
such exceptions, amendments and additions and such title as Seller is able to
convey (in which case such disapproved exceptions, amendments and additions
shall be deemed Permitted Exceptions).

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ARTICLE IV
COVENANTS, WARRANTIES AND REPRESENTATIONS

Section 4.1 SELLER'S WARRANTIES AND REPRESENTATIONS. Except as
disclosed on the Schedule of Seller's Exceptions attached hereto as EXHIBIT K,
Seller hereby makes the following representations and warranties to Buyer, which
representations and warranties shall, subject to Section 4.5 below, survive the
Closing Date, and all of which are (i) material and are being relied upon by
Buyer, (ii) accurate as of the date hereof, and (iii) will be certified by
Seller as of the Closing Date in accordance with Section 6.1(a)(viii) below:

(a) subject to Seller's obtaining the approval of its board of
directors as set forth in Section 3.1(b)(iii) above, Seller has full power and
lawful authority to enter into and carry out the terms and provisions of this
Agreement and to execute and deliver all documents which are contemplated by
this Agreement, and all actions of Seller necessary to confer such power and
authority upon the persons executing this Agreement and all documents which are
contemplated by this Agreement on behalf of Seller have been taken;

(b) there are no service contracts with respect to the Real
Property to which Buyer would be bound that are not cancellable by the owner of
the Real Property within 30 days after written notice from such owner, except as
may otherwise be provided in the documents described in EXHIBIT B to this
Agreement;

(c) Seller has not received from any governmental agency any
written notice that condemnation proceedings or special assessment proceedings
are pending as of the date of this Agreement which would materially and
detrimentally affect the present use and operation of the Property;

(d) To the Best of Seller's Knowledge (as defined below), Seller
is the sole owner of the Personal Property free and clear of any lien or
encumbrance of any other person, where such lien or encumbrance was created by
Seller. To the Best of Seller's Knowledge, the Real Property is not encumbered
by any easement or license created by Seller that is not disclosed by the public
records of Fresno County;

(e) To the Best of Seller's Knowledge, there is no pending
litigation or proceeding that may materially and detrimentally affect the
Business or the Property;

(f) To the Best of Seller's Knowledge, other than circumstances
described in the Harding Lawson Environmental Materials, the items listed on
EXHIBIT L or any other environmental reports or studies received by Buyer,
Seller has not with respect to Real Property violated any Environmental Laws (as
defined below) where (i) such violation has not been remedied or remediated as
of the date of this Agreement, and (ii) such violation is likely to have an
adverse effect on the ownership of the Property or the operation of the
Business. For purposes of this Agreement, "Environmental Laws" shall mean the
Comprehensive Environmental

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Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 ET SEQ., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901
ET SEQ., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 ET
SEQ., 33 U.S.C. Section 1251 ET SEQ., 42 U.S.C. Section 300(f) ET SEQ., 42
U.S.C. Section 7401 ET SEQ., California Water Code Section 13000 ET SEQ., and
any other similar statutes, laws and ordinances regulating the protection of the
environment; and

(g) As of the date hereof, other than the Collective Bargaining
Agreement, Seller has no unexpired employment contracts in place for employees
whose primary workplace is at the Property.

As used in this Section 4.1 or elsewhere in this Agreement (including
without limitation the exhibits attached hereto), "To the Best of Seller's
Knowledge" shall mean and be limited to the actual knowledge of Ronald Hanson,
Thomas Vitali, Len Cairney, James Beckman and Angela Campisi. "Actual
knowledge" shall not include implied, imputed or constructive knowledge, or a
duty to inquire or investigate any facts or information with respect to the
Property or the representations and warranties of Seller contained herein.
Notwithstanding any other provision hereof, the representations and warranties
of Seller shall not extend to, and shall exclude, any information actually known
to Buyer on or prior to the Closing Date and Seller shall have no liability with
respect thereto.

Section 4.2 SELLER'S COVENANTS. Seller hereby covenants and agrees as
follows:

(a) during the Contract Period, except for the contracts entered
into by Seller pursuant to Section 4.2(d) below, Seller will not enter into any
service contracts binding upon Buyer other than in the ordinary course of
business and on terms consistent with then current market conditions and which
permit cancellation by the owner of the Property on not more than forty-five
(45) days' notice, without Buyer's prior approval, which approval shall not be
unreasonably withheld and shall be deemed given if Buyer should fail to approve
or disapprove any proposed contract in writing within five business days
following Seller's request for such action;

(b) during the Contract Period, Seller will not enter into any
leases or other binding occupancy commitments for any portion of the Real
Property (other than those leases and commitments contemplated hereby) without
Buyer's prior approval, which approval shall not be unreasonably withheld and
shall be deemed given if Buyer should fail to approve or disapprove any proposed
lease or commitment in writing within five (5) working days following Seller's
request for such action. The cost to landlord of any commissions and/or tenant
improvements payable in connection with any such leases or commitments which
become effective at any time during the Contract Period shall be prorated
between Buyer and Seller, based on the initial term of the lease or commitment,
as of the Closing Date. Buyer shall be responsible for all such costs for any
leases or commitments commencing after the Closing Date. Any and all leases and
commitments entered into pursuant to this Section 4.2(b) shall be

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assigned to, and assumed by, Buyer pursuant to the Assignment of Leases (as
defined in Section 6.1(a) below). Nothing in this Agreement shall obligate
Seller to attempt to obtain tenants for any portion of the Real Property or to
execute leases or commitments for the same;

(c) during the Contract Period, Seller will use all reasonable
efforts to obtain the consent of any and all third parties required in order to
transfer to Buyer each and every item of Intangible Property listed on
EXHIBIT 8;

(d) during the Contract Period, Seller shall continue its
efforts to (i) implement the installation of monitoring wells in accordance with
the Order, and (ii) develop the technical report and the engineering report
described in paragraph D.6.a and paragraph D.6.b of the Order, respectively, and
coordinate with Buyer with respect to such efforts. Seller shall use reasonable
efforts to complete these tasks prior to the Closing Date; provided that Seller
shall not be obligated to spend in the aggregate more than $40,000 with respect
to accomplishing such tasks; and further provided that failure to complete such
tasks shall not be a breach of this Agreement by Seller or allow Buyer to delay
the Closing Date or terminate this Agreement. If Seller has not completed such
tasks prior to the Closing Date, then Seller shall be obligated to reimburse
Buyer for its reasonable costs and expenses incurred in completing such tasks up
to a maximum aggregate amount equal to $40,000 less the aggregate amount spent
by Seller prior to the Closing Date with respect to the completion of such
tasks; and

(e) during the Contract Period, Seller shall not make any
material and adverse physical changes to the Property, and shall continue to
manage the Property substantially in the manner they are being managed as of the
date of this Agreement; provided that nothing in this Section 4.2(e) shall
prevent Seller from operating the Business in the ordinary course of business.

Section 4.3 BUYER'S WARRANTIES AND REPRESENTATIONS. Buyer hereby makes
the following representations and warranties to Seller, all of which are (a)
material and are being relied upon by Seller, and (b) accurate as of the date
hereof and shall be accurate as of the Closing Date: (i) Buyer and any entity to
which Buyer may assign this Agreement pursuant to Section 7.3 below have, and as
of the Closing Date shall have, full power and lawful authority to enter into
and carry out the terms and conditions of this Agreement and to execute and
deliver all documents which are contemplated by this Agreement, (ii) all actions
necessary to confer such power and authority upon the persons executing this
Agreement and all documents which are contemplated by this Agreement to be
executed on behalf of Buyer or its assignee have been taken, (iii) Buyer has
available to it an operating line and term loan facility from Sanwa (the
"Facilities"), and the amount available to Buyer under the Facilities is
sufficient to finance the purchase of the Property pursuant to the terms hereof,
(iv) Buyer is capable of satisfying all conditions of funding of the loans from
Sanwa under the Facilities of an amount sufficient to finance the purchase of
the Property pursuant to the terms hereof (the "Sanwa Loan"), and (v) Buyer has
no reason to believe that the Sanwa Loan will not be funded on the Closing Date.

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Section 4.4 BUYER'S COVENANTS.

(a) Without limiting any of its obligations under any and all
confidentiality agreements previously executed by Buyer, Buyer shall hold in
strict confidence all documents and information obtained by it with respect to
Seller and its affiliates, the Property and the Business, except to the extent
required by law or otherwise publicly available, shall not disclose or convey
any of such documents or information to any other person without the written
consent of Seller (other than on a need-to-know basis to counsel, accountants or
experts retained by Buyer where Buyer insures that such counsel, accountants and
experts are bound by the restrictions set forth herein), shall use such
documents and information solely for the purpose of evaluating the transactions
contemplated thereby, and shall return to Seller all such documents and
information, without retaining copies thereof, if this Agreement shall terminate
without the consummation of such transactions. If such transactions are not
consummated, the terms and conditions of this Section 4.4 shall survive the
termination of this Agreement, and if such transactions are consummated, such
terms and conditions as they pertain to documents and information with respect
to Seller and its affiliates shall survive the Closing Date.

(b) Buyer shall promptly deliver to Seller splits of all samples
taken by Buyer's environmental consultants (which splits shall be left with a
representative of Seller on the Real Property at the time that such splits are
taken) and copies of all environmental reports and studies relating to the
Property obtained by Buyer during the Contract Period (or, if the transactions
contemplated hereby are not consummated, obtained by Buyer at any time).

(d) Buyer will use its reasonable best efforts to obtain on or
prior to the Closing Date all of the items referenced in Sections 3.1(a)(vii)
and (ix) above.

Section 4.5 LIMITATION OF COVENANTS, REPRESENTATIONS AND WARRANTIES.
Notwithstanding anything to the contrary in this Agreement, the respective
covenants of the parties to be performed under the terms of this Agreement at or
before the Closing Date, shall expire upon the closing of the purchase and sale
of the Property; provided, however, that nothing in this Section 4.5 shall be
deemed to limit or otherwise affect any covenant (or part thereof) of either
party that is permitted or required to be performed after the Closing Date,
including without limitation, any obligation arising under the provisions of
Sections 2.2(c), 4.4, 6.3, 7.2, 7.9, 7.12 or 7.16 of this Agreement, or pursuant
to the closing documents to be delivered by each party under Section 6.1 of this
Agreement. The parties further agree that (a) Seller's warranties and
representations contained in this Agreement and in any document (including any
certificate) executed by Seller pursuant to this Agreement shall survive Buyer's
purchase of the Property only for a period of one (1) year after the Closing
Date (the "Limitation Period"), and (b) Buyer shall provide actual written
notice to Seller of any breach of such warranties or representations within the
Limitation Period (which notice must set forth in reasonable detail the basis
for

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Buyer's determination that such a breach has occurred and a calculation of the
damages incurred as a result thereof) and shall allow Seller thirty (30) days
within which to cure such breach, or, if such breach cannot reasonably be cured
within thirty (30) days, an additional reasonable time period, so long as such
cure has been commenced within such thirty (30) days and diligently pursued. If
Seller fails to cure such breach after actual written notice and within such
cure period, Buyer's sole remedy shall be an action at law for damages as a
consequence thereof, which must be commenced, if at all, within the Limitation
Period; provided, however, that if within the Limitation Period Buyer gives
Seller written notice of such a breach and Seller commences to cure and
thereafter terminates such cure effort, Buyer shall have an additional thirty
(30) days from the date of such termination within which to commence an action
at law for damages as a consequence of Seller's failure to cure. The Limitation
Period referred to herein shall apply to known as well as unknown breaches of
such warranties or representations. Notwithstanding any other provision of this
Agreement, (i) the representations and warranties of Seller under this Agreement
shall not extend to, and shall exclude, any information actually known to Buyer
on or prior to the Closing Date and Seller shall have no liability with respect
thereto, and (ii) Seller shall not be liable for any breach of any
representation or warranty unless the total of all damages incurred by Buyer as
a result of Seller's breaches of the representations and warranties hereunder
exceed in the aggregate Seventy-Five Thousand and 00/100 Dollars ($75,000.00),
and then only for the amount by which such damages exceed Seventy-Five Thousand
and 00/100 Dollars ($75,000.00).

ARTICLE V
INVENTORY

The Inventory shall remain on the Property after the Closing Date, and
shall continue to be owned by Seller. The terms relating to the storage,
blending and delivery of the Inventory by the parties after the Closing Date
shall be governed by the Processing Agreements.

ARTICLE VI
ESCROW AND CLOSING

Section 6.1 ESCROW ARRANGEMENTS. An escrow for the purchase and sale
contemplated by this Agreement has been opened by Buyer and Seller with Title
Company. On or before the Closing Date, Seller and Buyer shall each deliver
escrow instructions to Title Company consistent with this Article VI, and the
parties shall deposit in escrow the funds and documents described below.

(a) Seller shall deposit:

(i) a duly executed and acknowledged grant deed relating to
the Real Property in the form attached to this Agreement as EXHIBIT D (the
"Deed");

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(ii) a duly executed bill of sale with respect to the
Personal Property in the form attached to this Agreement as EXHIBIT E (the "Bill
of Sale");

(iii) two duly executed counterparts of an assignment and
assumption of Seller's interest in the Intangible Property in the form attached
to this Agreement as EXHIBIT F (the "Assignment of Intangible Property");

(iv) two duly executed counterparts of an assignment and
assumption of Leases in the form attached to this Agreement as EXHIBIT G (the
"Assignment of Leases");

(v) a certificate from Seller certifying the information
required by Section 1445 of the Internal Revenue Code and the regulations issued
thereunder to establish, for the purposes of avoiding Buyer's tax withholding
obligations, that Seller is not a "foreign person" as defined in Internal
Revenue Code Section 1445(f)(3) (the "FIRPTA Certificate");

(vi) a California Form 590 certifying that Seller has a
permanent place of business in California or is qualified to do business in
California (the "Form 590");

(vii) two duly executed counterparts of the two processing
agreements in the form attached to this Agreement as EXHIBIT H (the "Processing
Agreements");

(viii) a certificate from Seller certifying that the
representations and warranties set forth in Section 4.1 above are accurate as of
the Closing Date, except as otherwise set forth in such certificate; and

(ix) such other documents as reasonably may be required by
Title Company to evidence the authority of Seller and the individuals executing
the documents described herein to be executed on behalf of Seller to so execute
such documents.

(b) Buyer shall deposit:

(i) immediately available funds sufficient to pay the
Purchase Price, plus sufficient additional cash to pay Buyer's share of all
escrow costs and closing expenses;

(ii) two duly executed counterparts of the Assignment of
Intangible Property;

(iii) two duly executed counterparts of the Assignment of
Leases;

(iv) two duly executed counterparts of each Processing
Agreement;

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(v) a certificate duly executed by Buyer in favor of Seller
confirming the waivers and acknowledgments set forth in Sections 2.3(a) and (b)
above (the "Buyer's Certificate");

(vi) the Note, duly executed by Buyer; and

(vii) the Deed of Trust, duly executed and acknowledged by
Buyer.

Section 6.2 CLOSING. Title Company shall close escrow by:

(a) recording the Deed and the Deed of Trust, in that order;

(b) issuing the Owner's Title Policy to Buyer and the Seller's
Title Policy to Seller;

(c) delivering to Buyer the Bill of Sale, the FIRPTA
Certificate, the Form 590, one counterpart of the Assignment of Intangible
Property executed by Seller and one counterpart of each Processing Agreement
executed by Seller; and

(d) delivering to Seller one counterpart of the Assignment of
Intangible Property executed by Buyer, one counterpart of each Processing
Agreement executed by Buyer, the Buyer's Certificate, the Note, and funds in the
amount of the Purchase Price, as adjusted for prorations and closing costs in
accordance with Sections 6.3 and 6.4 below.

Section 6.3 PRORATIONS.

(a) Real estate taxes and assessments, personal property taxes
(if any), rent and all other items of income and expense with respect to the
Property shall be prorated between Seller and Buyer as of the Closing Date. All
such items attributable to the period through and including the Closing Date
shall be credited to Seller. All such items attributable to the period
following the Closing Date shall be credited to Buyer. Seller shall be credited
in escrow with any refundable deposits or bonds held by any utility,
governmental agency or service contractor with respect to the Property.

(b) Buyer shall be responsible for all leasing commissions and
the cost to landlord of tenant improvements attributable to periods after the
Closing Date for all leases executed during the Contract Period as set forth in
Section 4.2(b). Buyer shall receive a credit in escrow in the amount of any
deposits under leases in effect on the Closing Date, or any portion thereof,
which are in Seller's possession and refundable to the tenant as of the Closing
Date plus the amount of any prepaid rent for periods from and after the Closing
Date. Buyer shall not be entitled to any interest on such deposits which may
have accrued prior to the Closing Date unless such interest, under the terms of
the applicable lease, accrues for the benefit of the tenant. Any rent collected
by Buyer after the Closing Date shall be applied first to pay any rent then due
and

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owing for any period prior to the Closing Date, and Buyer shall remit such
amounts immediately upon receipt to Seller, and then to pay any rent owing for
any period after the Closing Date. If either Buyer or Seller receives any
revenues attributable to the period during which it is not the owner of the
Property, said party shall promptly forward such amounts to the other party (if
such revenues are only partially attributable to the period during which said
party is not the owner of the Property, the amount paid to the other party shall
be based upon proration as of the Closing Date as set forth above). Buyer shall
use its best efforts to collect and assist Seller in collecting any revenue
which is owed to Seller as of the Closing Date or which comes due thereafter and
is owed to Seller.

Section 6.4 OTHER CLOSING COSTS. Buyer and Seller shall each pay fifty
percent (50%) of the local governmental documentary transfer or transaction
taxes or fees due on the transfer of the Property from Seller to Buyer and all
other costs of escrow and closing in connection with the purchase and sale of
the Property, including, without limitation, (a) the escrow fee charged by Title
Company, (b) that portion of the premium for the Owner's Title Policy equal to
the Title Company's regularly scheduled premium for a C.L.T.A. Owner's Policy of
Title Insurance in the amount of the Purchase Price (the "C.L.T.A. Portion"),
(c) the recording costs for this transaction, and (d) any sales or use taxes
determined to be payable in connection with this transaction; provided that (i)
Buyer shall pay one hundred percent (100%) of (A) the cost of any survey
requested by Buyer (including without limitation the Survey), and (B) the
premium for the Owner's Title Policy in excess of the C.L.T.A. Portion
(including without limitation the cost of any and all extended coverage and
endorsements to the Owner's Title Policy), and (ii) Seller shall pay one hundred
percent (100%) of the premium for Seller's Title Policy.

Section 6.5 INSURANCE. Seller's existing liability and property
insurance pertaining to the Property shall be canceled as of the Closing Date,
and Seller shall receive any premium refund due thereon. Seller shall maintain
throughout the Contract Period property insurance in form and amount
substantially similar to the property insurance maintained by Seller as of the
date of this Agreement.

Section 6.6 FILING OF REPORTS. The parties shall cause Title Company to
be solely responsible for the timely filing of any reports-or returns required
pursuant to the provisions of Section 6045(e) of the Internal Revenue Code of
1986 (and any similar reports or returns required under any state or local laws)
in connection with the closing of the transaction contemplated in this
Agreement.

Section 6.7 EMPLOYEE MATTERS. Seller has previously advised Buyer that
Seller is a party to that certain collective bargaining agreement with the
Distillery, Wine and Allied Workers International Union AFL-CIO Local No. 45
(the "Collective Bargaining Agreement"), a copy of which has been provided to
Buyer. Nothing contained in this Agreement shall in any way obligate or require
Buyer to offer employment to any of the employees covered by the Collective
Bargaining Agreement or any other employees at the Real Property. Buyer shall
have no responsibility for any salary, benefits, severance pay or similar
obligations that become

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payable to any such employees for periods of time prior to the Closing Date. On
or before the Closing Date, Seller shall terminate the employment of all of its
employees at the Property (including employees on active payroll as well as
those on layoff, leave of absence or medical or other leave), that Seller is not
retaining as Seller's employees.

ARTICLE VII
MISCELLANEOUS

Section 7.1 DAMAGE OR DESTRUCTION AND EMINENT DOMAIN.

(a) In the event of any damage or destruction to the Real
Property during the Contract Period for which the cost to repair is less than
One Hundred Thousand and 00/100 Dollars ($100,000.00), Seller and Buyer shall
proceed with the purchase and sale of the Property in accordance with the terms
of this Agreement and Seller shall assign to Buyer at closing its right to
receive all insurance proceeds (if any) with respect to such damage or
destruction up to the sum of One Hundred Thousand and 00/100 Dollars
($100,000.00). In the event of any damage or destruction to the Real Property
during the Contract Period for which the cost of repair equals or exceeds One
Hundred Thousand and 00/100 Dollars ($100,000.00), either party may elect to
terminate this Agreement by delivering written notice to the other party within
thirty (30) days following such damage or destruction. In the event the parties
elect to close as provided herein notwithstanding such damage or destruction,
Seller shall assign to Buyer its right to receive insurance proceeds (if any).
Notwithstanding anything in this Agreement to the contrary, the insurance
proceeds to be credited or delivered to Buyer pursuant to this Section 7.1 shall
exclude business interruption or rental loss insurance proceeds, if any,
allocable to the period through the Closing Date, which proceeds shall be
retained by Seller.

(b) If, prior to the Closing Date, all of the Property is taken
by eminent domain, this Agreement shall be deemed canceled. If only part of the
Property is so taken, Buyer shall have the option of (i) proceeding with the
closing and acquiring the Property as affected by such taking, together with all
compensation and damage awarded or the right to receive same, or (ii) canceling
this Agreement. If Buyer elects option (i) above, Seller agrees to assign to
Buyer at the closing its rights to such compensation and damages, and shall not
settle any proceedings related to such taking without Buyer's prior written
consent.

Section 7.2 BROKERAGE COMMISSIONS AND FINDER'S FEES. Each party to this
Agreement warrants to the other that no person or entity can properly claim a
right to a real estate commission, real estate finder's fee, real estate
acquisition fee or other real estate brokerage-type compensation (collectively,
"Real Estate Compensation") based upon the acts of that party with respect to
the transaction contemplated by this Agreement. Each party hereby agrees to
indemnify and defend the other against and to hold the other harmless from any
and all loss, cost, liability or expense (including but not limited to
attorneys' fees and returned commissions)

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<PAGE>

resulting from any claim for Real Estate Compensation by any person or entity
based upon such acts by the indemnifying party.

Section 7.3 SUCCESSORS AND ASSIGNS. Neither party may assign any of its
rights or delegate its obligations hereunder without the prior written consent
of the other party, provided that Buyer may assign its rights and delegate its
obligations hereunder without Seller's consent to a subsidiary or affiliate in
which Buyer has a substantial equity position and which is controlled by or
under common control with Buyer, provided Buyer is the principal operating
entity in the affiliated group to which such assignee belongs, and further
provided that Buyer irrevocably and unconditionally guarantees the performance
of all of "Buyer's" obligations under this Agreement and all documents executed
pursuant to this Agreement and assumes all of "Buyer's" liabilities under this
Agreement and all such documents, by an instrument satisfactory to Seller.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and permitted assigns.
Notwithstanding anything in the foregoing to the contrary, Buyer shall not have
the right to assign its rights or delegate its obligations hereunder to any
person or entity which, as of the date of this Agreement, competes directly or
indirectly with the business of Seller or any of Seller's affiliates.

Section 7.4 NOTICES. All written notices required to be given pursuant
to the terms hereof shall be either personally delivered or deposited in the
United States express mail or first class mail, registered or certified return
receipt requested, postage prepaid, and addressed as follows:

To Seller: Heublein, Inc.
16 Munson Road
Farmington, Connecticut 06032
Attn: General Counsel

and with a copy to: Pettit & Martin
101 California Street, 35th Floor
San Francisco, California 94111
Attn: Randal B. Short, Esq.

To Buyer: Golden State Vintners
38558 Road 128
Cutler, California 93615
Attn: Jeffrey B. O'Neill

with a copy to: Farella, Braun & Martel
235 Montgomery Street
San Francisco, California 94104
Attn: Matthew J. Lewis

21
<PAGE>

The foregoing addresses may be changed from time to time by written
notice. Notices shall be deemed received upon the earlier of actual receipt or
three (3) business days following mailing.

Section 7.5 TIME. Time is of the essence of every provision contained
in this Agreement.

Section 7.6 POSSESSION. Possession of the Property shall be delivered
to Buyer on the Closing Date.

Section 7.7 INCORPORATION BY REFERENCE. All of the exhibits attached to
this Agreement or referred to herein and all documents in the nature of such
exhibits, when executed, are by this reference incorporated in and made a part
of this Agreement.

Section 7.8 NO DEDUCTIONS OR OFF-SETS. Buyer acknowledges that the
Purchase Price to be paid for the Property pursuant to this Agreement is a net
amount and shall not be subject to any off-sets or deductions.

Section 7.9 ATTORNEYS' FEES. In the event any dispute between Buyer and
Seller should result in litigation or arbitration, the prevailing party (or, in
the case of a voluntary dismissal or similar proceeding, the party that does not
initiate the dismissal or proceeding) shall be reimbursed for all reasonable
costs and attorneys' fees incurred in connection with such litigation or
arbitration, including, without limitation, reasonable costs and attorneys' fees
incurred in collecting the judgment(s) or arbitration award(s) resulting from
such litigation or arbitration.

Section 7.10 CONSTRUCTION. The parties acknowledge that each party and
its counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments or exhibits hereto.

Section 7.11 GOVERNING LAW. This Agreement shall be construed and
interpreted in accordance with and shall be governed and enforced in all
respects according to the laws of the State of California.

Section 7.12 DAMAGES. Buyer agrees that any liability of Seller under
any claim brought prior to the Closing Date pursuant to this Agreement or any
document or instrument delivered simultaneously or in connection with, or
pursuant to this Agreement, shall be limited solely to the Property, and no
other assets of Seller shall be subject to levy or execution. With respect to
any such claim brought following the Closing Date, any liability of Seller shall
be limited solely to the assets of Seller. In no event shall Buyer seek
satisfaction for any such obligation from any of the shareholders, officers,
directors, employees or agents of Seller. Buyer specifically waives any right
to seek specific performance of Seller's obligations under this

22
<PAGE>

Agreement and acknowledges that its only remedy in the event of a breach of this
Agreement by Seller shall be the right (as limited by this Section 7.12) to seek
money damages at law.

Section 7.13 NO MERGER. The provisions of this Agreement shall not merge
with the delivery of the Deed but shall, except as otherwise provided in this
Agreement, survive the close of escrow.

Section 7.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts. All counterparts so executed shall constitute one contract,
binding on all parties, even though all parties are not signatory to the same
counterpart.

Section 7.15 ENTIRE AGREEMENT. This Agreement and the attached exhibits,
which are by this reference incorporated herein, all documents in the nature of
such exhibits, when executed, and any and all confidentiality agreements
previously executed by Buyer, contain the entire understanding of the parties
and supersede any and all other written or oral understanding.

Section 7.16 PUBLICITY. Without limiting the terms of any and all
confidentiality agreements previously executed by Buyer, no press release,
notice or disclosure to any person or other publicity concerning the
transactions contemplated by this Agreement or the other agreements referred to
herein, or negotiations and discussions related to such transactions, shall be
issued, given, made or otherwise disseminated at any time before or after the
Closing Date without the prior approval of each of the parties hereto; provided,
however, that such approval shall not be unreasonably withheld. The terms and
conditions of this Section shall survive the closing of the transactions
contemplated by this Agreement or, if such transactions are not consummated, the
terms and conditions of this Section shall survive the termination of this
Agreement; provided that if the transactions contemplated by this Agreement are
consummated, then either party may disclose the occurrence of the sale of the
Property as set forth herein and the existence of the parties, relationship
under the Production Agreements (but not the terms and conditions of such sale
or agreements) without obtaining the prior approval of the other party. The
parties shall mutually agree upon the text of all press releases and other
disclosures to be made by either party upon the consummation of the sale of the
Property to Buyer.

23
<PAGE>

IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of
the day and year first written above.

SELLER: BUYER:

HEUBLEIN, INC., GOLDEN STATE VINTNERS,
a Connecticut corporation a California corporation

By: By:
--------------------------- --------------------------
Its Its
-------------------- --------------------

<PAGE>

Exhibit 2.4

VINEYARD

PURCHASE AGREEMENT

THIS AGREEMENT is entered into as of the 12th day of May, 1995, by and
between The Grape Group, Inc., a California corporation ("Seller"), and
Golden State Vintners, a California corporation, or its nominee ("Buyer").

RECITALS

Seller owns and is offering for sale the approximately 1,700 acre
vineyard property located in Kern County, California which is more completely
described below. Buyer has offered to buy the property, and the parties are
entering into this Agreement to set forth the terms and conditions of the
sale to Buyer.

Beginning in February 1995, Seller commenced a regrafting program
("Regrafting Program") in which the 1500 acres of Chenin Blanc and French
Colombard grapevines are being converted to Chardonnay, Zinfandel and Merlot
grapevines. Pursuant to a promissory note dated , 1995 in the
original principal amount of $1,600,000 ("Regrafting Note"), Buyer has
advanced funds to Seller to pay regrafting costs, water fees and property
taxes, which Regrafting Note will be due August 31, 1995 in the event the
Closing of this sale does not occur.

NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:

1. AGREEMENT OF SALE. Seller hereby agrees to sell to Buyer and Buyer
hereby agrees to purchase from Seller that certain real property (the "Land")
located in Kern County California and more particularly described in attached
EXHIBIT A, together with:

a. any and all buildings, trellising, any and all fixtures,
parking areas, fuel and water tanks, landscaping, vines, growing crops,
stakes, fencing, posts, vines, wells, irrigation and frost control
facilities, fixtures and other improvements located upon the Land (the
"Improvements");

b. all machinery, equipment, furnishings, tools, motor vehicles,
trailers, pumps, supplies, and other tangible personal property owned or
leased by Seller and used in connection with the maintenance or operation of
the Land and Improvements (the "Personal Property");

<PAGE>

c. all easements, rights of way, privileges, water rights, mineral
rights (to the extent owned by Seller), licenses, appurtenances and other
rights and benefits of Seller or belonging to or in any way related to the
Land (the "Appurtenant Rights");

d. all permits, consents, authorizations, variances, waivers,
licenses, permits, certificates and approvals from any governmental or
quasi-governmental authority with respect to Land or Improvements
(collectively, the "Approvals"); and

e. all architectural, mechanical, engineering, as-built and other
plans, specifications and drawings (the "Plans"), all surveys (including any
ALTA survey) and all soil, environmental, engineering, production records or
other reports or studies (the "Reports"), all trademarks, service marks,
trade or business names and other intangible property used in connection with
the operations of the Property, and all transferable or assignable
warranties, representations, guaranties, contract rights and miscellaneous
rights (the "Warranties") relating to the ownership, development, use and
operation of the Land and Improvements.

f. the Land, the Improvements, the Personal Property, the
Appurtenant Rights, the Approvals, the Plans and the Warranties are referred
to collectively herein as the "Property."

2. PURCHASE PRICE. The purchase price for the Property is Four Million
Five Hundred Ninety Thousand Dollars ($4,590,000) ("Purchase Price") and
shall be paid by Buyer as follows:

a. Buyer's assumption of that certain promissory note, dated
September 30, 1986 in the original principal amount of $3,350,000
("Prudential Note") payable to The Prudential Insurance Company of America
("Prudential"), secured by the first deed of trust on the property recorded
on September 30, 1986 at Book 5921, page 2252 as Document No. 041570 in the
Official Records of Kern County ("Prudential Deed of Trust"), a Security
Agreement, dated September 30, 1986 between Seller and Prudential
("Prudential Security Agreement"), a UCC-1 Financing Statement recorded on
September 30, 1986 at Book 5921, page 2271 as Document No. 041580 and a UCC-1
Financing Statement recorded on September 30, 1986 at Book 5921, page 2278 as
Document No. 041581 ("Prudential UCCs"), as such documents were modified by
that certain Modification and Extension Agreement, dated April 30, 1992,
between Seller and Prudential, recorded May 22, 1992 at Book 6677, page 1411
as Document No. 072542 ("Modified Agreement"). The Prudential Note,
Prudential Deed of Trust, Prudential Security Agreement, Prudential UCCs and
Modification Agreement are collectively referred to as the "Prudential Loan
Documents." The Prudential Loan Documents shall be revised as of the
"Closing" (as defined in Section 6.1 below) by a First Supplemental
Modification and Extension Agreement ("Supplemental Modification"), and as so
revised shall be collectively referred to as the "Revised Prudential Loan

<PAGE>

Documents." The principal balance of the Prudential loan evidenced by the
Revised Prudential Loan Documents is estimated to be $2,441,000;

b. Buyer's assumption of that certain unsecured promissory note,
dated September 30, 1986, in the original principal amount of $452,791.17
("Cottonwood Note") payable to Cottonwood Vineyard, as such Cottonwood Note
shall be revised as of the Closing ("Revised Cottonwood Note") to be a term
of 8 years payable interest only (which Revised Cottonwood Note shall be
secured by a second deed of trust, subordinate to Prudential and Sanwa and it
shall be non-recourse;

c. Buyer's obligation to make certain payments to Seller of up to
$1,696,209, without interest ("Contingent Obligation"), subject to the term
and conditions of Section 2.1 below.

2.1 CONTINGENT OBLIGATION PAYMENTS

2.1.1 Buyer shall not be required to make any payments with
respect to the Contingent Obligation until such time, if any, that Buyer has
received "Net Cash Flow" (defined below) from the Property in sufficient
amount to have:

(a) paid in full the principal and interest of the Sanwa Bank
California loan (in an estimated amount of $1.8 million) contracted to
finance regrafting costs (the "Sanwa Loan");

(b) reimbursed in full any costs in excess of the Sanwa Loan
required for the total cost of regrafting the Property, plus interest on
such excess amounts at the rate of 10 percent per annum from the date of
advance of such excess costs ("Interest");

(c) reimbursed the amount of $214,611, plus Interest, advanced to
Seller to enable it to pay Prudential an interest payment which was part
of the consideration for Prudential agreeing to the Supplemental
Modification;

(d) reimbursed in full for all farming losses incurred during the
period commencing at the Closing ending with the first distribution of
Net Cash Flow under Section 2.1.2., including without limitation, the
cost of farming, owning and maintaining the Property, plus Interest.

The amounts set forth in Sections 2.1.1(a)-(d) above shall collectively
referred to as the "Regrafting and Carrying Costs."

2.1.2 After Buyer has received Net Cash Flow sufficient to pay
the Regrafting and Carrying Costs, Net Cash Flow thereafter generated by the
Property shall be

<PAGE>

distributed according to this Subsection 2.1.2 until such time as Seller has
received payment in full of the Contingent Obligation. Net Cash Flow shall be
distributed to the Seller and Buyer annually pursuant to this Subsection
2.1.2 in the following order and priority:

(a) First, to Buyer until such time as Buyer shall have
received the sum of $150,000;

(b) Then, to Seller until such time as Seller shall have
received the sum of $50,000;

(c) Then, prorata to Seller and Buyer, with Seller receiving
25% and Buyer receiving 75% of all Net Cash Flow until such time as Seller
has received payment in full of the Contingent Obligation from the payments
made pursuant to this Subsection 2.1.2.

Net Cash Flow shall be calculated at the end of each fiscal year of Buyer
(which fiscal year begins on July 1 and ends on June 30) and payments owing
to Seller pursuant to this Subsection 2.1.2 shall be paid within fifteen (15)
business days after delivery of the audit of Buyer for such fiscal year.

2.1.3 The term "Net Cash Flow" under Sections 2.1.1 and 2.1.2
means the excess of deemed cash receipts for sales of grapes (based on the
actual tonnage of grapes produced from the Property) over the costs of
farming, owning and maintaining the Property (including, without interest,
the cost of capital expenditures and those farming losses that are incurred
after the first distribution under Section 2.1.2), interest payments on the
Prudential and the Revised Cottonwood Note, excluding depreciation or
amortization; cash receipts shall be deemed received within 60 days following
harvest and be calculated in accordance with the following:

(i) for Zinfandel and Chardonnay grapes, the price per ton payable by
Gallo to Buyer under its contract with Gallo dated ____________,
1995.

(ii) for Merlot grapes, the price per ton payable by Gallo to Buyer for
Chardonnay grapes under its contract with Gallo dated ____________,
1995.

2.1.4. SALE OF THE PROPERTY OR SHARE TRANSFERS:

(a) If (i) Buyer sells the Property, either as part of the sale of
all or substantially all of the assets of Buyer or Buyer's
parent corporation ("Parent") or a sale of the Property
standing alone ("Property Sale") or (ii) there is a sale of
all or substantially all the outstanding shares of Buyer or
Parent, or Parent is acquired by merger, consolidation or
other reorganization (a "Share Transfer"), then, in either
case, the provisions for Payment under Section 2.1.2 of this
Agreement shall be terminated

<PAGE>

and Buyer shall be entitled to share in the proceeds of the
Property Sale or Share Transfer up to the amount of the
Contingent Obligation (less amounts paid to Seller under
Sections 2.1.1 and 2.1.2) on the terms and conditions set
forth in the following subsections.

(b) The proceeds of a Property Sale shall be either (i) the amount
of consideration received for a sale of the Property
individually, net of all commissions, expenses, attorneys and
other consultant fees and other costs of sale ("Net Proceeds")
or (ii) an allocable portion of the Net Proceeds (as described
below) if the Property Sale includes other assets of Buyer or
Parent or if a Share Transfer occurs.

(c) An allocable portion of the Net Proceeds attributable to the
Property (the "Allocable Consideration") means the total
amount of Net Proceeds in cash or the face value of the other
consideration received and calculating the cash flow multiple
for the Property Sale or Share Transfer by dividing such Net
Proceeds by the total "Net Cash Flow from Operations" ("NCF")
of the assets sold in the Property Sale or, in the case of a
Share Transfer, the total NCF of the Parent or Buyer's (or
that percentage of Parent's or Buyer's NCF equal to the
percentage of shares being transferred) and the product shall
be referred to as the "Multiple". The NCF of the Property
shall then be multiplied by the Multiple to determine the
Allocable Consideration.

(d) The Net Proceeds or Allocable Consideration, as the case may
be, shall be distributed as follows: (i) first to discharge
all amounts due under the Prudential and Cottonwood Notes
(including principal and interest) (ii) NEXT, to discharge all
other unrecovered amounts of Buyer under Sections 2.1.1 and
2.1.3 above, and (iii) out of any excess, 25% shall be payable
to Seller and 75% to Buyer. All consideration payable to
Seller shall be payable in the same form and ratio as received
by Buyer, Parent or Parent's shareholders. If the Property
Sale or Share Transfer calls for reserves or holdbacks for
warranties, indemnities or other deferrals, Seller shall be
subject to its share of proceeds being held back or deferred.

(e) NCF shall be determined for the twelve calendar months
immediately preceding the closing of the Property Sale or
Share Transfer, and shall be determined as net earnings before
interest, taxes, depreciation and amortization, with net
earnings calculated under generally accepted accounting
principles.

<PAGE>

3. TITLE.

a. PERMITTED TITLE EXCEPTIONS. Seller shall deliver good and
marketable title to the Property to Buyer subject only to the following
exceptions which hereinafter are referred to as the "Permitted Title
Exceptions":

i. a lien for local real estate taxes and assessments not
yet due or payable;

ii. the lien of the Prudential Deed of Trust, as modified by
the Supplemental Modification; and

iii. such other exceptions as may be approved in writing by
Buyer pursuant to Section 5.1.c. below.

b. OWNER'S POLICY. Evidence of title shall be the issuance at
the Closing by the Title Company of its CLTA Standard Coverage Owner's Policy
of Title Insurance insuring that fee title in the Property is vested in
Buyer, subject only to the Permitted Title Exceptions (the "Title Policy").
Seller shall cause the Title Policy to include such endorsements as Buyer may
reasonably request, including without limitation, a mechanic's lien
endorsement.

4. DOCUMENTS TO BE DELIVERED TO BUYER. Seller shall provide Buyer
with a copy of each of the following documents and items on or before the
earlier of May 12, 1995 or Closing (except as otherwise noted):

i. TITLE REPORT. A current preliminary title report for the
Property, issued by Chicago Title Company (the "Preliminary Title Report"),
together with a copy of each document referred to in the Preliminary Title
Report.

ii. AGREEMENTS. Copies of all existing easements, covenants,
restrictions, agreements, Warranties, and other documents which affect the
Property and are not disclosed by the Preliminary Title Report, or if no
documents exist, a certification of Seller to that effect.

iii. PROPERTY DOCUMENTS. Copies of all of the Plans, Reports and
Approvals and an inventory of the Personal Property.

iv. CONTRACTS. Copies of all service, farming, grape,
maintenance, management and other contracts and agreements related to the
operation and management of the Property. Buyer shall have ten (10) days from
the receipt of each such contract or agreement to notify Seller whether Buyer
will assume each such contract or agreement as of

<PAGE>

the Closing or require that they be terminated. All agreements and contracts
so assumed hereinafter are referred to as the "Assumed Contracts."

v. OPERATING DOCUMENTS. Copies of all real and personal property
tax bills and utility bills and a statement of income and expenses for the
Property for the last two years, and all notices regarding any actual or
potential claim, default, violation or liability with respect to the Property.

vi. REGRAFTING PROGRAM. Copies of all contracts, specifications,
agreements, invoices, work orders and all other documents, and a complete
written description of any oral agreements or understandings, relating to or
concerning the Regrafting Program (collectively, "Regrafting Contracts").

vii. PRUDENTIAL LOAN DOCUMENTS. Copies of the Prudential Loan
Documents, all financing statements relating to the Property recorded in
favor of Prudential, all other documents related thereto and all agreements,
amendments and modifications thereof.

5. CONDITIONS TO CLOSING.

a. BUYER'S CONDITIONS. Buyer's obligation to purchase the
Property is conditioned upon the satisfaction of each of the following
conditions:

i. The performance by Seller of every obligation of Seller
hereunder, and the truth of each representation and warranty made in this
Agreement by Seller at the time the representation or warranty was made and
as of the Closing.

ii. Buyer's review and approval of each document and item
provided to Buyer by Seller in accordance with Sections 4.c. through 4.g.
hereof. Any contracts and agreements provided to Buyer under 4.e and 4.f.
which Buyer does not agree to assume shall be terminated by Seller effective
as of the Closing date.

iii. Buyer's review and approval of the Preliminary Title
Report and all title exceptions. Buyer shall notify Seller in writing of any
objections Buyer has to the Preliminary Title Report and the title exceptions
within fifteen (15) days of Buyer's receipt of the referenced documents.
Seller shall use its best efforts (including payment of money) to remove the
objectionable exceptions. If the objectionable exceptions cannot be so
removed prior to the Closing, Seller will advise Buyer thereof in writing and
Buyer may either waive its objections or terminate this Agreement.

iv. Buyer's inspection and approval, in Buyer's sole
discretion, of the present physical condition and status of the Property,
including (if applicable) such items as soil, electrical, mechanical,
irrigation, frost control and drainage plans or specifications, the existence
of any Hazardous Materials (defined in Section 7.1.f) on the Property, and
conformance of the Land and Improvements with all applicable laws, codes,
regulations and

<PAGE>

governmental approvals. Buyer shall have the right to conduct or cause to be
conducted soils tests, tests for Hazardous Materials or any other tests Buyer
determines are necessary or desirable to evaluate the condition of the
Property.

v. Buyer's inspection and approval, in Buyer's sole
discretion, of all aspects of the Regrafting Program performed up to the
Closing, including without limitation, inspection of the nursery records
regarding the budwood, planting location of each of the varietals, and
determination of whether the regrafts were successfully performed.

vi. REGRAFTING CONTRACTS. Buyer shall have received an
assignment of all Regrafting Contracts, and all other rights (if any),
including warranties and guaranties, relating to the Regrafting Program, that
Buyer has chosen to assume as of the Closing.

vii. FINANCING. Buyer shall have obtained any and all
necessary financing on terms and conditions satisfactory to Buyer in its sole
and absolute discretion, and all such financing shall have been funded, to
enable Buyer to consummate the transactions contemplated hereby and to
provide adequate working capital to complete the Regrafting Program required
to fulfill Buyer's obligations pursuant to the Grape Agreements and to
finance the operation of the Property until the 1997 crop harvest.

viii. THIRD PARTY CONSENTS. All consents, approvals and
waivers from Prudential, Sanwa Bank, John Hancock Life Insurance Company, any
governmental authorities, and other third parties necessary to permit Seller
to transfer the Property to Buyer as contemplated hereby shall have been
obtained.

ix. REVISED PRUDENTIAL LOAN DOCUMENTS. Buyer's review and
approval, in its sole and absolute discretion, of the Supplemental
Modification, and the deposit into escrow prior to Closing of counterpart
pages, duly executed by all parties thereto and notarized (where applicable),
of the Supplemental Modification.

x. SHAREHOLDER CONSENTS. Buyer shall have received
resolutions adopted by its board of directors and ratified by its
shareholders approving this Agreement and the transactions contemplated
hereby, certified by the corporate secretary of Buyer.

xi. NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit,
action, investigation, inquiry or other proceeding by any governmental
authority or other party shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby.

xii. OPINION OF COUNSEL. Seller shall have delivered to Buyer
an opinion of counsel for Seller acceptable to Buyer, dated the Closing Date,
in a form reasonably acceptable to Buyer opining that: Seller has been duly
incorporated and organized and is validly existing and in good standing under
the laws of the State of California; that Seller has full corporate power and
authority to enter into and perform this transaction; that

<PAGE>

this Agreement has been duly authorized by all necessary corporate action on
the part of Seller and has been duly executed and delivered by Seller; and
that this Agreement is a valid and binding obligation of Seller, enforceable
in accordance with its terms.

xiii. CERTIFICATES. Seller shall furnish Buyer with such
certificates of the respective officers of Seller (without qualification with
respect to knowledge) and others to evidence compliance with the conditions
set forth in this Article 5 as may be reasonably requested by Buyer.

xiv. CORPORATE DOCUMENTS. Buyer shall have received from
Seller resolutions adopted by the board of directors and ratified by the
shareholders of Seller approving this Agreement and the transactions
contemplated hereby, certified by the corporate secretary of Seller.

b. DUE DILIGENCE PERIOD. Buyer's obligation to purchase the
Property is subject to Buyer's satisfaction, in its sole discretion, with the
Property after the review and inspections described in Section 5.1. above.
Buyer shall have a period of twenty (20) days ("Due Diligence Period") from
the last date that Buyer receives the documents required to be provided by
Seller under Section 4 to notify Seller in writing that the Property is
unsatisfactory and that Buyer wishes to terminate this Agreement. Upon
delivery of that notice to Seller within the required period, this Agreement
shall terminate. Buyer shall not be required to state the reasons for the
termination in its notice.

c. ACCESS. Seller shall afford authorized representatives of
Buyer reasonable access to the Property for the purposes of satisfying Buyer
with respect to the representations, warranties and covenants of Seller
contained herein and the conditions precedent to the Closing. In performing
its examinations and inspections of the Property, Buyer shall minimize any
interference with Seller's use of the Property and Buyer shall indemnify
Seller against and hold Seller harmless from all losses, costs, damages,
liabilities and expenses resulting from the gross negligence or willful
misconduct of Buyer or its representatives in connection with Buyer's entry
upon the Property, but excluding claims arising out of the existence of new
information about the condition of the Property.

d. SELLER'S CONDITIONS.

i. The performance by Buyer of every obligation of Buyer
hereunder, and the truth of each representation and warranty made in this
Agreement by Buyer at the time the representation or warranty was made and as
of the Closing.

ii. All consents, approvals and waivers from governmental
authorities, Prudential and other third parties necessary to permit Seller to
transfer the Property to Buyer as contemplated hereby shall have been
obtained.

<PAGE>

e. WAIVER. Either party may, at any time or times before the
Closing, waive one or more of the foregoing conditions, without affecting its
rights and remedies with respect to the remaining conditions. Any such waiver
must be in writing and signed by the waiving party.

6. CLOSING.

a. CLOSING DATE. The consummation of the purchase and sale of the
Property (the "Closing") shall be held at the offices of Chicago Title
Company ("Title Company") on __________, 1995, or earlier as Buyer may elect,
or later if agreed to in writing by Buyer and Seller.

b. SELLER'S DEPOSITS INTO ESCROW. Seller shall deposit the
following documents and items into escrow:

i. a duly executed and acknowledged grant deed conveying
the Land and Improvements to Buyer, subject only to the Permitted Title
Exceptions;

ii. a duly executed bill of sale, in the form of attached
EXHIBIT B, transferring the Personal Property to Buyer;

iii. a duly executed assignment, in the form of attached
EXHIBIT C, assigning to Buyer all of Seller's interest in the Plans and
Reports, all Warranties, the Service Contracts, Trademarks and all Approvals;

iv. originals of all Service Contracts, Warranties, and
originals or copies of all Plans, Reports, and Approvals;

v. an affidavit in the form of attached EXHIBIT D stating
that Seller is not a "foreign person" under IRC Section 1445(f)(3).

vi. a certificate from Seller certifying that there has been
no change in or damage to the Property (or specifying such change or damage)
from the date of this Agreement and that the representations and warranties
described in Section 7.a. are complete and accurate as of the Closing date;

vii. Seller's share of the closing costs as described in
Section 6.5 below;

viii. the mortgagee estoppel statement from the lender holding
the Prudential Deed of Trust in the form attached as EXHIBIT E.

ix. the Supplemental Modification, duly executed and
notarized by Prudential and Seller.

10.

<PAGE>

x. such other documents as may reasonably be required to
complete the Closing.

c. BUYER'S DEPOSITS INTO ESCROW. Buyer shall deposit the
following into escrow:

i. the Purchase Note duly executed by Buyer;

ii. The original Regrafting Note.

iii. Buyer's share of the closing costs as described in
Section 6.5. below; and

iv. such other documents as may reasonably be required to
complete the Closing.

d. PRORATIONS. All expenses for the Property will be prorated as
of February 1, 1995 (the "Proration Date") and the Purchase Price will be
adjusted on the following basis:

i. 1995 CROP. The parties acknowledge that due to the
grafting to be conducted pursuant to the Grape Agreements, the Property will
not produce a saleable crop in 1995 or 1996. However, all cultural costs paid
by Seller with respect to the 1995 growing season (for example, water costs
for 1995), not paid from the proceeds of the loan evidenced by the Regrafting
Note, and attributable to the period after the Proration Date and will be
reimbursed to Seller by Buyer.

ii. ACCOUNTS PAYABLE. All sums due for accounts payable which
were owing or accrued by the Property prior to the Proration Date and for all
agreements and contracts not assumed by Buyer will be paid by Seller and
Seller agrees to indemnify and hold Buyer harmless with respect thereto.
Buyer will furnish to Seller for payment any bills received after the Closing
with respect to such accounts, agreements and contracts, and Buyer will have
no further obligation with respect thereto. Payments due under any Service
Contracts shall be prorated as of the Proration Date, and Buyer shall be
liable for all payments accruing thereafter.

iii. PROPERTY TAXES. All real and personal property ad
valoreum taxes and special assessments, if any, will be prorated to the
Proration Date, based on the latest available tax rate and assessed valuation.

iv. UTILITY CHARGES. All utility (including, without
limitation, electricity, gas, water, sewer and telephone) charges will be
prorated to the Proration Date. All utility security deposits, if any, will
be retained by Seller.

11.

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v. POST CLOSING. If the amount of any proration cannot be
determined at the Closing, the adjustments will be made between the parties
as soon after Closing as possible.

e. CLOSING COSTS. The Closing costs for this transaction shall be
paid as follows:

i. Seller shall pay one-half (1/2) of the Title Company's
escrow and recording fees, and all transfer taxes.

ii. Seller shall pay the cost of Buyer's title insurance
policy and Buyer shall pay the additional cost of any lender's policies of
title insurance or endorsements to the existing Prudential lender's title
policy which may be required by Prudential.

iii. Buyer shall pay all remaining escrow fees and recording
fees.

f. CLOSING. Pursuant to Section 6.1 above, Title Company shall
close the escrow for this transaction when it is in a position to issue the
Title Policy and has received from Seller and Buyer the items required of
each in Sections 6.2 and 6.3 above. Title Company shall close escrow by doing
the following:

i. Recording the grant deed and the Supplemental
Modification, in that order, in the Official Records of Kern County Recorder;

ii. Delivering to Buyer the Title Policy, the original
documents and items listed in Section 6.2 above, and a closing statement for
the escrow consistent with this Agreement and satisfactory to Buyer and
Seller (the "Closing Statement"), and any refund due Buyer; and

iii. Delivering to Seller the Purchase Note, the Regrafting
Note and Seller's closing statement.

g. POSSESSION. Seller shall deliver possession to the Property to
Buyer on the Closing Date.

12.

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7. REPRESENTATIONS AND WARRANTIES.

a. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby makes
the following representations and warranties to Buyer, which representations
and warranties shall survive the Closing and all of which (i) are material
and are being relied upon by Buyer, and (ii) are complete and accurate as of
the date hereof and shall be complete and accurate at the Closing date:

i. To the best of Seller's knowledge, there are no material,
physical or mechanical defects of the Property, including, without
limitation, the irrigation, frost control, drainage and wastewater and
stormwater disposal systems, stakes, fencing, posts and trellising and all
such items are in good operating condition and repair and in compliance with
all applicable governmental requirements. There is no evidence of phylloxera
or other diseases and pests on or about the Property, including without
limitation, the existing vines, and vines regrafted as part of the Regrafting
Program.

ii. To the best of Seller's knowledge, the use and operation
of the Property is in full compliance with applicable building codes,
environmental, seismic design, zoning and land use laws, other local, state
and federal laws and regulations, and restrictive easements or covenants
affecting the Property;

iii. The Plans, Reports, Service Contracts, Approvals,
Warranties, Regrafting Contracts, and all other contracts or documents
delivered to Buyer in connection with the purchase and sale of the Property
are all of the documents or agreements affecting the Property, are originals
or complete and accurate copies, and are in full force and effect and, to
Seller's knowledge, without default by any party thereto. No information or
documents given to Buyer pursuant to this Agreement will contain any untrue
statement of a material fact or omit to state a material fact making the
statements contained therein misleading;

iv. Except as disclosed to Buyer in writing, Seller does not
have knowledge of any condemnation proceedings or any land-use or development
regulations or proceedings existing or proposed, which would affect the use
and operation of the Property, nor has Seller received notice of any special
assessment proceedings or other matters affecting the use, occupancy or value
of the Property;

v. To the best of Seller's knowledge, Seller has obtained all
licenses, permits, certificates, approvals, variances, easements and rights
of way required from all governmental authorities having jurisdiction over
the Property or from private parties for the normal use and operation of the
Property and to insure vehicular and pedestrian ingress to and egress from
the Property;

13.

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vi. For purposes of this Agreement, the term "Hazardous
Substances" shall mean materials regulated under any federal, state or local
law or regulation, as amended from time to time, as a toxic, hazardous,
contaminated or similarly harmful or dangerous material or substance. To the
best of Seller's knowledge, there are no Hazardous Materials being stored or
otherwise held on, under or about the Property by Seller or to Seller's
knowledge after due inquiry, by any other party. To the best of Seller's
knowledge, the Property has been maintained in substantial compliance with all
federal, state, local and foreign environmental protection, occupational,
health and safety or similar laws, statutes, ordinances, restrictions,
licenses and local environmental protection, occupational, health and safety
or similar laws, statutes, ordinances, restrictions, licenses and
regulations, including those relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution,
labeling, testing, processing, discharge, release, threatened release,
control, or cleanup of any hazardous or otherwise regulated materials,
substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, and also including,
but not limited to, the Federal Water Pollution Control Act (33 U.S.C.
Section 1251 ET SEQ.), Resource Conservation & Recovery Act (33 U.S.C.
Section 6901 ET SEQ.), Safe Drinking Water Act (21 U.S.C. Section 349, 42
U.S.C. Sections 201, 300f), Toxic Substances Control Act (15 U.S.C. Section
2601 ET SEQ.), Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), Comprehensive
Environmental Response, Compensation and Liability Act, (42 U.S.C. Section
9601 ET SEQ.), California Health & Safety Code (Section 25100 ET SEQ.,
Section 39000 ET SEQ.), and California Water Code (Section 13000 ET SEQ.);

vii. Seller has not received any written report, notice or
other information, or to its knowledge otherwise been advised under the
California Health and Safety Code or any other applicable local, state or
federal law regarding Hazardous Materials on, under or affecting the Property
or requiring the removal of any Hazardous Materials from the Property;

viii. To Seller's knowledge after due inquiry, no property
within two thousand (2,000) feet of the Property has been the site of a
significant disposal of Hazardous Materials or has been designated a
hazardous waste or border zone property as such terms are defined in Sections
25117.3 or 25117.4 of the California Health and Safety Code;

ix. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of California; this
Agreement and all documents executed by Seller which are to be delivered to
Buyer at the Closing are, or at the time of Closing will be, duly authorized,
executed, and delivered by Seller, and are, or at the Closing will be, legal,
valid, and binding obligations of Seller, and do not, and at the time of
Closing will not, violate any provision of any agreement to which Seller is a
party or to which it is subject or any law, judgment or order applicable to
Seller;
x. At the time of Closing there will be no outstanding
contracts made by Seller with respect to grapes to be grown on the Property
or for any improvements

14.

<PAGE>

to the Property which have not been fully performed or paid, as the case may
be, and Seller shall cause to be discharged all mechanics' liens arising from
any labor or materials furnished to the Property prior to the time of the
Proration Date;

xi. Seller is the sole owner of the Property in fee simple
free and clear of any right to or claim of possession by any other party
(including, without limitation, tenants or employees, with or without
leases), and has authority to sell it to Buyer;

xii. Seller is not a "foreign person" within the meaning if
IRC Section 1445(f)(d);

xiii. To the best of Seller's knowledge, there is no claim,
litigation, or governmental investigation or proceeding, actual or potential,
that may affect the Property and no unrecorded easements, unrecorded
mechanics' lien claims, unrecorded taxes and assessments, claims of
encroachment or prescriptive easements affecting the Land or Improvements;

xiv. No proceedings under any bankruptcy or insolvency laws
have been commenced by or against Seller which have not been terminated; no
general assignment for the benefit of creditors has been made by Seller; and
no trustee or receiver of Seller's property has been appointed;

xv. Seller knows of no facts nor has Seller failed to
disclose any fact which would prevent Buyer from using and operating the
Property after Closing in the normal manner in which similar properties in
the area are operated;

xvi. The Property does not serve any adjoining property for
any purpose to Seller's knowledge after due inquiry, inconsistent with the
current use of the land by the Seller, and the property is not located within
any flood plain or subject to any similar type of restriction for which any
permits or licenses necessary to the use thereof have not been obtained;

xvii. There are no leases, subleases, licenses, concessions,
or other agreements, written, or, to Seller's knowledge after due inquiry,
oral granting to any person the right to use or occupancy of any portion of
the Property;

xviii. There are no outstanding options or rights of first
refusal to purchase or lease the Property, or any portion thereof or interest
therein;

xix. The Lost Hills Water District, which serves the
Property with water has received its full allocation of water from the Kern
County Water District for 1995; however, Seller makes no other representation
concerning whether or not the Property is restricted in any adverse way in
the current and forseeable future use of its water rights,

15.

<PAGE>

water supply or mineral rights, or whether such water rights and supply are
sufficient for the current and forseeable future operation of the Property;

xx. The Improvements have received all approvals of
governmental authorities (including permits and licenses) required in
connection with the operation of the Property and have been operated and
maintained in compliance with all applicable legal requirements; and

xxi. The Improvements are supplied with utilities and other
services in such amounts as are reasonably necessary for the current and
forseeable future operation of the Property, including any necessary gas,
electricity, irrigation, drainage facilities, sanitary and storm sewer
service, and such utilities and other services are installed, provided and
connected pursuant to valid permits and otherwise in compliance with all
legal requirements.

xxii. The budget for the Regrafting Program, which has been
previously provided to Buyer, has not been modified or amended and the
Regrafting Program has been or will be completed within such budget.

b. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby makes
the following representations and warranties to Seller, which representations
and warranties shall survive the Closing and all of which (i) are material
and are being relied upon by Seller, and (ii) are complete and accurate in
all respects as of the date hereof and shall be complete and accurate as of
the Closing Date:

i. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of California.

ii. This Agreement and all documents executed by Buyer
which are to be delivered to Seller at the Closing are, or at the time of
Closing will be, duly authorized, executed, and delivered by Buyer, and are,
or at the Closing will be, legal, valid, and binding obligations of Buyer,
and do not, and at the time of Closing will not, violate any provisions of
any agreement to which Buyer is a party or to which it is subject or any law,
judgement or order applicable to Buyer.

iii. No proceedings under any bankruptcy or insolvency laws
have been commenced by or against Buyer which have not been terminated; no
general assignment for the benefit of creditors has been made by Buyer; and
no trustee or receiver of Buyer's property has been appointed.

8. INDEMNIFICATION. Each party hereby agrees to indemnify the other
party and hold it harmless from and against any and all claims, demands,
liabilities, costs and damages, including without limitation, reasonable
attorneys' fees, resulting from any misrepresentations or breach of warranty
or covenant made by such party in this Agreement or in any document,

16.

<PAGE>

certificate, or exhibit given or delivered to the other party pursuant to or
in connection with this Agreement. Seller further agrees to indemnify Buyer
and hold Buyer harmless from and against any claims, demands, liabilities,
costs and damages asserted against or suffered by Buyer and resulting from or
arising out of the ownership, use or construction of the Property prior to
the conveyance of the Property to Buyer, including, without limitation,
claims arising from the presence, prior to Closing, of any Hazardous
Materials on the Property and reimbursement of cleanup or remedial action
costs under any law or regulation regarding the generation, use, storage, or
disposal of such Hazardous Materials. All of these indemnifications shall
survive the Closing and conveyance of the Property to Buyer.

9. RISK OF LOSS; INSURANCE PROCEEDS; CONDEMNATION.

a. DAMAGE OR DESTRUCTION.

i. In the event of damage or destruction of the Improvements
prior to the Closing date in an amount less than $100,000, Buyer and Seller
shall consummate this Agreement, and Seller shall promptly proceed to repair
and restore the Improvements and, at Buyer's election, the Closing date and
all other performance dates in this Agreement shall be extended for the
number of days required for such repair and restoration.

ii. In the event of damage or destruction of the Improvements
prior to the Closing date in an amount in excess of $100,000, Buyer may elect
any of the following:

(1) to terminate this Agreement upon written notice to
Seller;

ii. to consummate this Agreement, but to postpone the
Closing date, in which event Seller shall promptly proceed and diligently
pursue efforts to repair and restore the Improvements to their condition
immediately prior to such damage or destruction; and the Closing date and all
other performance dates in this Agreement shall be extended for the number of
days required for such repair and restoration; provided, however, that if
such repair and restoration is not completed within one hundred eighty (180)
days after the damage or destruction, Seller or Buyer may, at either party's
option, terminate this Agreement upon written notice to the other party; or

iii. consummate this Agreement as scheduled, in which
event Seller shall pay to Buyer any and all insurance proceeds payable with
respect to such damage or destruction for costs of repair and restoration of
the Property, plus such additional amount if any as may be required to repair
or restore the Improvements to their condition immediately prior to such
damage or destruction.

b. INSURANCE. Seller represents to Buyer that the Improvements
are presently insured by a fire and extended coverage policy of insurance in
an amount equal to 100% of the replacement cost of the Improvements. Seller
agrees to maintain the policy in

17.

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effect through the Closing date, and upon Buyer's request, to provide Buyer a
certificate of such insurance.

c. EMINENT DOMAIN. If, prior to the Closing, all of the Land and
Improvements are taken by eminent domain, this Agreement shall be deemed
cancelled. If only part of the Land or Improvements are so taken, Buyer shall
have the option of (a) proceeding with the Closing and acquiring the Property
as affected by such taking, together with all compensation and damage awarded
or the right to receive same, or (b) cancelling this Agreement. If Buyer
elects option (a) above, Seller agrees to assign to buyer at the Closing its
rights to such compensation and damages, and will not settle any proceedings
relating to such taking without Buyer's prior written consent. Seller shall
promptly (and in any event prior to the closing) notify Buyer of any actual
or threatened condemnation affecting the Property.

10. SELLER'S COVENANTS DURING CONTRACT PERIOD. Between Seller's
execution of this Agreement and the Closing, or earlier termination of this
Agreement as permitted hereunder, Seller shall (i) maintain the Property in
good order, condition and repair, reasonable wear and tear excepted, (ii) not
make any physical changes to the Improvements, (iii) continue to manage the
Property in manner in which it is being managed, and (iv) not enter into any
lease, amendment of lease or other agreement pertaining to the Property,
without Buyer's prior consent which consent shall not be unreasonably
withheld if such bases are entered into in the ordinary course of business
and are consistent with the type, term and rental of other comparable leases
of the Property.

11. ASSIGNMENT. Buyer shall have the right to assign this Agreement to
a third party or parties who shall then be entitled to acquire the Property
on the terms set forth herein. Except as just provided herein, neither party
may assign its rights or delegate its obligations hereunder without the prior
written consent of the other party. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and
their successors and assigns.

12. MISCELLANEOUS.

a. NOTICE. All notices and any other communications permitted or
required under this Agreement must be in writing and will be effective (i)
immediately upon delivery in person, or (ii) 24 hours after deposit with a
commercial courier or delivery service for overnight delivery, (iii) seven
days after deposit with the United States Postal Service, certified mail,
return receipt requested, postage prepaid, or (iv) upon receipt, if
transmitted by facsimile with confirmed receipt between 9:00 a.m. and 5:00
p.m. on a business day, otherwise, on the following business day. All notices
must be properly addressed and delivered to the parties at the addresses set
forth below, or at such other addresses as either party may subsequently
designate by written notice given in the manner provided in this Section:

18.

<PAGE>

Seller: The Grape Group, Inc.
c/o Simpson Farm Company
19357 Avenue 17 1/2
Madera, Ca 93637

Fax: (209) 674-0753
Attn: John Simpson

Buyer: Golden State Vintners
38558 Road 128
P.O. Box 39
Cutter, California 93615

Fax: (209) 528-2509
Attn: Ron Foster

With a copy to: Farella, Braun & Martel
235 Montgomery Street 30th Floor
San Francisco, California 94104

Fax: (415) 954-4480
Attn: Frank E. Farella

b. HEADINGS. The headings used herein are for purposes of
convenience only and should not be used in construing the provisions hereof.

c. COVENANT OF FURTHER ASSURANCES. The parties hereby agree to
execute such other documents and perform such other acts as may be necessary
or desirable to carry out the purposes of this Agreement.

d. ENTIRE AGREEMENT. This document represents the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements. This Agreement may only be modified by
a written instrument signed by both parties.

e. PARTIAL INVALIDITY. If any term, covenant or condition of this
Agreement or its application to any person or circumstances shall be held to
be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provisions to other persons or circumstances
shall not be affected.

f. NO WAIVER. No consent or waiver by either party to or of any
breach of any representation, covenant or warranty shall be construed as a
consent to or waiver of any other breach of the same or any other
representation, covenant, or warranty.

19.

<PAGE>

g. ATTORNEYS' FEES. In the event of any controversy, claim or
action being filed between the parties respecting this Agreement or in
connection with the Property, the prevailing party shall be entitled, in
addition to all expenses, costs or damages, to reasonable attorneys' fees,
whether or not such controversy was litigated or prosecuted to judgement.

h. BROKERS AND FINDERS. Neither party has had any contact or
dealings regarding the Property, through any licensed real estate broker or
other persons who can claim a right to a commission or finder's fee in
connection with this transaction. In the event that any other party claims a
commission or finder's fee in this transaction, the party through whom the
party makes his claim shall be responsible for said commission or fee and
shall indemnify the other against all costs and expenses (including
reasonable attorneys' fees) incurred in defending against the same.

i. TIME OF THE ESSENCE. Time is of the essence of this Agreement.

j. GOVERNING LAW. This Agreement is entered into and shall be
governed by and construed in accordance with the laws of the State of
California.

k. INTERPRETATION. All parties have been represented by counsel
in the preparation and negotiation of this Agreement, and this Agreement
shall be construed

20.

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated September 4, 1996
is by and between GOLDEN STATE VINTNERS, a California corporation, 60 East Sir
Francis Drake Boulevard, Suite 301, Larkspur, California ("Buyer"), and VINTNERS
INTERNATIONAL COMPANY, INC., a New York corporation with an office at 116
Buffalo Street, Canandaigua, New York ("Seller").

RECITALS

WHEREAS, Seller is the owner and operator of a winery facility located
near Soledad, California, including land and improvements, structures and
fixtures affixed thereon and machinery, equipment, cooperage, furnishings and
other tangible personal property used in connection therewith (the "Soledad
Facilities"); and

WHEREAS, Seller wishes to sell and Buyer wishes to purchase the Soledad
Facilities, subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Buyer and Seller, intending to be legally bound, hereby agree as follows:

ARTICLE I
PURCHASE AND SALE

1.1 ASSETS TO BE PURCHASED. Subject to the terms and conditions set
forth in this Agreement, Seller shall sell, convey, transfer, assign and deliver
to Buyer, and Buyer shall purchase and accept delivery from Seller, on the
Closing Date (as hereinafter defined), the Soledad Facilities, including without
limitation the following assets:

(a) All of Seller's right, title and interest in and to certain
real property located near Soledad in the County of Monterey, State of
California which is described on Exhibit A attached hereto (the "Real
Property"), together with all rights and appurtenances pertaining to the Real
Property including, without limitation, any and all rights of Seller in and to
all roads, alleys, easements, streets and ways adjacent to the Real Property,
strips and gores and rights of ingress and egress thereto;

(b) All improvements, structures and fixtures placed, constructed
or installed on or affixed to the Real Property;

(c) All material items of machinery, equipment, cooperage,
furnishings, and other tangible personal property, which as of the date hereof
are owned by Seller and used by

<PAGE>

Seller exclusively in the operation of the Soledad Facilities, excluding the
items of personal property currently stored on the Real Property and identified
on Schedule 1.1(c)(i) hereof that are to be retained by Seller, (the "Personal
Property"), which Personal Property shall include without limitation the items
of Personal Property set forth on Schedule 1.1(c)(ii) hereto; and

1.2 PURCHASE PRICE. The purchase price for the Soledad Facilities shall
be Four Million Four Hundred Fifty Thousand Dollars ($4,450,000.00) (the
"Purchase Price").

1.3 NO ASSUMPTION OF EMPLOYEE OBLIGATIONS. Buyer shall not assume any
liability or obligation of Seller with respect to any of Seller's employees
located at the Soledad Facilities, including, but not limited to, any of
Seller's obligations under any employee arrangements, union agreements or
benefit plans.

1.4 EARNEST MONEY DEPOSIT. Upon the execution and delivery to Seller of
this Agreement, Buyer shall deposit the sum of One Hundred Fifty Thousand
Dollars ($150,000) and, if and when Buyer exercises the Option (defined in
Section 9.1), Buyer shall deposit an additional One Hundred Thousand Dollars
($100,000) (collectively, the "Earnest Money") in escrow with Chicago Title
Company ("Chicago Title"). The Earnest Money shall be deposited by Chicago
Title in an interest bearing account, pursuant to the instructions of Seller and
on its behalf. The Earnest Money, together with all accumulated interest
thereon, shall be delivered by Chicago Title to Seller at the Closing (as
hereinafter defined) and shall be applied to the Purchase Price or delivered to
Seller pursuant to Section 10.2.

1.5 PAYMENT OF PURCHASE PRICE. Subject to all of the terms and
conditions of this Agreement, at the Closing, Buyer shall pay Four Million
Dollars ($4,000,000) of the Purchase Price (less the Earnest Money and
accumulated interest thereon delivered by Chicago Title) to Seller in
immediately available funds by wire transfer to an account specified by Seller,
and deliver to Seller its note in the form of Exhibit B for the balance of the
Purchase Price, after all prorations and adjustments provided for herein,
bearing interest at eight percent (8%) per annum, compounded monthly, with the
principal all due and payable in a lump sum at the end of the twenty-four (24)
month period from the date of the Closing ("Note").

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer, as of the date hereof and as of the
Closing, as follows:

2.1 ORGANIZATION, STANDING AND POWER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Seller has all necessary corporate power and authority to own, use
and transfer the Soledad Facilities.

2
<PAGE>

2.2 AUTHORITY OF SELLER. Seller has the corporate power and authority
to execute, deliver and perform under the terms of this Agreement. Seller's
execution and delivery of this Agreement, its compliance with the provisions
hereof and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Seller, and this Agreement is the legal, valid and binding obligation of Seller
enforceable against Seller in accordance with its terms.

2.3 NO CONFLICT. Neither the execution or delivery of this Agreement
nor the performance of the transactions contemplated hereby will conflict with
or violate any provision of the Certificate of Incorporation or By-laws of
Seller or of any indenture, mortgage, loan or other agreement, contract or
instrument, or any court or administrative order to which Seller is a party or
by which it may be bound or affected. No consent, waiver or approval by, notice
to or filing with any person or entity is required in connection with the
execution and delivery of this Agreement by Seller, compliance by Seller with
any of the provisions hereof or consummation of the transactions contemplated
hereby.

2.4 NO LITIGATION. There are no legal, equitable, administrative or
arbitration claims, actions, suits, proceedings or investigations pending or, to
Seller's knowledge, threatened against Seller to restrain or prevent the
carrying out of the transactions contemplated hereby.

2.5 TITLE TO ACQUIRED ASSETS. Seller has, or shall transfer to Buyer at
the Closing, good and marketable title to each item included in the Soledad
Facilities, free and clear of all encumbrances, other than encumbrances set
forth on Schedule 2.5 attached hereto (the "Permitted Encumbrances").

2.6 BROKERS AND FINDERS. Seller has not employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby.

2.7 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as may be disclosed in
Schedule 2.7, to Seller's knowledge, the Soledad Facilities comply with all
Environmental Laws in all material respects.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller, as of the date hereof and as of
the Closing, as follows:

3.1 DUE ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, and
Buyer has all necessary corporate power and authority to execute and deliver
this Agreement, to comply with the provisions hereof and to consummate the
transactions contemplated hereby.

3
<PAGE>

3.2 AUTHORITY FOR TRANSACTION. Buyer has the corporate power and
authority to execute, deliver and perform under the terms of this Agreement.
Buyer's execution and delivery of this Agreement, its compliance with the
provisions hereof and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on the
part of Buyer, and this Agreement is the legal, valid and binding obligation of
Buyer enforceable against Buyer in accordance with its terms.

3.3 NO CONFLICT. Neither the execution or delivery of this Agreement
nor the performance of the transactions contemplated hereby will conflict with
or violate any provision of the Certificate of Incorporation or By-laws of Buyer
or of any indenture, mortgage, loan or other agreement, contract or instrument,
or any court or administrative order to which Buyer is a party or by which it
may be bound or affected. No consent, waiver or approval by, notice to or
filing with any person or entity is required in connection with the execution
and delivery of this Agreement by Buyer, compliance by Buyer with any of the
provisions hereof or consummation of the transactions contemplated hereby.

3.4 NO LITIGATION. There are no legal, equitable, administrative or
arbitration claims, actions, suits, proceedings, or investigations pending or,
to Buyer's knowledge, threatened against Buyer to restrain or prevent the
carrying out of the transactions contemplated hereby.

3.5 BROKERS AND FINDERS. Buyer has not employed any broker or finder or
incurred any liability for any brokerage fees, commissions of finders' fees in
connection with the transactions contemplated hereby.

3.6 BUYER'S REPRESENTATION OF PROPERTY INSPECTION. Buyer has conducted
a full visual inspection of the property, and has not been denied reasonable
access to any part thereof; Buyer has had a complete right to bring experts on
the property and conduct, in a reasonable manner, all tests necessary to
determine the condition of the property; Buyer has knowledge of applicable laws
(including, but not limited to, laws and regulations governing zoning and land
use, environmental conditions, and hazardous substances) and its review and
investigation of the condition of the property has included consideration of the
applicability and effect of such laws; and Buyer has investigated to its own
satisfaction the environmental condition of the soil, water, ground water, and
structures upon the property and of any equipment or materials stored on the
property.

3.7 BUYER'S ACKNOWLEDGMENT OF AGRICULTURAL USE OF THE PROPERTY AND
INDEMNIFICATION FROM ACTION CONCERNING AGRICULTURAL CHEMICALS AND PESTICIDES.
Buyer represents and acknowledges that it knows, and is aware, that the property
has been used historically for the cultivation of crops and that such
cultivation may have involved the use of DBCP or other agricultural chemicals
used as pest or nematode control or as herbicides, pesticides, insecticides,
soil sterilants or for other purposes associated with the agricultural use of
the property. Buyer is aware and acknowledges that said prior use of
agricultural chemicals may involve future clean-up or remedial action compelled
or requested by any person, entity, or

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<PAGE>

governmental agency pursuant to the Comprehensive Environmental Response
Compensation Liability Act, the Superfund Amendments and Reauthorization Act,
the Clean Water Act; the Carpenter-Presley-Tanner Hazardous Substances Account
Act; the Porter-Calogne Water Quality Act, the Resource Conservation and
Recovery Act, or any other local, state or federal rule, regulation, or statute
relating to environmental protection ("Environmental Laws").

This Section shall constitute Seller's disclosure of agricultural
chemicals and pesticides, not specifically known to Seller, but rendered likely
by the historical use of the property, pursuant to Health and Safety Code
Section 25359.7.

3.8 FINANCIALS. The audited financial statements provided by Buyer for
its last two fiscal years and for the most recent stub periods were prepared in
accordance with GAAP, consistently applied, and fairly represent the financial
condition of the guarantor under the Guaranty.

ARTICLE IV
LIMITATIONS ON REPRESENTATIONS AND WARRANTIES

4.1 NO OTHER REPRESENTATIONS OR WARRANTIES. The parties acknowledge
that, except as expressly set forth in this Agreement, neither party hereto has
made or is making any representations or warranties whatsoever, express or
implied or otherwise, to the other party. WITHOUT LIMITING THE GENERALITY OR THE
EFFECT OF THE FOREGOING, BUYER SPECIFICALLY ACKNOWLEDGES THAT SELLER IS SELLING
AND BUYER IS PURCHASING THE PROPERTY ON AN "AS IS WITH ALL FAULTS" BASIS AND
THAT EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE III HEREOF, BUYER IS NOT RELYING
ON ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED
FROM SELLER, ITS AGENTS, OR BROKERS, AS TO ANY MATTERS CONCERNING THE PROPERTY
INCLUDING WITHOUT LIMITATION: (1) the quality, nature, adequacy and physical
condition of the property, (2) the quality, nature, adequacy, and physical
condition of soils, geology and any ground water, (3) the existence, quality,
nature, adequacy and physical condition of utilities that are presently serving
the property or may be extended by any governmental entity to the property, (4)
the development potential of the property, and the property's use, habitability,
merchantability, or fitness, suitability, value or adequacy of the property or
any other public or private restriction on use of the property, (5) the
compliance of the property or its operation with any applicable codes, laws,
regulations, statutes, ordinances, covenants, conditions and restrictions of any
governmental or quasi-governmental entity or of any other person or entity, (6)
the presence or removal of hazardous or toxic materials, substances or waste on,
under or about the property or the adjoining or neighboring property, (7) the
quality of any labor and materials used in any improvement on the property, (8)
the condition of title of the property, (9) any leases, service contracts, or
other agreements affecting the property, and (10) the economics of the operation
of the property, (11) any licenses or permits for the production and/or sale of
alcoholic beverages, (12) the existence,

5
<PAGE>

condition or defectiveness of any underground storage tanks, or (13) the
potential or likelihood of flooding due to storm runoff or groundwater
accumulation.

ARTICLE V
PRE-CLOSING COVENANTS OF SELLER

5.1 AFFIRMATIVE COVENANTS OF SELLER PRIOR TO CLOSING. During the period
from the date hereof to the Closing Date or earlier termination of this
Agreement, Seller shall:

(a) operate and maintain the Soledad Facilities in a manner
reasonably consistent with its past practices and shall not permit the physical
condition of the Soledad Facilities, taken as a whole, to materially deteriorate
from its current condition, reasonable and ordinary wear and tear excepted; and

(b) allow Buyer, or Buyer's authorized agents, reasonable access
to the Soledad Facilities during regular business hours and upon reasonable
advance notice to conduct any reasonable due diligence inspection Buyer deems
desirable.

5.2 NEGATIVE COVENANTS OF SELLER PRIOR TO CLOSING. During the period
from the date hereof to the Closing Date or earlier termination of this
Agreement, Seller shall not, unless Buyer consents thereto:

(a) sell, assign or create any right, title or interest whatsoever
in or to the Soledad Facilities, or create or permit to exist any lien or
encumbrance thereon, other than Permitted Encumbrances, without discharging such
lien or encumbrance on or before the Closing Date.

(b) take or omit to take any action (other than in the ordinary
course of business), which action or omission would have the effect of violating
any of the representations and warranties of Seller contained in this Agreement.

ARTICLE VI
CERTAIN ADDITIONAL AGREEMENTS

6.1 PRORATIONS AND ADJUSTMENTS. Operating expenses, including but not
limited to water, sewer, electric, gas, telephone and other utility charges, ad
valorem taxes on the Soledad Facilities and general and special assessments for
the current year shall be prorated at the Closing, effective as of the Closing
Date, utilizing the best available computations of such items. Such adjustments
will be payable from one party to the other on the Closing Date to the extent
practicable. If current ad valorem tax assessments are unavailable at Closing,
such ad valorem taxes shall be adjusted based on tax assessments for the
immediately preceding tax year, with such tax proration to be adjusted in cash
between the parties, based on actual taxes for the current year, at the time
such actual taxes are determined.

6
<PAGE>

6.2 BUYER'S INDEMNIFICATION. Buyer agrees to indemnify, defend and hold
Seller and Seller's affiliates and the directors, officers, shareholders,
employees, assigns and successors and their affiliates harmless from any claims,
liabilities, damages, penalties, fines, costs or losses, including attorney's
fees, foreseen or unforeseen, that arise directly or indirectly from or in
connection with the use or operation of the Real or Personal Property and/or the
condition thereof during Buyer's ownership of such property after the Closing
Date, including, but not limited to, the presence, suspected presence, release
or suspected release of any hazardous substance of any kind caused by or
attributable to Buyer, whether into the air, soil, surface water, ground water,
pavement, structures, fixtures, equipment, tanks, containers or other personal
property at the Real Property. This hold harmless and indemnification provision
shall specifically and expressly include any actions by a person, entity, or
governmental agency pursuant to applicable Environmental Laws.

ARTICLE VII
CONDITIONS TO BUYER'S OBLIGATIONS

7.1 Conditions. The obligation of Buyer to complete the actions
provided for herein shall be subject, at its election, to satisfaction on or
before the Closing Date of each of the following conditions:

(a) The prorations and adjustments required by Section 6.1 hereof
shall have been completed.

(b) Seller shall have delivered to Buyer the following documents
and instruments in form reasonably satisfactory to counsel to Buyer:

(i) A deed and other appropriate instruments of conveyance
to convey all of Seller's interest in the Real Property, which shall be duly
executed by Seller, acknowledged, and in recordable form.

(ii) Bills of sale, assignments and other instruments of
transfer and conveyance, each duly executed by Seller, transferring to Buyer
title to each item comprising the Soledad Facilities other than the Real
Property.

(iii) A UCC-3 Statement sufficient to release any liens or
encumbrances against the Soledad Facilities, the Real Property and the Personal
Property existing pursuant to Uniform Commercial Code Financing Statements, and
all other Leases that may be required with respect thereto.

(iv) Evidence of the reconveyance of any Deed of Trust
encumbering the Soledad Facilities and/or the Real Property.

7
<PAGE>

(c) Seller shall have delivered to Buyer actual possession of the
Soledad Facilities.
.
(d) Buyer shall receive a commitment of the Chicago Title to
issue, upon payment by Buyer of its regularly scheduled premium, a CLTA Owner's
Policy of Title Insurance at Closing in the full amount of the Purchase Price,
pursuant to which Chicago Title shall insure that fee simple title to the
Property is vested in Buyer, containing no exceptions to such title other than
the Permitted Encumbrances and those created by or on behalf of Buyer.

(e) Buyer shall have received such other instruments and documents
as shall have been reasonably requested by counsel to Buyer on or before the
Closing Date.

(f) There shall not be in effect any judgment, decree or order of,
or position taken by, any court or administrative body of competent
jurisdiction, nor shall there have been any action, suit, proceeding or known
investigation instituted or threatened, nor shall any law or regulation have
been enacted or any action taken thereunder, which would be likely to restrain
or prohibit, make illegal, or subject Buyer to material damages as a result of,
the transactions contemplated hereby.

ARTICLE VIII
CONDITIONS TO SELLER'S OBLIGATION

8.1 CONDITIONS. The obligations of Seller to complete the transactions
provided for herein shall be subject, at its election, to satisfaction on or
before the Closing Date of each of the following conditions:

(a) The Purchase Price shall have been paid to Seller in
accordance with Section 1.5, including but not limited to the delivery of the
Note, and Chicago Title shall have delivered the Earnest Money to Seller in
accordance with Section 1.4.

(b) The acquisition of the release of any security interest or
reconveyance of any deed of trust in the Soledad Facilities.

(c) Buyer shall have entered into the Wine Agreement attached
hereto as Exhibit C(i) and the Storage Agreement attached hereto as Exhibit
C(ii).

(d) Seller shall have received such other instruments and
documents as shall have been reasonably requested by counsel to Seller on or
before the Closing Date.

(e) There shall not be in effect any judgment decree or order of,
or position taken by, any court or administrative body of competent
jurisdiction, nor shall there have been any action, suit, proceeding or known
investigation instituted or threatened, nor shall any law or regulation have
been enacted or any action taken thereunder, which would be likely to restrain
or

8
<PAGE>

prohibit, make illegal, or subject Seller to material damages as a result of,
the transactions contemplated hereby.

ARTICLE IX
CLOSING

9.1 CLOSING. The closing hereunder (the "Closing") shall take place at
the offices of Chicago Title Insurance Company, 50 Winham Street, Salinas,
California 93901, at 10:00 A.M. local time, on a mutually acceptable date no
longer than ninety (90) days from the date hereof or Buyer shall have the option
(the "Option") of increasing the Earnest Money by depositing in escrow with
Chicago Title an additional sum of One Hundred Thousand Dollars ($100,000), in
which case, the Closing shall take place on a mutually acceptable date no longer
than one hundred and twenty (120) days from the date hereof (the "Closing
Date"). The Option shall be exercised by notice to Seller at least thirty (30)
days prior to the expiration of the ninety (90) day period and by depositing the
additional Earnest Money in escrow with Chicago Title upon the expiration of the
ninety (90) day period.

ARTICLE X
TERMINATION

10.1 RIGHT TO TERMINATE. This Agreement may be terminated at any time
prior to the Closing Date, as follows:

(a) By the mutual written consent of Buyer and Seller.

(b) By Buyer or by Seller, upon thirty (30) days notice to the
other, following the breach by such other party of a mutual condition contained
herein or of a representation or warranty thereof, which breach remains uncured
at the end of such thirty (30) day period.

In the event of any termination as provided by this Section 10. 1, this
Agreement shall thereupon become void and of no effect, without any liability on
the part of any party except as otherwise set forth herein.

10.2 LIQUIDATED DAMAGES.

BUYER RECOGNIZES THAT IF THIS PURCHASE AND SALE IS NOT CONSUMMATED
BECAUSE OF BUYER'S FAILURE TO COMPLETE THE TRANSACTION CONTEMPLATED
HEREBY FOR A REASON OTHER THAN SELLER'S DEFAULT OR A FAILURE OF A
CONDITION TO BUYER'S OBLIGATIONS TO OCCUR, IT WOULD BE EXTREMELY
DIFFICULT AND IMPRACTICABLE TO ASCERTAIN THE EXTENT OF THE DETRIMENT
TO SELLER. THE PARTIES HAVE DETERMINED AND AGREED THAT THE ACTUAL
AMOUNT OF DAMAGES THAT WOULD BE SUFFERED BY SELLER AS A

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<PAGE>

RESULT OF ANY SUCH DEFAULT IS DIFFICULT OR IMPRACTICABLE TO
DETERMINE AS OF THE DATE OF THIS AGREEMENT AND THAT THE AMOUNT OF
THE EARNEST MONEY (AS DEFINED IN SECTION 1.4) PLUS ALL INTEREST
ACCRUED THEREON IS A REASONABLE ESTIMATE OF THE AMOUNT OF SUCH
DAMAGES. FOR THESE REASONS, THE PARTIES AGREE THAT IF THIS PURCHASE
AND SALE IS NOT CONSUMMATED BECAUSE OF BUYER'S DEFAULT, SELLER SHALL
BE ENTITLED TO RETAIN THE FULL AMOUNT OF THE EARNEST MONEY PLUS
ACCRUED INTEREST AS LIQUIDATED DAMAGES.

-------------------- ---------------------
Buyer Seller

10.3 SPECIFIC PERFORMANCE. Seller acknowledges that the remedies at law
available to Buyer for the breach of any provision of this Agreement, or the
failure by Seller to perform pursuant to the terms hereof, may be inadequate and
that Buyer may suffer immediate and irreparable harm with respect to such
breach. Seller hereby agrees that Buyer shall have the right to seek the
specific performance by Seller of the terms of this Agreement, in addition to
any and all other rights or remedies at law or in equity, including without
limitation, Buyer's right to seek damages, that may be available to Buyer.

ARTICLE XI
CONDEMNATION

11.1 CONDEMNATION. In the event that all or a material part of the Real
Property is appropriated prior to the close of escrow by the exercise of the
power of eminent domain, Buyer or Seller shall have the right to terminate this
Agreement, in which case the full amount of the Earnest Money (and all interest
thereon) shall be returned to Buyer. Following such condemnation, if the
Agreement is terminated and escrow does not close, then Buyer shall have no
compensable interest and no right to share in the condemnation award; provided,
however, if the Agreement is not terminated and escrow does close, then Buyer
shall have the right to offset the amount of the condemnation award, less the
expenses of the condemnation proceedings incurred by Seller, against the
Purchase Price or to collect the condemnation award in the first instance in
Buyers' sole discretion.

ARTICLE XII
GENERAL PROVISIONS

12.1 COVENANT OF FURTHER ASSURANCES. At and after the Closing, upon
request of Buyer, Seller shall take such action and deliver to Buyer such
further instruments of assignment, conveyance, transfer or delivery or other
documents of further assurance as in the opinion of

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<PAGE>

counsel for Buyer may be reasonably desirable to assure, complete and evidence
the full and effective transfer, conveyance, assignment and delivery of the
Soledad Facilities and possession thereof to Buyer, its successors and assigns
in accordance with the terms of this Agreement.

12.2 TAXES ON TRANSACTION. All sales, use or similar taxes payable by
reason of the transfer of Personal Property pursuant to this Agreement shall be
borne and paid by Buyer within thirty days of the Closing Date.

12.3 EXPENSES OF THE PARTIES. Except as otherwise specified herein, all
expenses involved in the preparation, negotiation, authorization and
consummation of this Agreement and the transactions contemplated hereby,
including all fees and expenses of agents, representatives, brokers, counsel and
accountants, shall be borne solely by the party which shall have incurred the
same, and no other party shall have any liability in respect thereof.

12.4 AMENDMENT AND WAIVER. This Agreement may be amended only by a
writing executed by each of the parties hereto. No waiver of compliance with
any provision or condition hereof, and no consent provided for herein, shall be
effective unless evidenced by an instrument in writing duly executed by the
party hereto sought to be charged with such waiver or consent. No failure on
the part of any party hereto to exercise and no delay in exercising, any of its
rights hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by any party of any right preclude any other or future exercise
thereof or the exercise of any other right.

12.5 INTEGRATION. This Agreement contains all of the agreements and
understandings of the parties with respect to any matter mentioned in this
Agreement, and supersedes and terminates all prior and contemporaneous
agreements between Seller and Buyer with respect to the matters covered in this
Agreement. The Agreement may be modified in writing only, signed by the Seller
and Buyer at the time of the modification.

12.6 RELATIONSHIP OF PARTIES. Nothing contained in this Agreement shall
be deemed or construed by the parties or by any third party to create the
relationship of principal and agent, partnership, joint venture, or any other
association between Buyer and Seller.

12.7 NO RIGHTS IN THIRD PARTIES. Nothing in this Agreement, expressed or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any third party, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third party to any party
to this Agreement, nor shall any provision in this Agreement give any third
party any right of subrogation or action over or against any party to this
Agreement.

12.8 ASSIGNMENT. Buyer shall not assign, transfer, or convey its rights
and obligations under this Agreement with respect to the property without the
prior written consent of Seller. Any attempted assignment without the prior
written consent of Seller shall be void and Buyer shall be deemed in default of
this Agreement. Any permitted transfer shall not relieve the assigning party
from its liability under this Agreement.

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<PAGE>

12.9 REMEDIES CUMULATIVE. No remedy or election of remedies provided for
in this Agreement shall be deemed exclusive, but shall be cumulative with all
other remedies at law or in equity. Each remedy shall be construed to give it
the fullest effect allowed by law.

12.10 INDEMNIFICATION. Each party to this Agreement shall defend,
indemnify, and hold harmless, the other party from any losses, liabilities,
claims, costs, and expenses, including reasonable attorney's fees and expenses,
resulting from, or when occurred in connection with, any breach of any warranty,
the incorrectness of any representation, or the failure to perform any agreement
or covenant contained in the Agreement.

12.11 KNOWLEDGE. Wherever the term "knowledge" or "known" is used in
connection with Seller, it shall be limited to the knowledge of Mark Gabrielli,
John Handel and Dan Barnett.

12.12 TIME OF ESSENCE. Time shall be of the essence in this Agreement and
each and all of its provisions in which performance is a factor.

12.13 SEVERABILITY. The invalidity of any Section or provision of this
Agreement, as determined by a court of competent jurisdiction, shall in no way
affect the validity of any other provision of this Agreement.

12.14 WAIVER. The forbearance in the enforcement of any term or provision
of this Agreement, or the waiver of any of the covenants in this Agreement, or
the prompt and timely performance thereof, shall not be deemed or construed to
be a waiver of each party's rights to enforce the same at any future time, nor
shall it be a continuing waiver, nor shall any party who has made such waiver be
required to give written demand for performance to the other party in order to
enforce the terms of any condition or covenant which may have been waived, not
enforced, or extended as to time of performance.

12.15 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without reference to
principles of conflicts of laws contained therein.

12.16 NOTICES. Any notice, report demand, waiver or consent required or
permitted hereunder or any other related document shall be in writing and shall
be personally delivered, or sent by registered, certified or express first-class
mail, postage prepaid, or by telecopy or reputable overnight courier service,
addressed as follows:

If to Seller: Vintners International Company, Inc.
116 Buffalo Street
Canandaigua, New York 14424
Attn: Robert S. Sands, Vice President
Telecopier: (716) 396-7675

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<PAGE>

If to Buyer: Golden State Vintners
60 East Sir Francis Drake Blvd., Suite 302
Larkspur, CA 94939
Attn: Jeffrey B. O'Neill, President
Telecopier: (415) 461-4497

Each such notice or other communication given by mail shall be deemed to have
been given when it is delivered by hand, deposited in the United States mail in
the manner specified herein, deposited with a reputable overnight courier
service or telecopied and the appropriate confirmation of transmission is
received. Any party to this Agreement may change its address or telecopier
number for the purpose hereof by giving notice in accordance with the provisions
of this Section 12.16.

12.17 HEADINGS: COUNTERPARTS. The article and section headings of this
Agreement are for convenience of reference only and do not form a part hereof
and do not in any way modify, interpret or construe the intentions of the
parties. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

12.18 NO SOLICITATIONS. So long as Buyer is not in breach of any
provision hereof, prior to the Closing Date, Seller shall not communicate with,
solicit, or encourage or participate in any discussions or negotiations with any
entity or person (other than Buyer) with respect to the sale of all or any
portion of the Soledad Facilities.

IN WITNESS WHEREOF, the parties hereto have duly signed this Agreement on
the date first written above.

VINTNERS INTERNATIONAL COMPANY, INC.

By: /S/ ROBERT S. SANDS
-------------------------------------
Robert S. Sands
Secretary

GOLDEN STATE VINTNERS

By: /s/ Jeffrey B. O'Neill
-------------------------------------
Its: President
-------------------------------------

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<PAGE>

FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT

THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT is made and entered into as of
September 17, 1996, by and between GOLDEN STATE VINTNERS, a California
corporation, 60 East Sir Francis Drake Boulevard, Suite 301, Larkspur,
California ("Buyer"), and VINTNERS INTERNATIONAL COMPANY, INC., a New York
corporation with an office at 116 Buffalo Street, Canandaigua, New York
("Seller").

RECITALS

WHEREAS, Seller and Buyer are parties to an Asset Purchase Agreement dated
September 4, 1996, pursuant to which Seller agreed to sell to Buyer, and Buyer
agreed to purchase from Seller, that certain property described in Section 1.1
of the Asset Purchase Agreement.

WHEREAS, Seller and Buyer now desire to modify or amend the Asset Purchase
Agreement as more particularly set forth below.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained
herein, and for other valuable consideration, the adequacy and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:

1. Section 1.5 of the Asset Purchase Agreement is hereby amended to
provide that, at the Closing, Buyer shall pay Three Million, Nine Hundred and
Fifty Thousand Dollars ($3,950,000) of the Purchase Price to Seller upon all of
the terms and conditions set forth in Section 1.5.

2. Exhibit B to Exhibit C(i) of the Asset Purchase Agreement, the Wine
Sale Agreement, is hereby amended by deleting the 2,000 Tons of 100% California
Rubired grapes to be delivered in 1996.

3. Concurrent with the execution hereof, Buyer agrees to execute and be
bound by the terms of the Market Price Contract, attached hereto.

4. The commencement date, September 4, 1996, of Exhibit C(i), Wine Sale
Agreement, and Exhibit C(ii), Storage Agreement, is hereby deleted and a blank
is substituted therefor, which such blank will be completed upon execution of
each such Exhibit in accordance with the Asset Purchase Agreement.

5. Except as otherwise modified or amended above, the terms and
conditions of the Asset Purchase Agreement shall remain unmodified and in full
force and effect. In the event of

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<PAGE>

any conflict or inconsistency between the terms of this First Amendment to Asset
Purchase Agreement, the terms of this First Amendment shall control.

6. This First Amendment to Asset Purchase Agreement may be signed in
counterpart and transmitted by telefacsimile. A copy of this First Amendment to
Asset Purchase Agreement containing counterpart signatures obtained by
telefacsimile shall be as valid and enforceable as a single original draft
signed by both parties.

IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to
Asset Purchase Agreement the date and year first above written.

Seller:

VINTNERS INTERNATIONAL COMPANY, INC.,
a New York corporation

By: /s/ Robert S. Sands
-------------------------------------
Its: Secretary

Buyer:

GOLDEN STATE VINTNERS
a California corporation,

By: /s/ Jeffrey B. O'Neill
-------------------------------------
Its: President
-------------------------------------

<PAGE>
COMMON STOCK SUBSCRIPTION AGREEMENT

This Common Stock Subscription Agreement (this "Agreement") is entered into
as of April 27, 1995, by and among Golden State Acquisition Corp., a Delaware
corporation (the "Company") and each of the parties listed on the Schedule I
attached hereto (collectively, the "Stockholders"). Except as otherwise
indicated herein, capitalized terms used herein are defined in Section 1 of this
Agreement.

In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

1. DEFINITIONS. All capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings ascribed to such terms below:

"ACQUISITION" shall mean the purchase by the Company of at least 90% of the
outstanding shares of Capital Stock of GSV pursuant to that certain Stock
Purchase Agreement entered into as of April 27, 1995 by and among the Company
and certain of the Company's shareholders.

"CAPITAL STOCK" shall mean common stock, preferred stock and warrants to
purchase common stock or preferred stock.

"EXETER" shall mean Exeter Equity Partners, L.P., a Delaware limited
partnership, and Exeter Venture Lenders, L.P., a Delaware limited partnership.

"FAC" shall mean FAC, Ltd., a Cayman Islands corporation.

"GSV" shall mean Golden State Vintners, a California corporation.

"PERSON" shall mean an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.

"SBIC PARTNERS" shall mean SBIC Partners, L.P., a Texas limited
partnership.

"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal law then in force.

"SECURITIES EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.

<PAGE>

"SECURITIES AND EXCHANGE COMMISSION" shall mean the Securities and Exchange
Commission, including any governmental body or agency succeeding to the
functions thereof.

"SECURITIES PURCHASE AGREEMENT" shall mean that certain Securities Purchase
Agreement by and between the Company, GSV and John Hancock Mutual Life Insurance
Company, dated the date hereof.

2. PURCHASE AND SALE OF THE COMMON STOCK. At the Closing (as defined in
Section 3 below), the Company shall: (i) sell to FAC and, subject to the terms
and conditions set forth herein, FAC shall purchase from the Company 650,000
shares of its Class A Common Stock (the "CLASS A COMMON STOCK"), par value $0.01
per share, at a price of $5.00 per share; (ii) sell to Exeter and, subject to
the terms and conditions set forth herein, Exeter shall purchase from the
Company 650,000 shares of its Class B Common Stock (the "CLASS B COMMON STOCK"),
par value $0.01 per share, at a price of $5.00 per share; and (iii) sell to SBIC
Partners, and subject to the terms and conditions set forth herein, SBIC
Partners shall purchase from the Company 650,000 shares of the Class B Common
Stock at a price of $5.00 per share. The foregoing shares of Class A Common
Stock and Class B Common Stock shall be referred to herein collectively as the
"SECURITIES".

3. THE CLOSING. The closing of the purchase and sale (the "CLOSING")
shall take place at the offices of Anderson Kill at 10:00 a.m., New York City
time, on April 27, 1995, or at such other place or on such other time or day as
the parties hereto shall agree (the "CLOSING DATE"). At the Closing, the
Company shall deliver: (i) to FAC stock certificates evidencing the Class A
Common Stock to be purchased by FAC, registered in FAC's name, upon payment of
the purchase price in the amount of $3,250,000; (ii) to Exeter stock
certificates evidencing the Class B Common Stock to be purchased by Exeter,
registered in Exeter's name, upon payment of the purchase price in the amount of
$3,250,000; (iii) to SBIC Partners stock certificates evidencing the Class B
Common Stock to be purchased by SBIC Partners, registered in SBIC Partners'
name, upon payment of the purchase price thereof in the amount of $3,250,000.
In each of the foregoing cases, the purchase price shall be paid by a cashier's
or certified check, or by wire transfer of immediately available funds to such
account as designated by the Company.

4. RESTRICTIONS ON TRANSFER.

4.1. REGISTRATION. Each Stockholder understands and agrees that
the Securities it will be acquiring have not been registered under the
Securities Act and that, accordingly, will not be transferable except as
permitted under exemptions available under the Securities Act, or upon
satisfaction of the registration and prospectus delivery requirements thereof.
Each Stockholder acknowledges and agrees that it must bear the economic risk of
its investment in the Securities for an indefinite period of time, since the
Securities have not been registered under the Securities Act and, therefore,
cannot be sold unless they are subsequently registered or an exemption from
registration is available.

2
<PAGE>

4.2. LEGENDS. Each Stockholder agrees with the Company that the
certificate or certificates evidencing the Securities, and each certificate
issued in any transfer thereof, will bear the following legends:

"THE SECURITIES REPRESENTED HEREBY (A) HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN AVAILABLE EXEMPTION THEREFROM UNDER
SAID ACT OR THE RULES AND REGULATIONS PROMULGATED THEREUNDER, AND (B)
ARE SUBJECT TO THE PROVISIONS, INCLUDING THE LIMITATIONS ON TRANSFER,
SET FORTH IN THAT CERTAIN STOCKHOLDER AGREEMENT BY AND AMONG THE
COMPANY AND THE SIGNATORIES THERETO, AS AMENDED AND MODIFIED FROM TIME
TO TIME. A COPY OF SUCH STOCKHOLDER AGREEMENT SHALL BE FURNISHED
WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST."

and

"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES."

5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Stockholders that, as of the Closing Date:

5.1. CORPORATE EXISTENCE, POWER, ETC. The Company has been duly
incorporated and is validly existing and in good standing under the laws of the
State of Delaware and is duly qualified as a foreign corporation in good
standing in each jurisdiction where the nature of its activities or of its owned
or leased properties makes such qualification necessary, except where the
failure to so qualify would not have a material adverse effect on the Company.
The Company has all requisite power and authority to carry on its business, to
own and hold its properties and assets, to enter into this Agreement, to issue
the Securities and to carry out the provisions of this Agreement and the terms
and conditions of the Securities. The Company has taken all actions necessary
to authorize it to enter into and perform its obligations under this Agreement,
to issue the Securities and to consummate the transactions contemplated hereby.

3
<PAGE>

This Agreement is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject (i) to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights, (ii) to general
equitable principles and (iii) to the discretion of the court before which any
proceeding therefor may be brought.

5.2. NO VIOLATION. The execution and delivery by the Company of
this Agreement and the performance hereof and the consummation of the
transactions contemplated hereby do not and will not result in a material breach
or violation of any of the terms and provisions of, or constitute a default
under (i) any material agreement or instrument to which the Company is a party
or by which it is bound or (ii) the charter or by-laws of the Company.

5.3. CAPITAL STOCK. After the Closing, the authorized capital
stock of the Company will consist of: (i) 1,000,000 shares of Class A Common
Stock, 650,000 shares of which will be issued and outstanding pursuant to this
Agreement; (ii) 2,000,000 shares of Class B Common Stock, 1,300,000 shares of
which will be issued and outstanding pursuant to this Agreement, and 136,210
shares of which will be reserved for exchange pursuant to that certain Preferred
Stock Exchange Agreement (the "PREFERRED STOCK EXCHANGE AGREEMENT") entered into
as of the date hereof by and among the Company and certain stockholders of GSV;
(iii) 3,500,000 shares of Class D Common Stock, par value $0.01 per share (the
"CLASS D COMMON STOCK"), none of which will be issued and outstanding, but
2,086,210 shares of which will be reserved for issuance upon conversion of the
Class A Common Stock and Class B Common Stock pursuant to the Company's
Certificate of Incorporation; (iv) 200,000 shares of 12% cumulative convertible
preferred stock (the "SENIOR PREFERRED STOCK"), 100,000 of which shall be issued
and outstanding pursuant to the terms of the Securities Purchase Agreement; (v)
750,000 shares of 6% junior exchangeable preferred stock (the "JUNIOR PREFERRED
STOCK"), 523,980 shares of which shall be issued and outstanding pursuant to the
terms of the Preferred Stock Exchange Agreement; and (vi) 1,000,000 shares of
Class E Common Stock, par value $0.01 per share (the "CLASS E COMMON STOCK"),
414,079 shares of which will be issued and outstanding pursuant to the terms of
the Securities Purchase Agreement. After the Closing, all of the outstanding
shares of capital stock of the Company will upon their issuance be duly
authorized, validly issued, fully paid and nonassessable.

5.4. PRIVATE OFFERING.

(i) The offer and sale of the Securities hereunder are exempt
from the registration and prospectus delivery requirements of the Securities
Act. The Company has not sold any shares of the Securities to anyone other than
the Stockholders. The Company agrees that it, or anyone acting on its behalf,
will neither offer any of the Stockholders so as to bring the issuance and sale
thereof within the provisions of Section 5 of the Securities Act, nor offer any
similar securities for issuance of, sale to, or solicit any offer to acquire any
of the same from, or otherwise approach or negotiate with respect thereto with,
anyone if the sale of any of the Securities and any such securities would be
integrated as a single offering for the purposes of the

4
<PAGE>

Securities Act, including, without limitation, Regulation D promulgated
thereunder. Each share of the Securities shall have a legend or legends setting
forth the restrictions on transferability and sale set forth in Section 4.2
hereof for at least so long as such restrictions apply. The representations of
the Company in this Section 5.4(i) are based upon and subject to the accuracy of
each of the Stockholders' representations contained in Section 6 hereof.

(ii) In the case of the offer and sale of the Securities, no
form of general solicitation or general advertising was used by the Company,
including, but not limited to, advertisements, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
were invited by any general solicitation or general advertising.

5.5. SIZE STANDARD. The Company complies with the size standards
set forth in 13 C.F.R. Section 121.802(a)(2)(ii) and, to the extent relevant,
those size standards set forth in 13 C.F.R. Section 121.601.

6. Representations and Agreements of the Stockholders. Each Stockholder
represents, warrants and agrees for the benefit of the Company as of the Closing
Date that:

(a) such Stockholder has had an opportunity to discuss the
business, management and financial affairs of the Company, and the terms and
conditions of the proposed purchase, with the management of the Company;

(b) such Stockholder qualifies as an "accredited investor"
within the meaning of Rule 501(a) of Regulation D under the Securities Act, and
has such knowledge and experience in financial and business matters that such
Stockholder is capable of evaluating the merits and risks of its purchase of the
Securities;

(c) such Stockholder is acquiring the Securities for its own
account and not with a view to any resale or distribution of the Securities that
would violate the Securities Act; and

(d) such Stockholder acknowledges and understands that there
are substantial restrictions on the transferability of the Securities and that
the Securities have not been registered under the Securities Act and that
certificates representing the Securities initially will bear the legend or
legends and be subject to the restrictions on transfer and sale set forth in
Section 4.2 of this Agreement;

5
<PAGE>

7. DOCUMENTS DELIVERED AT THE CLOSING.

7.1. CLOSING CERTIFICATE. On the Closing Date, the Company will
deliver to the Stockholders a certificate from the Company signed by an
appropriate officer of the Company, dated the Closing Date, to the effect that,
to the best of such officer's knowledge, the representations and warranties of
the Company in this Agreement are true and correct as of the Closing Date and
that Company has complied in all material respects with all the agreements and
satisfied all the material conditions on its part to be performed or satisfied
at or prior to the Closing Date.

7.2. SMALL BUSINESS INVESTMENT COMPANY FORMS. On or promptly after
the Closing, the Company shall deliver to the Stockholders, upon request, (a) an
executed copy of SBA Form 480 -- Size Status Declaration, (b) an executed copy
of SBA Form 652 -- Assurance of Compliance for Nondiscrimination, and (c) the
information needed to complete Part A of SBA Form 1031 -- Portfolio Financing
Report.

8. USE OF PROCEEDS; ACCESS TO RECORDS. The Company covenants and agrees
that it will use the proceeds from the sale of the Securities hereunder for
general corporate purposes as duly authorized by the Board of Directors of the
Company including, maintenance, operation, growth, expansion or modernization of
the Company. The Company will provide all Stockholders requesting such
information with reasonable access to the Company's financial records so as to
allow such Stockholders to confirm that such proceeds were used in the manner
contemplated by this Agreement, such access to include a review by Stockholders
of the use of proceeds within ninety (90) days after the Closing. The Company
acknowledges and agrees that if the proceeds are not used in the manner
contemplated hereby, the Stockholders shall have the right to demand the
immediate repayment of such proceeds.

9. MISCELLANEOUS.

9.1. NOTICES. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
hand delivered or mailed postage prepaid by registered or certified mail,

(a) if to any Stockholder, addressed to such Stockholder at
its address shown on the applicable signature pages hereof, or at such other
address as such Stockholder may specify by written notice to the Company, or

(b) if to the Company, at its address shown on the applicable
signature page hereof or at such other address as the Company may specify by
written notice to the Stockholders, and each such notice, request, consent and
other communication shall for all purposes of the Agreement be treated as being
effective or having been given when delivered if delivered personally, or, if
sent by mail, at the earlier of its receipt or 4 days after the same has

6
<PAGE>

been deposited in a regularly maintained receptacle for the deposit of United
States mail, addressed and postage prepaid as aforesaid.

9.2. SEVERABILITY. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to or in connection
with this Agreement or any of the transactions contemplated hereby shall be
given effect separately from the provision or provisions determined to be
illegal or unenforceable and shall not be affected thereby.

9.3. PARTIES IN INTEREST. Except as otherwise set forth herein, all
the terms and provisions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto. This Agreement shall not run to the benefit of or be
enforceable by any Person other than a party to this Agreement and its
successors and assigns.

9.4. HEADINGS. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.

9.5. CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to conflict of law provisions thereof.

9.6. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.

7
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.

GOLDEN STATE ACQUISITION CORP.

By:
--------------------------------
Its:
-------------------------------

8
<PAGE>

The foregoing Agreement is
hereby accepted as of the
date first above written.

FAC, LTD.

By: /s/ MARK D. MCDONNELL
------------------------------
Name: Mark D. McDonnell
Title:

Number of shares of Class A Common Stock to be issued to
Stockholder by the Company: 650,000

Exact name of Stockholder or Stockholder's nominee
as it should appear on Class A Common Stock certificate:
FAC, LTD.

Address for notices:

c/o Smith McDonnell Stone & Co., Inc.
430 Park Avenue (Suite 2102)
New York, NY 10022
Attention: Mark D. McDonnell

Telephone: (212) 750-7780

Telecopier: (212) 754-3362

Telex:
-----------------------------

Stockholder is organized or incorporated under the laws
of the State of:

THE CAYMAN ISLANDS

Stockholder's principal place of business is in the
State of:

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

9
<PAGE>

The foregoing Agreement is
hereby accepted as of the
date first above written.

EXETER EQUITY PARTNERS, L.P.

By: Exeter Equity Advisors, L.P.,
General Partner

By: Exeter Equity Advisors, Inc.
General Partner

By: /s/ TIMOTHY P. BRADLEY
-------------------------
Timothy P. Bradley
Vice President

EXETER VENTURE LENDERS, L.P.

By: Exeter Venture Advisors, Inc.,
General Partner

By: /s/ TIMOTHY P. BRADLEY
-------------------------
Timothy P. Bradley
Vice President

Number of shares of Class B Common Stock to be issued to the
Stockholders named above by the Company:

Exeter Venture Lenders, L.P.: 110,000
Exeter Equity Partners, L.P.: 540,000

Exact name of each Stockholder or each Stockholder's nominee
as it should appear on Class B Common Stock certificate:
EXETER EQUITY PARTNERS, L.P. EXETER VENTURE LENDERS, L.P.
- ----------------------------------------------------------------------

Address for notices:

c/o Exeter Venture Lenders L.P.
10 East 53rd Street
New York, New York 10022
Attention: Timothy P. Bradley
Telephone: (212) 872-1175
Telecopier: (212) 872-1198

Each Stockholder is organized under the laws of the State of Delaware.

Each Stockholder's principal place of business is in the
State of:
-----------------------------------

10
<PAGE>

The foregoing Agreement is
hereby accepted as of the
date first above written.

SBIC PARTNERS, L.P.

By: Forrest Binkley & Brown L.P.,
General Partner

By: Forrest Binkley & Brown
Venture Co., General Partner

By: /s/ JEFFREY J. BROWN
-------------------------
Jeffrey J. Brown
Office of the President

By: SL-SBIC Partners, L.P.,
General Partner

By: FW-SBIC, Inc.,
General Partner

By:
-------------------------
Name:
Title:

Number of shares of Class B Common Stock to be issued to the
Stockholders named above by the Company: 650,000

Exact name of each Stockholder or each Stockholder's nominee
as it should appear on Class B Common Stock certificate:
SBIC PARTNERS, L.P.
- ----------------------------------------------------------------------

Address for notices:

c/o Forrest Binkley & Brown L.P.
800 Newport Center Drive -- Suite 725
Newport Beach, California
Attention: Jeffrey J. Brown
Telephone: (714) 729-3222
Telecopier: (714) 729-3226

Each Stockholder is organized under the laws
of the State of Texas.

Each Stockholder's principal place of business is in the
State of:
-----------------------------------

11
<PAGE>

The foregoing Agreement is
hereby accepted as of the
date first above written.

SBIC PARTNERS, L.P.

By: Forrest Binkley & Brown L.P.,
General Partner

By: Forrest Binkley & Brown
Venture Co., General Partner

By: /s/ JEFFREY J. BROWN
-------------------------
Jeffrey J. Brown
Office of the President

By: SL-SBIC Partners, L.P.,
General Partner

By: FW-SBIC, Inc.,
General Partner

By: /s/ PETER STERLING
-------------------------
Name: Peter Sterling
Title: Chairman

Number of shares of Class B Common Stock to be issued to the
Stockholders named above by the Company:
------------------------------

Exact name of each Stockholder or each Stockholder's nominee
as it should appear on Class B Common Stock certificate:

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

Address for notices:

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

Attention:
-------------------------
Telephone:
-------------------------
Telecopier:
------------------------

Each Stockholder is organized or incorporated under the laws
of the State of: .
----------------------------------

Each Stockholder's principal place of business is in the
State of: .
-----------------------------------

12
<PAGE>

SCHEDULE I

LIST OF STOCKHOLDERS

FAC, Ltd.
SBIC Partners, L.P.
Exeter Equity Partners, L.P.
Exeter Venture Lenders, L.P.

<PAGE>
PURCHASE AGREEMENT

THIS AGREEMENT is entered into as of the 10th day of March 1997, by and
between WILLIAM D. REID and JOHNYE B. REID ("Seller"), and GOLDEN STATE
VINTNERS, a California corporation, or its nominee ("Buyer").

RECITALS

Seller owns and has leased to Buyer the land and improvements located at
1075 Golden Gate Drive in Napa, California, pursuant to a certain Warehouse
Lease, dated June 15, 1995 (the "Lease"), which grants Buyer an option to
purchase that property. Buyer has exercised the purchase option in the Lease
and wants to buy that property. The parties are entering into this Agreement to
set forth the terms and conditions of the sale to Buyer.

NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:

1. AGREEMENT OF SALE. Seller hereby agrees to sell to Buyer and
Buyer hereby agrees to purchase from Seller that certain real property (the
"Land") located at 1075 Golden Gate Drive in Napa County, California and more
particularly described in attached EXHIBIT A, together with:

a. the warehouse building of approximately 78,168 square feet,
any and all fixtures, parking areas, landscaping and other improvements located
upon the Land (collectively the "Improvements");

b. all machinery, equipment, furnishings and other tangible
personal property owned by Seller and used in connection with the maintenance or
operation of the Improvements (collectively the "Personal Property"), a current
list of which is attached as Schedule I to EXHIBIT B;

c. all easements, rights of way, privileges, licenses,
appurtenances and other rights and benefits of Seller or belonging to the Land
(collectively the "Privileges");

d. the certificate(s) of occupancy with respect to the
Improvements and all other building or equipment permits, consents,
authorizations, variances, waivers, licenses, permits, certificates and
approvals from any governmental or quasi-governmental authority with respect to
the Land or the Improvements (collectively the "Approvals"); and

e. all architectural, mechanical, engineering, as-built and
other plans, specifications and drawings (collectively the "Plans") all surveys
(including any ALTA survey) and all soil, environmental, engineering, or other
reports or studies (collectively the "Reports"), and all transferable or
assignable warranties, representations, guaranties, contract rights and

<PAGE>

miscellaneous rights (collectively the "Warranties") relating to the ownership,
development, use and operation of the Land and Improvements.

The Land, Improvements, Personal Property, Privileges, Approvals, Plans,
Reports and Warranties are sometimes collectively called herein the "Property."

2. PURCHASE PRICE. The purchase price for the Property shall be
equal to the sum of $125,000 and the outstanding principal balance and
outstanding accrued interest under two loans in favor of Sumitomo Bank of
California ("Sumitomo"), secured by the Property, and in the original principal
amounts of $2,120,000 and $104,887 (the "Sumitomo Loans") as of the "Closing"
(as defined in Section 6.1 below) (the "Purchase Price"); provided, however,
that Buyer shall only be obligated to pay the Purchase Price by paying $125,000
directly to Seller, in the form of cash, cashier's check or federal funds wire
transfer, on the following payment schedule: $25,000 on the date of Closing,
$50,000 on January 5, 1998, and $50,000 on June 1, 1998, and by either assuming
the obligations of or paying in full the Sumitomo Loans. Nothing contained in
this Agreement shall require Buyer to assume the Sumitomo Loans. The Purchase
Price shall be allocated as follows: Land $1,841,902 (83.47%) and Improvements
$364,761 (16.53%).

3. TITLE.

3.1 PERMITTED TITLE EXCEPTIONS. Seller shall deliver good and
marketable title to the Property to Buyer subject only to the following
exceptions (the "Permitted Title Exceptions"):

a. a lien for local real estate taxes and assessments
not yet due or payable; and

b. such other exceptions as may be approved in writing
by Buyer pursuant to Section 5.1.b. below.

3.2 ALTA OWNER'S POLICY. Evidence of title shall be the
issuance at the Closing by Chicago Title Insurance Company (the "Title Company")
of its ALTA 1970 Form B Owner's Policy of Title Insurance with extended coverage
in the amount of the Purchase Price, insuring that fee title in the Property is
vested in Buyer subject only to the Permitted Title Exceptions and containing
those endorsements required by Buyer pursuant to Section 5.l.c below (the "Title
Policy"). The Title Policy shall be issued free of all standard or general
exceptions which the Title Company is permitted by applicable law to remove or
modify, including: (i) unrecorded mechanic's lien claims, (ii) rights of parties
in possession, (iii) unrecorded taxes and assessments, (iv) unrecorded
easements, and (v) any state of facts which a current survey would disclose
(other than survey matters shown on the survey and accepted by Buyer).

2
<PAGE>

4. DOCUMENTS TO BE DELIVERED TO BUYER. Within thirty (30) days of
February 28, 1997 (the date Buyer exercised its option to purchase the Property
pursuant to the Lease), Seller shall provide Buyer with each of the following
documents and items, except as otherwise noted below:

a. TITLE REPORT. A current ALTA preliminary title report for
the Property (the "Title Report"), together with a copy of each document
referred to in the Title Report.

b. ALTA SURVEY. A copy of any surveys of the Land, in
Seller's possession, showing the Improvements constructed thereon and easements
of record and encroachments, if any.

c. AGREEMENTS. Copies of all existing easements, covenants,
restrictions, agreements, Warranties, and other documents which affect the
Property and are not disclosed by the Title Report, and which Seller has in its
possession or is able to obtain through the exercise of Seller's best efforts.

d. PROPERTY DOCUMENTS. Copies of or access to all of the
Plans, Reports and Approvals and an inventory of the Personal Property which
Seller has in its possession or is able to obtain through the exercise of
Seller's best efforts.

e. SERVICE CONTRACTS. Copies of all service, maintenance,
management and other contracts and agreements related to the operation and
management of the Property (collectively, "Service Contracts") which Seller has
in its possession or is able to obtain through the exercise of Seller's best
efforts. Buyer shall have until thirty (30) days prior to the Closing to notify
Seller if Buyer will assume any of such Service Contracts as of the Closing. On
or before Closing, Seller shall terminate all Service Contracts that Buyer does
not so elect to assume.

f. OPERATING DOCUMENTS. Copies of all real and personal
property tax bills and utility bills and a statement of income and expenses for
the Property for the last two years, and all notices regarding any actual or
potential claim, default, violation or liability with respect to the Property,
that Seller has in its possession.

g. PROPERTY REPORTS. Copies of or access to all environmental
studies and reports in Seller's possession relating to the Property, including
any correspondence with any governmental entity concerning environmental
conditions of the Property, and copies of or access to all other reports or
studies concerning the Property or its physical condition in Seller's
possession.

Buyer agrees that if it does not receive any of the foregoing within the
required time periods, it will notify Seller and give Seller a reasonable
opportunity to provide the omitted documents, before it will deem Seller to be
in default under this Agreement.

3
<PAGE>

5. CONDITIONS TO CLOSING.

5.1 BUYER'S CONDITIONS. Buyer's obligation to purchase the
Property is conditioned upon the satisfaction of each of the following
conditions, any of which may be enforced or waived in Buyer's sole discretion:

a. The performance by Seller of every obligation of
Seller hereunder, and the truth of each representation and warranty made in this
Agreement by Seller at the time the representation or warranty was made and as
of the Closing.

b. Buyer's review and approval of the Title Report, all
title exceptions, and the ALTA survey, if any, and Buyer's receipt of the Title
Policy on Closing. Buyer shall notify Seller in writing of any objections Buyer
has to the Title Report, the title exceptions or the survey, if any, and of any
endorsements Buyer will require, at least thirty (30) days prior to the Closing.
Seller may, but shall be under no obligation to, correct any such objections,
except that Seller shall be required to remove any monetary liens or
encumbrances and all title exceptions, except title exception numbers 1, 2, 3,
4, 5, 6 and 7 listed in Schedule B of the Title Report attached as Exhibit B to
the Lease and encumbrances and exceptions to title created by Tenant or approved
by Tenant at the time of recording, and to give Title Company an indemnity if
required in order for Title Company to remove from the Title Policy any
creditors' rights exceptions. If the objections cannot be removed prior to or
upon the Closing, Seller will advise Buyer thereof in writing and Buyer may
either waive its objections or seek other remedies against Seller pursuant to
this Agreement and/or the Lease.

c. No material casualty or condemnation and no material
adverse change in the zoning of the Property may have occurred.

5.4 WAIVER. Buyer may, at any time or times before the
Closing, waive one or more of the foregoing conditions, without affecting its
rights and remedies with respect to the remaining conditions. Any such waiver
must be in writing and signed by Buyer.

6. CLOSING.

6.1 CLOSING DATE. The consummation of the purchase and sale of
the Property (the "Closing") shall be held at the offices of the Title Company
on or before May 28, 1997 (the date specified by Buyer in its election to
exercise its option to purchase the Property pursuant to the Lease).

6.2 SELLER'S DEPOSITS INTO ESCROW. Seller shall deposit the
following documents and items into escrow:

a. a duly executed and acknowledged grant deed
conveying the Land and Improvements to Buyer, subject only to the Permitted
Title Exceptions;

4
<PAGE>

b. a duly executed bill of sale, in the form of
attached EXHIBIT B, transferring the Personal Property to Buyer;

c. a duly executed assignment, in the form of attached
EXHIBIT C, assigning to Buyer all of Seller's interest in the Plans and Reports,
all Warranties, any Service Contract that Buyer elects to assume, and all
Approvals;

d. originals of all Service Contracts that Buyer elects
to assume, Warranties, and originals or copies of all Plans, Reports, and
Approvals in Seller's possession;

e. an affidavit in the form of attached EXHIBIT D
stating that Seller is not a "foreign person" under IRC Section 1445(f)(3);

f. a duly executed certificate from Seller certifying
that there has been no change in or damage to the Property or its use or
operation (or specifying such change or damage) from the commencement date of
the Lease and that the representations and warranties described in Section 7.1
are complete and accurate as of the Closing date;

g. cash equal to the amount of any closing prorations
that are the responsibility of the Seller as set forth below; and

h. such other documents as may reasonably be required
to complete the Closing.

6.3 BUYER'S DEPOSITS INTO ESCROW. Buyer shall deposit the
following into escrow:

a. the $25,000 portion of the Purchase Price in
accordance with the provisions of Section 2 above (subject to any federal or
state tax withholding requirements);

b. an unsecured promissory note in favor of Seller, in
the form of attached EXHIBIT E, in the principal amount of $100,000, bearing no
interest and requiring two $50,000 payments on January 5, 1998 and June 1, 1998;

c. Buyer's share of the closing costs and closing
prorations as described below; and

d. such other documents as may reasonably be required
to complete the Closing.

6.4 PRORATIONS. All rents and other sources of income and all
expenses for the Property will be prorated on the Closing date on the basis of
the actual number of days in the month, 365 days in the year, and appropriate
adjustments made between the parties; provided,

5
<PAGE>

however, that the parties acknowledge that, pursuant to the terms of the Lease,
Buyer is responsible for all real and personal property taxes assessed against
the Property, insurance premiums, costs of utilities, normal operating expenses
and normal repairs and maintenance costs of the Property and that accordingly,
no prorations should be required at the Closing. If the amount of any proration
cannot be determined or cannot be determined accurately at the Closing, the
adjustments will be made between the parties as soon after Closing as possible.

6.5 CLOSING COSTS. Buyer shall pay all transfer taxes, the
cost of the Title Policy and the Title Company's escrow and recording fees.

6.6 CLOSING. Pursuant to Section 6.1 above, Title Company
shall close the escrow for this transaction when it is in a position to issue
the Title Policy and has received from Seller and Buyer the items required of
each in Sections 6.2 and 6.3 above. Title Company shall close escrow by doing
the following:

a. Recording the Grant Deed in the Official Records of
the Napa County Recorder;

b. Delivering to Buyer the Title Policy, the original
documents and items listed in Section 6.2 above, and a closing statement for the
escrow consistent with this Agreement and satisfactory to Buyer and Seller (the
"Closing Statement"), and any refund due Buyer; and

c. Delivering to Seller the amount due Seller as shown
on the Closing Statement, Seller's closing statement and the original documents
listed in Section 6.3 above.

6.7 POSSESSION. Seller shall deliver possession of the
Property to Buyer on the Closing date.

7. REPRESENTATIONS AND WARRANTIES.

7.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby
makes the following representations and warranties to Buyer, which
representations and warranties shall survive the Closing and all of which (i)
are material and are being relied upon by Buyer, and (ii) are complete and
accurate as of the date hereof and shall be complete and accurate at the Closing
date:

a. To the best of Seller's knowledge, after reasonable
inquiry, all contracts, materials, reports and other documents delivered to
Buyer in connection with the Lease and the purchase and sale of the Property are
all of the documents or agreements affecting the Property, are originals or
complete and accurate copies, and are in fall force and effect and without
default by any party thereto. To the best of Seller's knowledge, after
reasonable inquiry, no information or documents given to Buyer pursuant to this
Agreement contains any untrue

6
<PAGE>

statement of a material fact or omits to state a material fact making the
statements contained therein misleading.

b. To the best of Seller's knowledge, after reasonable
inquiry, except as disclosed to Buyer in writing, Seller does not have knowledge
of any condemnation proceedings, sewer moratorium, zoning changes, or any
land-use or development regulations or proceedings, existing or proposed, which
would affect the use and operation of the Property, nor has Seller received
notice of any special assessment proceedings affecting the Property.

c. This Agreement and all documents executed by Seller
which are to be delivered to Buyer at the Closing are, or at the time of Closing
will be, legal, valid, and binding obligations of Seller, and do not, and at the
time of Closing will not, violate any provision of any agreement to which Seller
is a party or to which it is subject or any law, judgment or order applicable to
Seller.

d. At the time of Closing, there will be no outstanding
contracts made by Seller for any improvements to the Property which have not
been fully paid for, and Seller shall cause to be discharged all mechanics' or
materialmen's liens arising from any labor or materials furnished to the
Property on behalf of Seller prior to the time of Closing.

e. Seller is the sole owner of the Property free and
clear of any right to or claim of possession by any other party, except as
disclosed on the Title Report and for Buyer's rights under the Lease, and has
authority to sell it to Buyer. There are no unrecorded easements or claims of
encroachment or prescriptive easement affecting the Property.

f. Seller is not a "foreign person" within the meaning
of IRC Section 1445(f)(3).

g. To the best of Seller's knowledge, after reasonable
inquiry, there is no claim, litigation, or governmental investigation or
proceeding, actual or potential, that may affect the Property.

h. No proceedings under any bankruptcy or insolvency
laws have been commenced by or against Seller which have not been terminated; no
general assignment for the benefit of creditors has been made by Seller; and no
trustee or receiver of Seller's property has been appointed.

i. To the best Seller's knowledge, after reasonable
inquiry, there are no claims, defects, problems or facts which would prevent
Buyer from using and operating the Property after the Closing in the normal
manner in which similar properties in the area are operated.

7
<PAGE>

j. There are no uncured defaults, or acts or omissions
which with notice or the passage of time, or both, would constitute a default
under any of the documents evidencing or securing the Permitted Title
Exceptions.

k. Seller has not Handled and has no knowledge of the
Handling of any Hazardous Materials at, on, under, or about the Property and has
no knowledge of any Hazardous Materials having affected the Property in any
manner prior to the commencement date under the Lease. Buyer acknowledges
having received a copy of the Phase I Environmental Site Assessment, dated
November 18, 1994, prepared by Balbl & Chang Associates. The capitalized terms
shall have the following definitions:

(i) "HAZARDOUS MATERIALS" shall mean any
substance: (A) that now or in the future is regulated or governed by, requires
investigation or remediation under, or is defined as a hazardous waste,
hazardous substance, pollutant or contaminant under any federal, state or local
laws, regulations or permits (the "Laws") and any amendments thereto, including,
for example only and without limitation, the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C. Section 9601 ET SEQ., and the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 ET SEQ., or (B)
that is toxic, explosive, corrosive, flammable, radioactive, carcinogenic,
dangerous or otherwise hazardous, including, for example only and without
limitation, gasoline, diesel, petroleum hydrocarbons, polychlorinated biphenyls
(PCBs), asbestos, radon and urea formaldehyde foam insulation.

(ii) "ENVIRONMENTAL REQUIREMENTS" shall mean all
present and future Laws, permits, licenses, approvals, authorizations and other
requirements of any kind applicable to Hazardous Materials.

(iii) "HANDLE," "HANDLED," or "HANDLING" shall mean
any installation, introduction, presence, handling, generation, storing,
treatment, use, disposal, discharge, release, manufacture, refinement, presence,
migration, emission, abatement, removal, transportation, or any other activity
of any type in connection with or involving Hazardous Materials.

(iv) "ENVIRONMENTAL LOSSES" shall mean all costs
and expenses of any kind, damages, foreseeable and unforeseeable, consequential
damages, fines and penalties incurred in connection with any violation of and
compliance with Environmental Requirements and all losses of any kind
attributable to the diminution of value, loss of use or adverse effects on
marketability or use of any portion of the Property.

7.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby
makes the following representations and warranties to Seller, which
representations and warranties shall survive the Closing and all of which (i)
are material and are being relied upon by Seller, and (ii) are complete and
accurate in all respects as of the date hereof and shall be complete and
accurate as of the Closing date:

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<PAGE>

a. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. This
Agreement and all documents executed by Buyer which are to be delivered to
Seller at the Closing are, or at the time of Closing will be, duly authorized,
executed, and delivered by Buyer, and are, or at the Closing will be, legal,
valid, and binding obligations of Buyer, and do not, and at the time of Closing
will not, violate any provisions of any agreement to which Buyer is a party or
to which it is subject or any law, judgment or order applicable to Buyer.

b. No proceedings under any bankruptcy or insolvency
laws have been commenced by or against Buyer which have not been terminated; no
general assignment for the benefit of creditors has been made by Buyer; and no
trustee or receiver of Buyer's property has been appointed.

7.3 All of the representations and warranties in this Agreement
shall survive the Closing and delivery of the Property to Buyer for a period of
eighteen (18) months; provided, however, in the event any party notifies the
other party before the end of such period that facts or circumstances which may
give rise to a claim hereunder have been discovered, or have been claimed, and
of the nature of such facts and circumstances, the obligations hereunder of the
party so notified shall survive as to such facts or circumstances to the maximum
extent permitted by law.

8. INDEMNIFICATION. Each party hereby agrees to indemnify, protect,
defend and hold harmless the other party from and against all claims, demands,
liabilities, losses, damages, costs and expenses, including reasonable
attorneys' fees and costs incurred in defending against the same, arising from
or in connection with any misrepresentations or breach of warranty, covenant or
agreement made by such party in this Agreement or in any document, certificate,
or exhibit given or delivered to the other party pursuant to or in connection
with this Agreement. Seller further agrees to indemnify, defend, protect and
hold harmless Buyer from and against any claims, demands, liabilities, losses,
damages, costs and expenses, including reasonable attorneys' fees and costs
incurred in defending against the same, arising from or in connection with
Seller's ownership of the Property prior to the Closing date, excluding only
claims, liability, damages, losses, costs or expenses to the extent caused by
the negligence or willful misconduct of Buyer or its partners, shareholders,
directors, officers, employees, agents, invitees, licensees, contractors or
other persons acting with authority for or on behalf of Buyer ("Buyer's
Representatives"). These indemnifications shall survive the Closing and
conveyance of the Property to Buyer for a period of eighteen (18) months;
provided, however, in the event any party notifies the other party before the
end of such period that facts or circumstances which may give rise to a claim
hereunder have been discovered, or have been claimed, and of the nature of such
facts and circumstances, the obligations hereunder of the party so notified
shall survive as to such facts or circumstances to the maximum extent permitted
by law.

9. RISK OF LOSS; INSURANCE PROCEEDS; CONDEMNATION. The provisions of
the Lease regarding insurance (Article 11), damage to the Property (Article 12)
and condemnation (Article

9
<PAGE>

13) shall control the obligations of the parties through the Closing date, and
those provisions are hereby incorporated into this Agreement as if fully set
forth herein; provided, however, that notwithstanding any contrary provisions in
the Lease, if Buyer completes the purchase of the Property, all available
insurance proceeds and condemnation awards shall be tendered and/or assigned to
Buyer by Seller as of the Closing date, and provided, further, that if a
material portion of the Property is condemned, Buyer shall have the right to
elect to terminate this Agreement and not purchase the Property, upon written
notice to Seller given within thirty (30) days of Buyer's receipt of notice of
the condemnation.

10. SELLER'S COVENANTS DURING CONTRACT PERIOD. Between Buyer's
exercise of its option to purchase the Property and the Closing, Seller shall
not (i) sell or offer the Property for sale publicly or otherwise solicit,
entertain or accept offers for the sale of the Property from any party, and (ii)
take any material actions affecting the Property, including actions affecting
title, physical condition or creating new leases, contracts, easements or
encumbrances of any kind without Buyer's prior written consent.

11. ASSIGNMENT. Neither party may assign its rights or delegate its
obligations hereunder without the prior written consent of the other party,
except that Buyer shall have the right to assign this Agreement, without the
consent of Seller, to any affiliate of Buyer. Such permitted assignee of Buyer
shall then be entitled to acquire the Property on the terms set forth herein.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their legal representatives, heirs, successors
and assigns.

12. MISCELLANEOUS.

12.1 NOTICE. All notices and any other communications permitted
or required under this Agreement must be in writing and will be effective (i)
immediately upon delivery in person or by facsimile copy, or (ii) upon the next
calendar day after deposit with a commercial courier or delivery service for
overnight delivery, or (iii) three days after deposit with the United States
Postal Service, certified mail, return receipt requested, postage prepaid. All
notices must be properly addressed and delivered to the parties at the addresses
set forth below, or at such other addresses as either party-may subsequently
designate by written notice given in the manner provided in this Section:

Seller: William D. and Johnye B. Reid
3620 Spring Mountain Road
St. Helena, CA 95474
Facsimile No: (707) 963-7960

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<PAGE>

Buyer: Golden State Vintners
60 East Sir Francis Drake Blvd., Suite 302
Larkspur, CA 94939
Attn: Jeffrey B. O'Neill
Facsimile No: (415) 461-4497

with a copy to: Farella Braun & Martel LLP
235 Montgomery Street, 30th Floor
San Francisco, CA 94104
Attn: Edward A. Cherry, Esq.
Facsimile No: (415) 954-4480

12.2 HEADINGS. The headings used herein are for purposes of
convenience only and should not be used in construing the provisions hereof.

12.3 COVENANT OF FURTHER ASSURANCES. The parties hereby agree
to execute such other documents and perform such other acts as may be necessary
or desirable to carry out the purposes of this Agreement.

12.4 ENTIRE AGREEMENT. This document and the Lease represent
the entire agreement between the parties with respect to the subject matter
hereof and supersede all other prior agreements. This Agreement may only be
modified by a written instrument signed by both parties.

12.5 PARTIAL INVALIDITY. If any term, covenant or condition of
this Agreement or its application to any person or circumstances shall be held
to be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provisions to other persons or circumstances shall
not be affected.

12.6 NO WAIVER. No consent or waiver by either party to or of
any breach of any representation, covenant or warranty shall be construed as a
consent to or waiver of any other breach of the same or any other
representation, covenant, or warranty.

12.7 ATTORNEYS' FEES. In the event of any controversy, claim or
action being filed between the parties respecting this Agreement or in
connection with the Property, the prevailing party shall be entitled, in
addition to all expenses, costs or damages, to reasonable attorneys' fees,
whether or not such controversy was litigated or prosecuted to judgment.

12.8 BROKERS AND FINDERS. Neither party has had any contact or
dealings regarding the Property, through any licensed real estate broker or
other persons who can claim a right to a commission or finder's fee in
connection with this transaction. In the event that any other party claims a
commission or finder's fee in this transaction, the party through whom the party
makes his claim shall be responsible for said commission or fee and shall
indemnify the

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<PAGE>

other against all costs and expenses (including reasonable attorneys' fees)
incurred in defending against the same. This indemnification shall survive
termination of this Agreement for any reason and the Closing on the purchase of
the Property.

12.9 TIME OF THE ESSENCE. Time is of the essence of this
Agreement.

12.10 GOVERNING LAW. This Agreement is entered into and shall be
governed by and construed in accordance with the laws of the State of
California.

12.11 INTERPRETATION. All parties have been represented by
counsel in the preparation and negotiation of this Agreement, and this Agreement
shall be construed according to the fair meaning of its language. The rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be employed in interpreting this Agreement.

12.12 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which when taken together shall constitute one binding
agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.

SELLER: WILLIAM D. REID and JOHNYE B. REID

By: /s/ William D. Reid
---------------------------------
Date: March 16, 1997
--------------------------------

By: /s/ Johnye B. Reid
---------------------------------
Date: March 16, 1997
--------------------------------

BUYER: GOLDEN STATE VINTNERS,
a California corporation

By: /s/ Jeffrey B. O'Neill
---------------------------------
Jeffrey B. O'Neill, President
Date:
--------------------------------

<PAGE>

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

GOLDEN STATE ACQUISITION CORP.

Golden State Acquisition Corp., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "General
Corporation Law"),

DOES HEREBY CERTIFY THAT:

FIRST: The name of the corporation is Golden State Acquisition
Corp., and that the corporation was originally incorporated on April 18, 1995
pursuant to the General Corporation Law.

SECOND: The following resolutions amending and restating the
corporation's Certificate of Incorporation were approved by the Board of
Directors of the corporation by an Action by Unanimous Written Consent dated as
of October 10, 1996 and were duly adopted by the stockholders of the Corporation
in accordance with the provisions of Sections 242 and 245 of the General
Corporation Law by written consent of stockholders given in accordance with
Section 228 of the General Corporation Law, with written notice given to
stockholders who did not consent in writing:

"RESOLVED, that the Certificate of Incorporation of the corporation
(the "Certificate") be and it hereby is amended and restated to read in its
entirety as follows:

ARTICLE I

The name of the Corporation is Golden State Acquisition Corp.
(hereinafter, the "CORPORATION").

ARTICLE II

The registered office of the Corporation is to be located at 15 East
North Street, Dover, County of Kent, Delaware, 19901. The name of its
registered agent at that address is United Corporate Services, Inc.

<PAGE>

ARTICLE III

The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporate Law of the State of Delaware.

ARTICLE IV

A. AUTHORIZED SHARES

The total number of shares of all classes of stock which the
Corporation has authority to issue is 4,300,000 shares, consisting of:

1. 2,500,000 shares of Class B Common Stock, par value $0.01
per share (the "CLASS B COMMON");

2. 100,000 shares of 12% Senior Redeemable Exchangeable
Preferred Stock, par value $0.01 per share (the "SENIOR PREFERRED STOCK");

3. 200,000 shares of 6% Junior Exchangeable Preferred Stock,
par value $0.01 per share (the "JUNIOR PREFERRED STOCK"); and

4. 1,000,000 shares of Class E Common Stock, par value $0.01
per share (the "CLASS E COMMON").

5. 500,000 shares of Class K Common Stock, par value $0.01 per
share (the "CLASS K COMMON").

The Class B Common, Class E Common, Class K Common and any other
common stock issued hereafter (collectively, the "COMMON STOCK") shall have the
rights, preferences and limitations separately set forth below. The Senior
Preferred Stock, Junior Preferred Stock and any other preferred stock issued
hereafter (collectively, the "PREFERRED STOCK") shall have the rights,
preferences and limitations separately set forth below.

B. PREFERRED STOCK

The Board of Directors of the Corporation is hereby expressly vested
with authority to provide for the issuance of shares of preferred stock in one
or more classes or one or more series, with such voting powers, full or limited,
or no voting powers, and with such designations, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations or restrictions thereof, if any, as shall be stated and expressed in
a resolution or resolutions providing for such issuance adopted by the Board of
Directors under the

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<PAGE>

General Corporation Law of the State of Delaware. Except as otherwise provided
by applicable law, the holders of the preferred stock of the Corporation shall
only have such voting rights as are provided for or expressed in the certificate
of designations relating to such preferred stock adopted pursuant to the
authority in the Certificate of Incorporation. For purposes of this Certificate
of Incorporation: (a) the term "Senior Certificate of Designations" shall mean
the Certificate of Powers, Designations, Preferences and Relative,
Participating, Optional and other Special Rights of Senior Preferred Stock and
Qualifications, Limitations and Restrictions Thereof governing the rights,
preferences and privileges of the Senior Preferred Stock; and (b) the term
"Junior Certificate of Designations" shall mean the Certificate of Powers,
Designations, Preferences and Relative, Participating, Optional and Other
Special Rights of Convertible Stock and Qualifications, Limitations and
Restrictions Thereof governing the rights, preferences and privileges of the
Junior Preferred Stock, in each case, as shall be filed by the Corporation as an
amendment to this Certificate of Incorporation on or after the date hereof.
Except as otherwise required by the Senior Certificate of Designations, the
Junior Certificate of Designations and applicable law, the holders of preferred
stock shall not be entitled to vote upon the election of directors or upon any
matter submitted to the stockholders for a vote.

C. COMMON STOCK

Except as otherwise provided in this Part C or as otherwise required
by applicable law, all shares of Class B Common, Class E Common and Class K
Common shall be identical in all respects and shall entitle the holders thereof
to the same rights and privileges, subject to the same qualifications,
limitations and restrictions.

1. VOTING RIGHTS.

(a) Class B Common. Except as otherwise expressly provided
herein or as otherwise required by applicable law, (i) each outstanding share of
Class B Common shall be entitled to vote on each matter on which the
stockholders of the Corporation shall be entitled to vote and (ii) each holder
of Class E Common shall be entitled to one (1) vote for each share of such stock
held by such holder.

(b) Class E Common. Except as otherwise expressly
provided herein or as otherwise required by applicable law, prior to April
21, 2000 (the "Class E Voting Date") (i) each outstanding share of Class E
Common shall not be entitled to vote on any matter on which the holders of
Class B Common shall be entitled to vote, and (ii) shares of Class E Common
shall not be included in determining the number of shares voting or entitled
to vote on any such matters. Effective as of the Class E Voting Date, except
as otherwise required by applicable law, (i) each outstanding share of Class
E Common shall be entitled to vote on each matter on which stockholders of
the Corporation shall be entitled to vote and (ii) each holder of Class E
Common shall be entitled to one (1) vote for each share of such stock held by
such holder.

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<PAGE>

(c) CLASS K COMMON. Except as otherwise expressly provided
herein or as otherwise required by applicable law, (i) each outstanding share of
Class K Common shall not be entitled to vote on any matter on which holders of
Class B Common or, after the Class E Voting Date, holders of Class E Common
shall be entitled to vote and (ii) shares of Class K Common shall not be
included in determining the number of shares voting or entitled to vote on any
such matters.

(d) Class Voting. Except as otherwise expressly provided
herein or as otherwise required by applicable law, on any matter on which the
holders of shares of Class B Common and Class E Common are entitled to vote, all
classes of Common Stock entitled to vote shall vote together as a single class.

2. FUNDAMENTAL CORPORATE EVENTS. Upon the occurrence of any
fundamental corporate transaction or series of related transactions, including
without limitation the events listed below, the holders of Class E Common and
Class K Common shall be treated identically with the holders of Class B Common,
share and share alike, receiving, among other things, the same consideration for
their shares of Class E Common and Class K Common, as the case may be, as
received by the holders of Class B Common, as if all such holders were members
of the same class:

(a) any sale, lease, exchange of all or substantially all
of the assets of the Corporation, whether in one transaction or a series of
related transactions;

(b) any merger or consolidation of the Corporation;

(d) any issuance by the Corporation of equity securities of
the corporation.

3. REDEMPTION OF CLASS E COMMON.

(a) If any Put Event or Class E Common Stock Put Event
shall occur, the Corporation shall: (x) deliver to the holders of Class E
Common a Notice and Offer to Redeem Common Stock pursuant to the provisions of
this Section C.3; and (y) if such holder accepts redemption as to the Class E
Common it holds by delivering a Response Notice pursuant to Section 3(d) below,
redeem such Class E Common as hereinafter provided.

(i) In the event of a Put Event, the redemption price
for a share of Class E Common hereunder shall be an amount equal to (i) the fair
market value of the

4
<PAGE>

Corporation and its subsidiaries, as determined by an independent appraiser
approved by holders of at least 51% of the then outstanding shares of Class E
Common or, at the option of such holders, if a third party is to purchase all of
the Corporation's outstanding capital stock or assets in an arm's length
transaction, the actual price to be paid for such stock or assets by such third
party (which actual price shall be net of liabilities being paid or assumed in
connection with such transaction), divided by (ii) the number of shares of
Common Stock then outstanding.

(ii) In the event of a Class E Common Stock Put Event,
the redemption price for a share of Class E Common hereunder shall be an amount
equal to (1) six (6) multiplied by EBITDA for the twelve calendar months
immediately preceding the date of the Notice and Offer to Redeem Common Stock
plus (2) all cash of the Corporation and its subsidiaries as of the end of the
calendar month immediately preceding the date of the Notice and Offer to Redeem
Common Stock minus (3) an amount equal to the sum of (x) Consolidated Funded
Debt as of the end of the calendar month immediately preceding the date of the
Notice and Offer to Redeem Common Stock, (y) the Liquidation Value of the Senior
Preferred Stock on the Special Redemption Date (as defined below) and (z)
$2,700,000 (minus the redemption price paid for all of the Junior Preferred
Stock on the Special Redemption Date) minus (iv) 3 of the sum of the amounts in
clauses (1), (2) and (3) (the "COMMON STOCK REDEMPTION PRICE"), divided by
(4) the number of shares of Common Stock then outstanding.

(b) Not later than thirty (30) days prior to the effective
date of a Put Event or Class E Common Stock Put Event, the Corporation shall
give written notice to each holder of Class E Common of the pendency thereof
and the right of such holders to elect to have their shares of Class E Common
redeemed hereunder arising as a result thereof (a "NOTICE AND OFFER TO REDEEM
COMMON STOCK"). Such Notice and Offer to Redeem Common Stock shall state:
(1) that such notice is delivered and such offer to redeem is made pursuant to
the provisions of this Certificate of Incorporation; (2) the date of and a
description of the circumstances surrounding such Put Event or Class E Common
Stock Put Event; (3) the date by which a holder of Class E Common must deliver a
Response Notice pursuant to clause (d) below; (4) the date on which the
Corporation shall redeem the Class E Common if the holder of Class E Common
delivers a Response Notice pursuant to clause (d) below and the Put Event or
Class E Common Stock Put Event giving rise to the Notice and Offer to Redeem
Common Stock is consummated, which redemption date shall be a Business Day prior
to the date the Put Event or Class E Common Stock Put Event occurs (the "SPECIAL
REDEMPTION DATE"); and (5) the amount of accrued and unpaid dividends to be paid
with respect to shares of Class E Common held by such holder on such Special
Redemption Date if such shares of Class E Common are redeemed hereunder;
PROVIDED that, notwithstanding the foregoing provisions of this sentence, the
Special Redemption Date specified in such Notice and Offer to Redeem Common
Stock may be postponed, by two (2) Business Days' prior written notice from the
Corporation to each holder of Class E Common to be redeemed, to the earlier
subsequent date which allows compliance with the restrictions imposed by the
last sentence of clause (c) below.

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<PAGE>

(c) If the Corporation fails to deliver to each holder of
the Class E Common notice of a Put Event or Class E Common Stock Put Event as
required by this Section C.3, any holder of Class E Common may, upon obtaining
knowledge of a pending or completed Put Event or Class E Common Stock Put Event,
notify the Corporation of such Put Event or Class E Common Stock Put Event in
writing (the "CLASS STOCKHOLDER NOTICE"), whereupon the Corporation shall, and
any holder of Class E Common may, promptly notify each other holder of Class E
Common of such pending or completed Put Event or Class E Common Stock Put Event,
the nature thereof and the date upon which it is scheduled to occur or did
occur. In such event, redemption hereunder shall occur not later than
thirty (30) days after the date of such Class E Stockholder Notice, unless the
Corporation and such holder agree to a different date or unless such redemption
is not accepted as provided in clause (d) below. Notwithstanding any other
provision herein, a redemption of Class E Common hereunder may only be made, if,
on the Special Redemption Date, such redemption is permitted by applicable law.

(d) To accept an offer of redemption of Class E Common
hereunder, a holder thereof shall deliver to the Corporation, on or before the
tenth (10th) day following the date of receipt of the Notice and Offer to
Redeem, such holder's notice that it accepts redemption hereunder with respect
to the shares of Class E Common designated therein (a "NOTICE"). The Response
Notice shall set forth the name of such holder and the statement that it accepts
redemption with respect to the shares of Class E Common designated therein.
Promptly and in any event within two (2) Business Days after receipt of such
holder's Response Notice, the Corporation shall, by written notice to such
holder, acknowledge receipt thereof.

(e) The provisions of this Section C.3. are applicable to
successive Put Events or Class E Common Stock Put Events and no failure on the
part of any holder to exercise any right hereunder arising on account of any Put
Event or Class Common Stock Put Event shall affect or impair any other right of
such holder hereunder upon the occurrence of any other or any subsequent Put
Event or Class E Common Stock Put Event.

4. DISTRIBUTIONS. The Board of Directors of the Corporation
may cause dividends to be paid to holders of shares of Common Stock out of funds
legally available for the payment of dividends. Any dividend or other
distribution on the Common Stock shall be payable ratably at the same rate on
shares of Class B Common, Class E Common and Class K Common, share and share
alike; PROVIDED, HOWEVER, that in the case of options, warrants or rights to
acquire shares of such Common Stock or securities convertible into or
exchangeable for shares of such Common Stock, the shares, options, warrants,
rights or securities so payable shall be payable in shares of, or options,
warrants or rights to acquire or securities convertible into or exchangeable
for, Common Stock of the same class upon which the dividend or distribution is
being paid. The right of the holders of Common Stock to receive dividends and
other distributions is subject to the rights of holders of all issued and
outstanding Preferred Stock.

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<PAGE>

5. LIQUIDATION RIGHTS. In the event of any dissolution,
liquidation or winding up of the affairs of the Corporation, whether voluntary
or involuntary, after payment or provision for payment of the debts and other
liabilities of the Corporation, and subject to the liquidation preference set
forth in the Senior Certificate of Designations with respect to the Senior
Preferred Stock and the Junior Certificate of Designations with respect to the
Junior Preferred Stock, the remaining assets and funds of the Corporation, if
any, shall be divided among and paid ratably to the holders of Class B Common,
Class E Common and Class K Common, share and share alike. A merger or
consolidation of the Corporation with or into any other corporation or a sale or
conveyance of all or any part of the assets of the Corporation (which shall not
in fact result in the liquidation of the Corporation and the distribution of
assets to stockholders) shall not be deemed to be a voluntary or involuntary
liquidation or dissolution or winding up of the Corporation within the meaning
of this Section C.5.

6. STOCK SPLITS AND STOCK DIVIDENDS.

(a) The Corporation shall not in any manner subdivide (by
stock split, stock dividend or otherwise) or combine (by reverse stock split or
otherwise) the outstanding Common Stock of one class unless the outstanding
Common Stock of all the other classes shall be proportionately subdivided or
combined and the Junior Preferred Stock conversion rights shall be adjusted
appropriately. All such subdivisions shall be payable in Class B Common only to
the holders of Class B Common, in Class E Common only to the holders of Class E
Common and in Class K Common only to holders of Class K Common.

(b) In the case of any reorganization, reclassification or
change of shares of the Common Stock (other than a change in par value or from
par to no par value as a result of a subdivision or combination), or in the case
of any consolidation of the Corporation with one or more corporations or a
merger of the Corporation with another corporation, or in the case of any sale,
lease or other disposition of all or substantially all of the assets of the
Corporation, each holder of a share of Common Stock, irrespective of class,
shall have the right at any time thereafter, so long as the conversion right
hereunder with respect to such share would exist had such event not occurred, to
convert such share into the kind and amount of shares of stock and other
securities and properties (including cash) receivable upon such reorganization,
reclassification, change, consolidation, merger, sale, lease or other
disposition by a holder of the number of shares of the class of Common Stock
into which such shares of Common Stock might have been converted immediately
prior to such reclassification, change, consolidation, merger, sale, lease or
other disposition. In the event of such a reorganization, reclassification,
change, consolidation, merger, sale, lease or other disposition: (1) the
holders of outstanding shares of Common Stock shall be entitled to receive the
same consideration, share and share alike, except for voting rights with respect
to securities receivable upon such reorganization, reclassification, change,
consolidation, merger, sale, lease or other disposition; and (2) effective
provision shall be made in the certificate of incorporation of the resulting or
surviving corporation or otherwise for the protection of the conversion rights
of the shares of Common Stock of each class that shall be

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<PAGE>

applicable, as nearly as reasonably may be, to any such other shares of stock
and other securities and property deliverable upon conversion of shares of
Common Stock into which such Common Stock might have been converted immediately
prior to such event. The Corporation shall not be a party to any merger,
consolidation or recapitalization pursuant to which any holder of shares of
Common Stock would be required to take (x) any voting securities which would
cause such holder to violate any law, regulation, or other requirement of any
governmental body applicable to such holder, or (y) any securities convertible
into voting securities which, if such conversion took place, would cause such
holder to violate any law, regulation or other requirement of any governmental
body applicable to such holder other than securities which are specifically
provided to be convertible only in the event that such conversion may occur
without any such violation.

(c) The issuance of certificates for shares of any class of
Common Stock upon conversion or exchange of shares of any other class of Common
Stock or Junior Preferred Stock shall be made without charge to the holders of
such shares for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such conversion and the related issuance of
shares of Common Stock; PROVIDED, HOWEVER, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
holder of the Common Stock converted and no such issuance and delivery shall be
made unless and until the Person requesting such issuance has paid to the
Corporation the amount of any such tax or has established to the satisfaction of
the Corporation that such tax has been paid.

7. REGISTRATION OF TRANSFER. The Corporation shall keep at its
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of shares of Common Stock and Preferred Stock.
Upon the surrender at such place of any certificate representing shares of any
class of Common Stock or Preferred Stock, the Corporation shall, at the request
of the registered holder of such certificate (provided that such request is
permitted by this Certificate of Incorporation or any written agreement by and
among the Corporation and certain or all of its stockholders, in each case, as
then in effect), execute and deliver a new certificate or certificates in
exchanged therefor representing in the aggregate the number of shares of such
class represented by the surrendered certificate, and the Corporation, forthwith
shall cancel such surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of shares of such class
as is requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate. The issuance of
new certificates shall be made without charge to the holders of the surrendered
certificates for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such issuance.

8. REPLACEMENT. Upon receipt of evidence satisfactory to the
Corporation (an affidavit of the registered holder shall be deemed satisfactory)
of the ownership and the loss, theft, destruction or mutilation of any
certificate evidencing one or more shares of any class of Common Stock or
Preferred Stock, and in the case of any such loss, theft or

8
<PAGE>

destruction, upon receipt of indemnity satisfactory to the Corporation or, in
the case of any such mutilation upon surrender of such certificate, the
Corporation shall execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.

9. NOTICES. All notices referred to herein shall be in
writing, shall be delivered personally or by first class mail, postage prepaid,
and shall be deemed to have been given when so delivered or mailed to the
Corporation at its principal executive offices and to any stockholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder),
provided, however, that the Corporation also provide notice via facsimile to any
stockholder who provides the Corporation with a facsimile number for notice
purposes.

10. AMENDMENT AND WAIVER. So long as any shares of Class B
Common or Class E Common are outstanding, in addition to any other vote or
consent of stockholders required by law or by this Certificate of Incorporation,
as amended or restated from time to time, the consent of the holders of at least
85% of the shares of each of such class at the time outstanding, given in person
or by proxy, either in writing without a meeting or by vote at any meeting
called for the purpose, shall be necessary for effecting or validating any
amendment, alteration or repeal of any of the provisions of this Certificate of
Incorporation as amended or restated from time to time, which affects adversely
the rights or preferences of the holders of shares of Class B Common or Class E
Common; PROVIDED, HOWEVER, that no such amendment, alteration or repeal shall
adversely affect the rights or preferences of any shares of Class E Common
without the consent of each holder thereof.

ARTICLE V

All capitalized terms used in this certificate of Incorporation and
not otherwise defined herein shall have the meanings ascribed to such terms in
ANNEX A attached hereto, which annex is hereby incorporated herein by reference
in its entirety.

ARTICLE VI

The Board of Directors shall have the power and authority to adopt,
amend or repeal bylaws of the Corporation, except as otherwise provided in any
bylaw adopted by the stockholders of the Corporation entitled to vote; PROVIDED,
HOWEVER, that the fact that such power has been so conferred upon the directors
shall not divest the stockholders of the Corporation of the power, nor limit
their power, to adopt, amend or repeal bylaws of the Corporation.

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<PAGE>

ARTICLE VII

A director of the Corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the Delaware General Corporation Law,
or (d) for any transaction from which the director derived an improper personal
benefit.

ARTICLE VIII

A. Each Person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter, a "PROCEEDING"), by
reason of the fact that he or she, or a Person of whom he or she is the legal
representative, is or was a director or officer, of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the corporation to the fullest extent authorized by law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees and expenses, judgments, fines, excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
such Person in connection therewith and such indemnification shall continue as
to a Person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and administrators;
PROVIDED, HOWEVER, that, except as provided in paragraph (b) hereof, the
Corporation shall indemnify any such Person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such Person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Article shall
be a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such Proceeding in advance of its final
disposition; PROVIDED, HOWEVER, that, if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such Person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a Proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Article or
otherwise. The

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<PAGE>

Corporation may, by action of its Board of Directors, provide indemnification
to employees and agents of the Corporation with the same scope and effect as
the foregoing indemnification of directors and officers.

B. If a claim under paragraph A of this Article is not paid in full
by the Corporation within thirty days after a written claim has been received by
the corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors independent legal counsel or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.

C. The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in this
Article shall not be exclusive of any other right which any Person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or disinterested directors
or otherwise.

D. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.

IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed by the President and Secretary of the Corporation
this _____ day of October, 1996.

GOLDEN STATE ACQUISITION CORP.
a Delaware corporation

11
<PAGE>

--------------------------------------
Jeffrey B. O'Neill, President

12
<PAGE>

ANNEX A

"AFFILIATE" shall mean, with respect to any Person, a Person or entity
that directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person. The term "control"
(including the terms "controlling," "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting shares, by contract, or otherwise.

"BUSINESS DAY" shall mean any day on which commercial banks are not
authorized or required to close in Boston, Massachusetts or Los Angeles,
California.

"CAPITAL LEASE" shall mean any lease which is required to be
capitalized on a balance sheet of the Corporation in accordance with generally
accepted accounting principles or for which the amount of the asset and
liability thereunder as if so capitalized should be disclosed in a note to such
balance sheet.

"CAPITALIZED LEASE OBLIGATIONS", with respect to any Person, shall
mean the aggregate amount which, in accordance with generally accepted
accounting principles, is required to be reported as a liability on the balance
sheet of such Person at such time in respect of such Person's interest as lessee
under a capital Lease.

"CERTIFICATES OF DESIGNATION" shall mean any certificate of
designation of the Corporation governing the powers, designations, preferences
and relative, participating, optional and other special rights of preferred
stock of the Corporation, as in effect and as amended from time to time,
including the Senior Certificate of Designations and the Junior Certificate of
Designations.

"CLASS E COMMON STOCK PUT EVENT" shall mean any redemption of any
shares of Senior Preferred Stock prior to the date of redemption therefor
specified in the Senior Certificate of Designations.

"CONSOLIDATED", when used with reference to Interest Expense or Funded
Debt, as the case may be, shall mean the aggregate of Interest Expense and
Funded Debt, as the case may be, of the Corporation and its subsidiaries, after
eliminating all offsetting debits and credits between the Corporation and its
subsidiaries and all other terms required to be eliminated in accordance with
generally accepted accounting principles.

"EBIDTA" shall mean, for any period, the Corporation's consolidated
net income for such period, plus Consolidated Interest Expense, provision for
taxes, depreciation and amortization for such period.

13
<PAGE>

"FUNDED DEBT" of any Person shall mean, at any date, (a) all
indebtedness for money borrowed of such Person which would, in accordance with
generally accepted accounting principles, be classified as long-term
indebtedness at such date, but in any event including all such indebtedness,
whether secured or unsecured, of such Person which matures (or which, pursuant
to the terms of a revolving credit agreement or otherwise, is directly or
indirectly renewable or extendible at the option of such Person for a period
ending) more than one year after the date of the creation thereof,
notwithstanding the fact that payments in respect thereof (whether installment,
serial maturity or sinking fund payments or otherwise) are required to be made
by such Person not more than one year after the date as of which the amount of
Funded Debt is being determined, other than any amount thereof which is at the
time included in current liabilities of such Person at such date and (b) without
duplication, all guaranties by such Person at such date of Funded Debt of
others.

"INTEREST EXPENSE", with respect to any Person for any period, shall
mean the aggregate of all interest paid or accrued by such Person during such
period in accordance with generally accepted accounting principles (including
without limitation the interest portion of capitalized Lease Obligations of such
Person and capitalized interest).

"LIQUIDATION VALUE" shall mean $100.00 per share of Senior Preferred
Stock.

"PERSON" shall mean any individual, partnership, joint venture,
corporation, limited liability company, association, joint stock company,
business trust, unincorporated organization or government or any department,
agency or political subdivision thereof or other entity of any kind.

"PUT EVENT" shall mean, with respect to the Class E Common, any event
or transaction or series of related events or transactions (whether occurring or
obtaining by reason of any current or future law or otherwise) in connection
with or as a consequence of which any of the following occur:

(i) at any time prior to the occurrence of either of the events
described in clauses (b) or (d) of the proviso to this sentence below, at least
a majority (by number of votes) of the outstanding shares of Voting Stock of the
Corporation (all classes of such Voting Stock being taken, for purposes of this
clause (i), as one class) shall not be or shall cease to be "beneficially owned"
(as such term is defined in Rule 13d-3 of the Securities Exchange Act of 1934,
as amended) by the Controlling Stockholder, either directly or indirectly
through beneficial ownership of a majority of the Voting Stock of a corporation,
partnership or other entity;

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<PAGE>

directly or indirectly through a corporation, partnership or other entity,
acting through its board of directors (or equivalent governing body) in its sole
discretion; or

(iii) any Person acquires a percentage of Voting Stock
greater than that held by the Controlling Stockholder;

PROVIDED, HOWEVER, that no Put Event shall be deemed to occur or have occurred:
(a) if the holders of the Senior Preferred Stock have the power to elect or
appoint or cause the election or appointment of at least a majority of the
members of the full Board of Directors of the Corporation as a result of any
failure by the Corporation to pay dividends or make mandatory redemptions of the
Senior Preferred Stock; (b) if the Corporation engages in an initial or
secondary public offering of its Common Stock and immediately after consummation
of such public offering no Person holds a greater percentage of Voting Stock of
the Corporation than the percentage of Voting Stock held by the Controlling
Stockholder immediately prior to the consummation of such public offering;
(c) upon any transfer of Common Stock by the Controlling Stockholder to any
Affiliate of such Controlling Stockholder; or (d) upon the occurrence of any
merger or sale of all or substantially all of the stock or assets of the
Corporation with respect to which prior approval has been obtained by the
holders of a majority of the Class E Common. For purposes of this definition,
the "Controlling Stockholder" shall mean SBIC Partners, L.P., a Texas limited
partnership, and its Affiliates.

"VOTING STOCK" shall mean the stock or other securities of a
corporation, partnership or other entity the holders of which are ordinarily, in
the absence of contingencies, entitled to elect members of the board of
directors or other governing body of such corporation, partnership or other
entity.

<PAGE>

CERTIFICATE OF AMENDMENT
OF
AMENDMENT AND RESTATED CERTIFICATE OF INCORPORATION
OF
GOLDEN STATE ACQUISITION CORP.

Golden State Acquisition Corp. (the "Company"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State
of Delaware, does hereby certify:

FIRST: That the date of filing of the Company's original Certificate
of Incorporation with the Delaware Secretary of State was April 18, 1995.

SECOND: That the Board of Directors of the Company (the "Board")
adopted a resolution proposing and declaring advisable the following
amendment to the Company's Amended and Restated Certificate of Incorporation:

NOW, THEREFORE BE IT RESOLVED, that Article I of the Amended
and Restated Certificate of Incorporation of the Company be amended to
read in its entirety as follows:

"ARTICLE I: The name of the Company is Golden State
Vintners, Inc. (hereinafter, the "Corporation")."

THIRD: That the aforesaid amendment was duly adopted by a majority of
the duly elected directors of the Company in accordance with the applicable
provisions of Section 242 of the General Corporation Law of the State of
Delaware.

IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed this 22nd day of April, 1998.

GOLDEN STATE ACQUISITION CORP.,
a Delaware corporation

By: /s/ Brian R. Thompson
------------------------------------------
Brian R. Thompson, Chief Financial Officer

<PAGE>

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

BYLAWS

GOLDEN STATE ACQUISITION CORP.

a Delaware corporation

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

<PAGE>

BYLAWS

GOLDEN STATE ACQUISITION CORP.
(hereinafter, the "Corporation")

ARTICLE I

OFFICES

SECTION 1.1. REGISTERED OFFICE. The registered office of the
Corporation shall be established and maintained at the office of UNITED
CORPORATE SERVICES, INC., IN THE CITY OF DOVER, IN THE COUNTY OF KENT, IN THE
STATE OF DELAWARE, and said corporation shall be the registered agent of the
Corporation in charge thereof.

SECTION 1.2. OTHER OFFICES. The Corporation may have other offices,
either within or without the State of Delaware, at such place or places as the
Board of Directors may from time to time appoint or the business of the
corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 2.1. ANNUAL MEETINGS. Annual meetings of stockholders for
the purpose of electing directors and of transacting such other business as may
be stated in the notice of the meeting, shall be held at such place, either
within or without the State of Delaware, and at such time and date as the Board
of Directors, by resolution, shall determine and as set forth in the notice of
the meeting.

If the date of the annual meeting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect a Board of Directors and
they may transact such other corporate business as shall be stated in the notice
of the meeting.

SECTION 2.2. VOTING. Each stockholder entitled to vote in accordance
with the terms of the Certificate of Incorporation and in accordance with the
provisions of these Bylaws shall be entitled to one vote, in person or by proxy,
for each share of stock entitled to vote held by such stockholder, but no proxy
shall be voted after three years from its date unless such proxy

2
<PAGE>

provides for a longer period. Upon the demand of any stockholder, the vote for
directors and the vote upon any question before the meeting, shall be by ballot.
All elections for directors shall be decided by plurality vote; all other
questions shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or by the laws of the State of Delaware.

A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.

SECTION 2.3. QUORUM. Except as otherwise required by law, by the
Certificate of Incorporation or by these Bylaws, the presence, in person or by
proxy, of stockholders holding a majority of the outstanding shares of each
class of stock of the Corporation entitled to vote shall constitute a quorum at
all meetings of the stockholders. In the absence of a quorum, a majority in
interest of the stockholders entitled to vote thereat, present in person or by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until the requisite amount of stock
entitled to vote shall be present. At any such adjourned meeting at which the
requisite amount of stock entitled to vote shall be represented, any business
may be transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof.

SECTION 2.4. SPECIAL MEETINGS. Special meetings of the stockholders
for any purpose may be held at any time upon call of the Chairman of the Board,
if any, the President, the Secretary, or a majority of the Board of Directors,
at such time and place as may be stated in the notice. A special meeting of the
stockholders may be called by the President or the Secretary upon the written
request, stating time, place, and the purpose or purposes of the meeting of
stockholders who together own of record a majority of the outstanding stock of
all classes entitled to vote at such meeting.

SECTION 2.5. NOTICE OF MEETINGS. Written notice, stating the place,
date and time of the meeting, and the general nature of the business to be
considered, shall be given by the President, any Vice President, the Secretary
or an Assistant Secretary to each stockholder entitled to vote thereat at his
address as it appears on the records of the Corporation, not less than ten nor
more than sixty days before the date of the meeting. No business other than
that stated in the notice shall be transacted at any meeting without the
unanimous consent of all the stockholders entitled to vote thereat.

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<PAGE>

SECTION 2.6. ACTION WITHOUT MEETING. Unless otherwise provided by
the Certificate of Incorporation, any action required to be taken at any annual
or special meeting of stockholders, or any action which may be taken at any
annual or special meeting, may be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the 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. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.

SECTION 2.7. ADJOURNMENT. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting. If the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.

ARTICLE III

DIRECTORS

SECTION 3.1. NUMBER AND TERM OF OFFICE. The business, property, and
affairs of the Corporation shall be managed by or under the direction of a Board
of Directors. The number of directors shall be between six and ten. The
directors shall be elected at the annual meeting of the stockholders, and each
director shall serve (subject to the provisions of Sections 3.2, 3.3 and 3.4 of
these Bylaws) until the next annual meeting of stockholders and until his
respective successor shall be elected and qualified. Directors need not be
stockholders.

SECTION 3.2. RESIGNATIONS. Any director, member of a committee or
other officer may resign at any time. Such resignation shall be made in
writing, and shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.

SECTION 3.3. VACANCIES. If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office,
though less than a quorum, by a majority vote, may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.

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<PAGE>

SECTION 3.4. REMOVAL. Except as hereinafter provided, any director
or directors may be removed either for or without cause at any time by the
affirmative vote of the holders of a majority of all the shares of stock
outstanding and entitled to vote, at a special meeting of the stockholders
called for the purpose and the vacancies thus created may be filled, at the
meeting held for the purpose of removal, by the affirmative vote of a majority
in interest of the stockholders entitled to vote.

Unless the Certificate of Incorporation otherwise provides, stockholders
may effect removal of a director who is a member of a classified Board of
Directors only for cause. If the Certificate of Incorporation provides for
cumulative voting and if less than the entire board is to be removed, no
director may be removed without cause if the votes cast against his removal
would be sufficient to elect him if then cumulatively voted at an election of
the entire board of directors, or, if there be classes of directors, at an
election of the class of directors of which he is a part.

If the holders of any class or series are entitled to elect one or more
directors by the provisions of the Certificate of Incorporation, these
provisions shall apply, in respect to the removal without cause of a director or
directors so elected, to the vote of the holders of the outstanding shares of
that class or series and not to the vote of the outstanding shares as a whole.

SECTION 3.5. INCREASE OF NUMBER OF DIRECTORS. The number of
directors may be increased by amendment of these Bylaws by the affirmative vote
of a majority of the directors, though less than a quorum, or, by the
affirmative vote of a majority in interest of the stockholders, at the annual
meeting or at a special meeting called for that purpose, and by like vote the
additional directors may be chosen at such meeting to hold office until the next
annual election and until their successors are elected and qualify.

SECTION 3.6. POWERS. The Board of Directors shall exercise all of
the powers of the Corporation except such as are by law, or by the Certificate
of Incorporation of the Corporation or by these Bylaws, conferred upon or
reserved to the stockholders.

SECTION 3.7. COMMITTEES. The Board of Directors may, by resolution
or resolutions passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member of
such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.

Any such committee, to the extent provided in the resolution of the Board
of Directors, or in these Bylaws, shall have and may exercise all the powers and
authority of the Board of

5
<PAGE>

Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation of the Corporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the Bylaws of the Corporation; and,
unless the resolution, these Bylaws, or the Certificate of Incorporation
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.

SECTION 3.8. MEETINGS. The newly elected directors may hold their
first meeting for the purpose of organization and the transaction of business,
if a quorum is present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may be fixed by consent in
writing of all the directors.

Regular meetings of the Board of Directors may be held without notice at
such place and time as shall be determined from time to time by the Board.

Special Meetings of the Board of Directors shall be held at such time and
place as shall be designated in the notice of the meeting whenever called by the
Chairman of the Board, if any, the President, or by a majority of the directors
then in office.

SECTION 3.9. TELEPHONE MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.

SECTION 3.10. QUORUM. A majority of the directors shall constitute a
quorum for the transaction of business. If at any meeting of the Board there
shall be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum is obtained, and no further notice
thereof need be given other than by announcement at the meeting which shall be
so adjourned.

SECTION 3.11. COMPENSATION. Directors shall not receive any stated
salary for their services as directors or as members of committees, but by
resolution of the Board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.

6
<PAGE>

SECTION 3.12. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if prior to such action a
written consent thereto is signed by all members of the Board, or of such
committee as the case may be, and such written consent is filed with the minutes
of proceedings of the Board or committee.

ARTICLE IV

OFFICERS

SECTION 4.1. OFFICERS. The officers of the Corporation shall be a
President, a Treasurer, and a Secretary, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors are elected
and qualified. In addition, the Board of Directors may elect a Chairman, one or
more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as
they may deem proper. None of the officers of the Corporation need be
directors. The officers shall be elected at the first meeting of the Board of
Directors after each annual meeting. Any person may hold at one time two or
more offices.

SECTION 4.2. OTHER OFFICERS AND AGENTS. The Board of Directors may
appoint such other officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.

SECTION 4.3. CHAIRMAN OF THE BOARD. The Board of Directors may elect
one of their members to be chairman of the Board of Directors (the "Chairman").
The Chairman shall preside at all meetings of the Board of Directors and shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.

SECTION 4.4. PRESIDENT. The President shall be the chief executive
officer of the Corporation and shall have the general powers and duties of
supervision and management usually vested in the office of President of a
corporation. He shall preside at all meetings of the stockholders if present
thereat, and in the absence or non-election of the Chairman of the Board of
Directors, at all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the Corporation. Except
as the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages and other contracts on behalf of the
Corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer.

SECTION 4.5. VICE-PRESIDENT. Each Vice-President shall have such
powers and shall perform such duties as shall be assigned to him by the
directors.

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<PAGE>

SECTION 4.6. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. He shall
deposit all monies and other valuables in the name and to the credit of the
Corporation in such depositaries as may be designated by the Board of Directors.

The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation. If required by the Board of Directors, he shall give the
Corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.

SECTION 4.7. SECRETARY. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by law or by these Bylaws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors, or stockholders, upon
whose requisition the meeting is called as provided in these Bylaws. He shall
record all the proceedings of the meetings of the corporation and of the
directors in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him by the directors or the President. He shall
have the custody of the seal of the Corporation and shall affix the same to all
instruments requiring it, when authorized by the directors or the President, and
attest the same.

SECTION 4.8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.
Assistant Treasurers and Assistant Secretaries, if any, shall be elected and
shall have such powers and shall perform such duties as shall be assigned to
them, respectively, by the directors.

ARTICLE V

CAPITAL STOCK

SECTION 5.1. CERTIFICATES OF STOCK. Certificates of stock, signed by
the Chairman or Vice-Chairman of the Board of Directors, if they be elected,
President or Vice President, and the Treasurer or an Assistant Treasurer, or
Secretary or an Assistant Secretary, shall be issued to each stockholder
certifying the number of shares owned by him in the Corporation. Any of or all
the signatures may be facsimiles.

SECTION 5.2. LOST CERTIFICATES. A new certificate of stock may be
issued in the place of any certificate theretofore issued by the Corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the Corporation
against any claim that may

8
<PAGE>

be made against it on account of the alleged loss of any such certificate, or
the issuance of any such new certificate.

SECTION 5.3. TRANSFER OF SHARES. The shares of stock of the
Corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificates shall be surrendered to the Corporation by
the delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the directors may designate, by whom they
shall be canceled, and new certificates shall thereupon be issued. A record
shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.

SECTION 5.4. STOCKHOLDERS RECORD DATE. In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any charge, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.

SECTION 5.5. DIVIDENDS. Subject to the provisions of the Certificate
of Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the Corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the Corporation.

ARTICLE VI

MISCELLANEOUS

SECTION 6.1. CORPORATE SEAL. The corporate seal shall be circular in
form and shall contain the name of the Corporation, the year of its creation and
the words "CORPORATE SEAL" and "DELAWARE." Said seal may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

9
<PAGE>

SECTION 6.2. FISCAL YEAR. The fiscal year of the Corporation shall
begin on the 1st day of January in each year and terminate on the 31st day of
December in such year or as shall otherwise be determined from time to time by
the Board of Directors.

SECTION 6.3. CHECKS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, agent or agents of
the Corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.

SECTION 6.4. NOTICES AND WAIVERS OF NOTICE. Whenever any notice is
required by law, the Certificate of Incorporation, or these Bylaws to be given,
personal notice is not meant unless expressly so stated, and any notice so
required shall be deemed to be sufficient if given by depositing the same in the
United States mail, postage prepaid, addressed to the person entitled thereto at
his address as it appears on the records of the Corporation, and such notice
shall be deemed to have been given on the day of such mailing. Stockholders not
entitled to vote shall not be entitled to receive notice of any meetings except
as otherwise provided by Statute.

Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
Corporation or these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the meeting or the
time stated therein, shall be deemed equivalent thereto.

SECTION 6.5. STOCK OF OTHER CORPORATIONS OR OTHER INTERESTS. Unless
otherwise ordered by the Board of Directors, the President, the Secretary, and
such attorneys or agents of the Corporation as may from time to time be
authorized by the Board of Directors or the President, shall have full power and
authority on behalf of this Corporation to attend and to act and vote in person
or by proxy at any meeting of the holders of securities of any corporation or
other entity in which this Corporation may own or hold shares or other
securities, and at such meetings shall possess and may exercise all the rights
and power incident to the ownership of such shares or other securities which
this Corporation, as the owner or holder thereof, might have possessed and
exercised if present. The President, the Secretary, or such attorneys or
agents, may also execute and deliver on behalf of the Corporation powers of
attorney, proxies, consents, waivers, and other instruments relating to the
shares or securities owned or held by this Corporation.

ARTICLE VII

AMENDMENTS

The holders of shares entitled at the time to vote for the election of
directors shall have power to adopt, amend, or repeal the Bylaws of the
Corporation by vote of not less than two-thirds of such shares, and except as
otherwise provided by law, the Board of Directors shall

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<PAGE>

have power equal in all respects to that of the stockholders to adopt, amend, or
repeal the Bylaws by vote of not less than two-thirds of the entire Board of
Directors. However, any Bylaws adopted by the Board may be amended or repealed
by vote of the holders of two-thirds of the shares entitled at the time to vote
for the election of directors.

<PAGE>

CERTIFICATE OF DESIGNATIONS

12% SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK
($0.01 PAR VALUE)

GOLDEN STATE ACQUISITION CORP.

(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)

GOLDEN STATE ACQUISITION CORP., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "CORPORATION"),
HEREBY CERTIFIES that the following resolution was duly adopted on April 25,
1995 by the Board of Directors of the Corporation pursuant to the authority
conferred upon the Board of Directors of the Corporation by the Certificate of
Incorporation of the Corporation and by the General Corporation Law of the State
of Delaware, which resolution remains in full force and effect as of the date
hereof:

RESOLVED, that the Board of Directors of the Corporation (the "BOARD OF
DIRECTORS"), pursuant to authority conferred upon the Board of Directors by the
provisions of the Certificate of Incorporation of the Corporation, which
authorize the initial issuance of 100,000 shares of 12% Senior Redeemable
Exchangeable Preferred Stock, par value $0.01 (the "Senior Preferred Stock"),
does hereby create and provide for the issuance of such series of Senior
Preferred Stock and does hereby fix and determine the voting powers,
designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions of such
series of Senior Preferred Stock as follows:

1. RANK. All shares of Senior Preferred Stock shall, with respect to
payments of dividends and distributions of assets upon liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, rank prior
to all of the Corporation's Junior Preferred Stock and Common Stock and any
other class or series of stock subsequently authorized and issued by the
Corporation (collectively, "JUNIOR STOCK").

2. CUMULATIVE ANNUAL DIVIDENDS. The holders of Senior Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds at the time legally available therefor, annual dividends
in cash at the rate (the "DIVIDEND RATE") of $12.00 per annum per share, which
shall be fully cumulative, shall accrue on a daily basis without interest with
respect to each share of Senior Preferred Stock from the date of first issuance
of such share and shall be payable in cash semi-annually in arrears on April 1
and October 1 of each

<PAGE>

year (except that if any such date is a Saturday, Sunday or legal holiday, then
such dividend shall be payable on the next day that is not a Saturday, Sunday or
legal holiday) (a "DIVIDEND PAYMENT DATE") to holders of record as they appear
on the stock transfer books of the Corporation on such record date, not more
than 60 days nor less than 10 days preceding the relevant Dividend Payment Date
such dividends, as is fixed by the Board of Directors (or, to the extent
permitted by applicable law, a duly authorized committee thereof) at the time
such dividend is declared. For purposes hereof, the term "LEGAL HOLIDAY" shall
mean any day on which banking institutions are authorized to close in New York,
New York or San Francisco, California. Unpaid dividends in arrears for any past
dividend period may be declared and paid at any time, without reference to any
regular Dividend Payment Date. The semi-annual dividend amount shall be
computed by dividing the annual dividend amount by two. The amount of dividends
payable for the initial dividend period and any period shorter than a full
semi-annual dividend period shall be computed on the basis of a 360-day year of
twelve 30-day months. The first Dividend Payment Date shall be October 1, 1995.

3. EFFECT OF PAYMENT DEFAULT. If (a) any dividends accumulated on
the Senior Preferred Stock are in arrears (any semi-annual dividend or unpaid
portion thereof, a "MISSED DIVIDEND"), or (b) the Corporation is in default with
respect to any of the provisions of Section 6 or Section 7 of this Certificate
of Designations (the "REDEMPTION PROVISIONS"), then:

(i) The Corporation may not, and may not permit
any corporation or entity directly or indirectly controlled by the Corporation
to, declare or pay any cash dividend or make any distributions in cash on or,
directly or indirectly, redeem or satisfy any sinking obligation in respect of,
any Junior Stock, or any warrants, rights or options exercisable for or
convertible into any of the Junior Stock.

(ii) The Corporation may not, and may not permit
any corporation or other entity directly or indirectly controlled by the
Corporation to, acquire, redeem (pursuant to a sinking fund or otherwise),
purchase or otherwise acquire any Junior Stock.

4. INCREASE IN DIVIDEND RATE UPON DEFAULT.

(a) If one Missed Dividend or any redemption price payable
under the Redemption Provisions (either of such amounts, a "MISSED PAYMENT") is
outstanding, the Dividend Rate payable on the Senior Preferred Stock shall be
increased to $12.50, effective on the date when such Missed Payment was due,
until the earlier of such time as all Missed Payments are paid in full or the
time when Section 4(b) applies. Unless Section 4(b) applies, when all Missed
Payments have been paid in full, the Dividend Rate shall be decreased to $12.00.

(b) If two or more consecutive Missed Payments are outstanding,
then the Dividend Rate payable on the Senior Preferred Stock shall be increased
to $13.00, effective on the date when the second Missed Payment was due, until
such time as (i) all Missed Payments

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<PAGE>

are paid in full or (ii) only one Missed Payment is outstanding, in which case
the Dividend Rate shall be decreased to $12.50.

5. LIQUIDATION PREFERENCE. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Senior Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders, whether
such assets are stated capital or surplus of any nature, an amount in cash equal
to the sum of (a) the amount of dividends accrued and unpaid thereon to the date
of final distribution to such holders, whether or not declared to the date of
such final distribution, (b) One Hundred Dollars ($100) per share and (c) the
Optional Redemption Premium (as defined in Section 8(a)), before any payment
shall be made or any assets distributed to the holders of Junior Stock.

6. MANDATORY REDEMPTION.

(a) To the extent that funds are legally available, the
Corporation shall redeem on each date set forth below (a "MANDATORY REDEMPTION
DATE"), the specified number of shares of Senior Preferred Stock set forth
opposite the respective Mandatory Redemption Dates at the redemption price of
One Hundred Dollars ($100) per share, payable in cash, plus all dividends
accrued and unpaid on such Senior Preferred Stock up to the Mandatory Redemption
Date:

Number of Shares
Mandatory Redemption Date to be Redeemed
----------------------------- ----------------------
<S> <C>
June 30, 2005 33,333
June 30, 2006 33,333
June 30, 2007 33,334

</TABLE>

If any shares of Senior Preferred Stock are redeemed other than on a Mandatory
Redemption Date (other than as a result of a failure to redeem on a mandatory
Redemption Date), the number of such shares so redeemed shall be applied first
to reduce the number of shares redeemable on June 30, 2007 until such number
equals zero, then to the number of shares redeemable on June 30, 2006 until such
number equals zero, and then to the number of shares redeemable on June 30,
2005.

(b) In determining the ability of the Corporation to redeem the
Senior Preferred Stock under Section 160 of the General Corporation Law of the
State of Delaware, the Corporation shall value its assets at the highest amount
permissible under applicable law. If the Corporation has insufficient funds to
discharge its mandatory redemption obligation pursuant to Section 6(a) above,
the shares to be redeemed shall be selected pro rata based on the holdings as of
such record date for the redemption, not more than 60 days nor less than 10 days
preceding the Mandatory Payment Date, as the Board of Directors shall determine.
The Corporation shall give

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<PAGE>

at least 30 days' but not more than 60 days' prior written notice to each holder
whose shares are to be redeemed pursuant to this Section 6 of the record date of
redemption and the shares to be redeemed.

(c) If, for any reason, the Corporation shall fail to discharge
its mandatory redemption obligation pursuant to Section 6(a) above, such
mandatory redemption obligation shall be discharged as soon as the Corporation
is able to discharge such obligation.

7. MANDATORY OFFER TO REDEEM UPON CHANGE OF CONTROL.

(a) In the event that a Change of control will occur, the
Corporation shall (i) deliver to each holder of Senior Preferred Stock a Notice
and Offer to Redeem (as defined in Section 7(c) hereof) and (ii) if such holder
accepts redemption as to the Senior Preferred Stock it holds by delivering a
Redemption Acceptance pursuant to Section 7(e) hereof, redeem such Senior
Preferred Stock as hereinafter provided. Any redemption of Senior Preferred
Stock pursuant to this Section 7 shall be made at a redemption price equal to
the Optional Redemption Price (as defined in Section 8(a)) of the shares of
Senior Preferred Stock so redeemed.

(b) For purposes of this Section 7, a "CHANGE OF CONTROL" shall
mean any event or transaction or series of related events or transactions
(whether occurring or obtaining by reason of any current or future law or
otherwise) in connection with or as a consequence of which any of the following
occur:

(i) at any time prior to the occurrence of either
of the events described in clauses (B) or (D) of the proviso to this sentence
below, at least a majority (by number of votes) of the outstanding shares of
Voting Stock of the Corporation (all classes of such Voting Stock being taken,
for purposes of this clause (i) as one class) shall not be or shall cease to be
"beneficially owned" (as such term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) by the Controlling Stockholder, either
directly or indirectly through beneficial ownership of a majority of the Voting
Stock of a corporation, partnership or other entity;

(ii) at any time prior to the occurrence of either
of the events described in clauses (B) or (D) of the proviso to this sentence
below, the power to elect or appoint or cause the election or appointment of at
least a majority of the members of the full Board of Directors of the
Corporation shall not be or shall cease to be exercisable by the Controlling
Stockholder, either directly or indirectly through a corporation, partnership or
other entity, acting through its board of directors (or equivalent governing
body) in its sole discretion; or

(iii) any Person acquires a percentage of Voting
Stock greater than that held by the Controlling Stockholder;

4
<PAGE>

PROVIDED, HOWEVER, that no Change of Control shall be deemed to occur or have
occurred: (A) if the holders of the Senior Preferred Stock shall have the power
to elect or appoint or cause the election or appointment of at least a majority
of the members of the full Board of Directors of the Corporation pursuant to
Section 9(b) of this Certificate of Designations; (B) if the Corporation engages
in an initial or secondary public offering of its Common Stock and immediately
after consummation of such public offering no Person holds a percentage of
Voting Stock of the Corporation greater than the percentage of Voting Stock held
by the Controlling Stockholder immediately prior to the consummation of such
public offering; (C) upon any transfer of Common Stock by the Controlling
Stockholder to any Affiliate of such Controlling Stockholder; or (D) upon the
occurrence of any merger or sale of substantially all of the stock or assets of
the Corporation with respect to which prior approval has been obtained by the
holders of a majority of the Senior Preferred Stock.

For purposes of this Section 7(b), the following capitalized terms shall
have the meanings set forth below:

"AFFILIATE" shall mean, with respect to any Person, a Person or entity
that, directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under common control with, such Person. The term
"control" (including the terms "controlling, "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting shares, by contract or otherwise.

"CONTROLLING STOCKHOLDER" shall mean (x) on any date prior to April 21,
2000, FAC, Ltd., a Cayman Islands corporation ("FAC"), and (y) on or after
April 21, 2000, collectively, FAC, SBIC Partners, L.P., a Texas limited
partnership, Exeter Equity Partners, L.P., a Delaware limited partnership, and
Exeter Venture Lenders, L.P., a Delaware limited partnership.

"VOTING STOCK" shall mean the stock or other securities of a corporation,
partnership or other entity the holders of which are ordinarily, in the absence
of contingencies, entitled to elect members of the Board of Directors or other
governing body of such entity.

(c) Not later than thirty (30) days prior to the effective date
of a Change of Control, the Corporation shall give written notice to each holder
of Senior Preferred Stock of the pendency thereof and the right of such holders
to elect to have their shares of Senior Preferred Stock redeemed hereunder
arising as a result thereof (a "NOTICE AND OFFER TO REDEEM"). Such Notice and
Offer to Redeem shall state: (i) that such notice is delivered and such offer
to redeem is made pursuant to this Section 7(c); (ii) the date of and a
description of the circumstances

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<PAGE>

surrounding such Change of Control; (iii) the date by which a holder of Senior
Preferred Stock must deliver a Redemption Acceptance pursuant to Section 7(e)
hereof; (iv) the date on which the Corporation shall redeem the Senior Preferred
Stock if the holder of Senior Preferred Stock delivers a Redemption Acceptance
and the date the Change of Control giving rise to the Notice and Offer to Redeem
is to be consummated, which redemption date shall be any Business Day prior to
the date the Change of Control occurs (the "SPECIAL REDEMPTION DATE"); and
(v) the amount of accrued and unpaid dividends to be paid with respect to shares
of Senior Preferred Stock held by such holder on such Special Redemption Date if
such shares of Senior Preferred Stock are redeemed pursuant to this Section 7;
PROVIDED that, notwithstanding the foregoing provisions of this sentence, the
Special Redemption Date specified in such Notice and Offer to Redeem may be
postponed, by two (2) Business Days' prior written notice from the Corporation
to each holder of Senior Preferred Stock to be redeemed, to the earliest
subsequent date which allows compliance with the restrictions imposed by the
last sentence of Section 7(d).

(d) If the Corporation fails to deliver to each holder of the
Senior Preferred Stock the notice of a pending Change of Control as required by
this Section 7, any holder of Senior Preferred Stock may, upon obtaining
knowledge of a pending or completed Change of Control, notify the Corporation of
such Change of Control in writing (the "STOCKHOLDER NOTICE"), whereupon the
Corporation shall, and any holder of Senior Preferred Stock may, promptly notify
each other holder of Senior Preferred Stock of such pending or completed Change
of Control, the nature thereof and the date upon which it is scheduled to occur
or did occur. In such event, redemption under this Section 7 shall occur not
later than thirty (30) days after the date of such Stockholder Notice unless the
Corporation and such holder agree to a different date or unless such redemption
is not accepted as provided in Section 7(e) below. Notwithstanding any other
provision of this Certificate of Designations, a redemption of Senior Preferred
Stock pursuant to this Section 7 may only be made, if, on the Special Redemption
Date, such redemption is permitted by law.

(e) To accept an offer of redemption of Senior Preferred Stock
pursuant to this Section 7, a holder thereof shall deliver to the Corporation,
on or before the tenth (10th) day following the date of receipt of the Notice
and Offer to Redeem, such holder's notice that it accepts redemption pursuant to
this Section 7 with respect to the shares of Senior Preferred Stock designated
therein (a "REDEMPTION ACCEPTANCE"). The Redemption Acceptance shall set forth
the name of such holder and the statement that it accepts redemption pursuant to
this Section 7 with respect to the shares of Senior Preferred Stock designated
therein. Promptly and in any event within two (2) Business Days after receipt
of such holder's Redemption Acceptance, the Corporation shall, by written notice
to such holder, acknowledge receipt thereof.

(f) The provisions of this Section 7 are applicable to
successive Changes of Control and no failure on the part of any holder of Senior
Preferred Stock to exercise any right under this Section 7 arising on account of
any Change of Control shall affect or impair any

6
<PAGE>

other right of such holder upon the occurrence of any other or any subsequent
Change of Control.

8. OPTIONAL REDEMPTION.

(a) Upon the terms and subject to the conditions hereinafter
set forth, the Corporation, at its option, upon notice as provided in
Section 7(c) hereof, may redeem the Senior Preferred Stock, at any time after
April 15, 2000, either in whole or from time to time in any part (but, if in
part, then with respect to at least 1,000 shares at any one time) at a
redemption price equal to the sum of $100 per share (the "LIQUIDATION VALUE")
and the "Optional Redemption Premium" (as defined below) for such Liquidation
Value, together with accrued and unpaid dividends with respect to the shares of
Senior Preferred Stock so to be redeemed to the date fixed for redemption
(collectively, the "OPTIONAL REDEMPTION PRICE").

(b) The "OPTIONAL REDEMPTION PREMIUM" for any Liquidation Value
shall equal the net present value (if positive) of the payment stream equal to
the difference between (i) each payment of dividends and mandatory redemption
price the holders of Senior Preferred Stock would have received on account of
such Liquidation Value at an annual 12% per annum dividend rate and (ii) each
corresponding payment of dividends and mandatory redemption price the holders of
Senior Preferred Stock would have received on account of such Liquidation Value
at an annual dividend rate equal to the sum of (A) the rate then being paid on
United States Treasury Notes with maturities equal to the Weighted Average Life
to Maturity (as defined below) of the remaining aggregate Liquidation Value of
Senior Preferred Stock at the time of prepayment plus (B) 2.75% (the "PREFERRED
TREASURY RATE"), discounted at the Preferred Treasury Rate; PROVIDED that if the
Corporation is redeeming at the same time all of the outstanding Senior
Preferred Stock and has previously redeemed or is redeeming, simultaneously with
the redemption of the Senior Preferred Stock, all of the outstanding Class E
Common Stock, then the Optional Redemption Premium shall be reduced by the
amount of the excess, if any, of (1) the sum of the aggregate redemption price
for the Class E Common Stock redeemed from holders of the Senior Preferred Stock
over (2) that amount which, if paid at the time of redemption, would have
resulted in the holders of Senior Preferred Stock and Class E Common Stock
receiving an annual yield of 25% on their aggregate investments in the Senior
Preferred Stock and the Class E Common Stock, taking into account all dividends
and other distributions made on the Senior Preferred Stock and the Class E
Common Stock prior to the time of redemption.

For purposes hereof, the term "WEIGHTED AVERAGE LIFE TO MATURITY" shall
mean, with respect to the remaining aggregate Liquidation Value of Senior
Preferred Stock, as of the date of the determination thereof, the number of
years obtained by dividing the then Remaining Dollar-years of such amount by the
then outstanding principal amount thereof. The term "REMAINING DOLLAR-YEARS" of
such amount shall mean the amount obtained by (i) multiplying the amount of each
then remaining mandatory redemption price by the number of years

7
<PAGE>

(calculated to the nearest one-twelfth) which will elapse between the time in
question and the date of the redemption and (ii) totaling all of the products
obtained in clause (i).

(c) Notice of any redemption of Senior Preferred Stock pursuant
to this Section 8 shall be given to each holder of the Senior Preferred Stock
not less than thirty (30) nor more than sixty (60) days before the date fixed
for redemption (the "OPTIONAL REDEMPTION DATE") and shall be accompanied by an
officer's certificate of the Corporation certifying as to: (i) the Optional
Redemption Date; (ii) the aggregate Liquidation Value of all of the shares of
Senior Preferred Stock to be so redeemed on such Optional Redemption Date;
(iii) the number of shares of Senior Preferred Stock held by such holder to be
redeemed on such Optional Redemption Date; (iv) the Optional Redemption Price to
be paid in respect of each share certificate of Senior Preferred Stock held by
such holder on such Optional Redemption Date and a calculation of such Optional
Redemption Premium; and (v) the amount of accrued and unpaid dividends to be
paid to such holder on such Optional Redemption Date. Any notice of redemption
pursuant to this Section 8 having been so given, the aggregate Optional
Redemption Price payable in respect of the shares of Senior Preferred Stock
specified in such notice shall become due and redeemable on such Optional
Redemption Date.

(d) Notwithstanding the foregoing provisions of this Section 8
an optional redemption of Senior Preferred Stock pursuant to this Section 8 may
only be made if, on the Optional Redemption Date, such optional redemption is
permitted by applicable law.

9. VOTING RIGHTS.

(a) GENERAL. The holders of Senior Preferred Stock will not
have any voting rights except as set forth below or as otherwise from time to
time required by law. In connection with any right to vote, each holder of
Senior Preferred Stock will have one vote for each share of Senior Preferred
Stock held. Shares of Senior Preferred Stock held by the Corporation or any
entity controlled by the Corporation shall not have voting rights hereunder and
shall not be counted in determining the presence of a quorum.

(b) DEFAULT VOTING RIGHTS.

(i) If three consecutive Missed Payments shall be
outstanding, then the number of members of the Board of Directors of the
Corporation shall increase by one and the holders of the Senior Preferred Stock,
voting as a Class, shall have the exclusive right to elect one member of the
Board of Directors of the Corporation. Such director or any successor elected
by holders of the Senior Preferred Stock shall have the right to serve on the
Board of Directors of the Corporation for at least one year from the date of his
or her election to the Board of Directors, irrespective of whether such Missed
Payments are cured. The right of the holders of the Senior Preferred Stock to
elect such additional director shall continue until the later of (x) one year
from the date of election of such director and (y) the date when two or fewer
Missed Payments are outstanding.

8
<PAGE>

(ii) If four consecutive Missed Payments shall be
outstanding, then the number of members of the Board of Directors of the
Corporation shall increase by two and the holders of the Senior Preferred Stock,
voting as a Class, shall have the exclusive right to elect two additional
members of the Board of Directors of the Corporation, in addition to the member
appointed pursuant to Section 9(b)(i). Such directors or any successors elected
by holders of the Senior Preferred Stock shall have the right to serve on the
Board of Directors of the Corporation for at least one year from the date of
their election to the Board of Directors, irrespective of whether such Missed
Payments are cured. The right of the holders of the Senior Preferred Stock to
vote for such additional directors shall continue until the later of (x) one
year from the date of election of such directors and (y) the date when three or
fewer Missed Payments are outstanding.

(iii) The foregoing right of the holders of the
Senior Preferred Stock with respect to the election of additional directors may
be exercised at any annual meeting of stockholders or at any special meeting of
stockholders held for such purpose. If the right to elect directors shall have
accrued to the holders of the Senior Preferred Stock more than thirty (30) days
preceding the date established for the next annual meeting of stockholders, the
appropriate officer of the Corporation shall, within five (5) days after the
delivery to the Corporation at its principal office of a written request,
addressed to the President of the Corporation, for a special meeting signed by
the holders of at least 10% of the Senior Preferred Stock then outstanding, call
a special meeting of the holders of the Senior Preferred Stock to be held within
ten (10) days after the delivery of such request of the purpose of electing such
additional director. Notwithstanding the foregoing, any action to be taken by
holders of Senior Preferred Stock with respect to the election of such director
may be taken without a meeting, without prior notice and without a vote, if
taken by the written consent of the holders of a majority of the Senior
Preferred Stock pursuant to Section 228(a) of the General Corporation Law of the
State of Delaware, or any successor statute.

(iv) The holders of the Senior Preferred Stock,
voting as a class, shall have the right to remove, with or without cause, at any
time and from time to time and to replace any director such holders shall have
elected pursuant to this Section 9 by electing a new director pursuant to this
Section 9.

(c) CLASS VOTING RIGHTS. So long as any of the Senior
Preferred Stock is outstanding, the Corporation (and, where applicable, the
Board of Directors) shall not, without the affirmative vote or consent of the
holders of at least 51% of all then outstanding Senior Preferred Stock voting
separately as a class, (i) amend, alter or repeal any provision of the
Certificate of Incorporation, Certificate of Designations or Bylaws of the
Corporation (A) increasing or decreasing the authorized number of shares or par
value of the Senior Preferred Stock, (B) granting voting rights to holders of
any bonds, debentures or other debt obligations of the Corporation or
(C) otherwise adversely affecting the relative rights, preferences,
qualifications, limitations, restrictions, powers or rights of the Senior
Preferred Stock; (ii) effect any reclassification of the Senior Preferred Stock;
(iii) effect a voluntary

9
<PAGE>

liquidation, dissolution or winding up of the Corporation; or (iv) merge or
consolidate into any corporation where the Corporation is not the survivor of
such merger or consolidation.

10. EXCHANGE FOR SUBORDINATED EXCHANGE NOTES. The Corporation may at
any time exchange all, but not less than all, of the outstanding shares of
Senior Preferred Stock for 13.2% Subordinated Exchange Notes due 2007 ("EXCHANGE
NOTES") pursuant to the terms of the Securities Purchase Agreement by and
between the Corporation and John Hancock Mutual Life Insurance Company.

11. OUTSTANDING SHARES. For purposes of the Certificate of
Designations, shares of Senior Preferred Stock shall be deemed outstanding upon
issuance except (i) from the date fixed for redemption pursuant to the
Redemption Provisions, all shares of Senior Preferred Stock that have been so
called for redemption under any of such provisions; (ii) from the effective date
of an exchange of shares of Senior Preferred Stock for Exchange Notes; and
(iii) from the date of registration of transfer, all shares of Senior Preferred
Stock held of record by the Corporation or any subsidiary of the Corporation.

12. STATUS OF ACQUIRED SHARES. Shares of Senior Preferred Stock
redeemed by the Corporation, received upon exchange for Exchange Notes or
otherwise acquired by the Corporation shall be retired and cancelled and shall
not be restored to the status of authorized but unissued shares of Senior
Preferred Stock or reissued thereafter.

13. SEVERABILITY OF PROVISIONS. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision of this Certificate of Designations is held
to be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating or otherwise adversely affecting the remaining provisions hereof.
If a court of competent jurisdiction should determine that a provision hereof
would be valid or enforceable if a period of time were extended or shortened or
a particular percentage were increased or decreased, then such court may make
such change as shall be necessary to render the provision in question effective
and valid under applicable law.

10
<PAGE>

IN WITNESS WHEREOF, Golden State Acquisition Corporation has caused this
Certificate of Designations to be signed by its President and attested by its
Secretary this 25th day of April, 1995.

GOLDEN STATE ACQUISITION CORP.

By: /s/ Mark D. McDonnell
--------------------------------
Name: Mark D. McDonnell
Title: President

Attest:

/s/ Paul M. Stone
- -------------------------------
Name: Paul M. Stone
Secretary

11
<PAGE>

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATIONS
OF
12% SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK
OF
GOLDEN STATE ACQUISITION CORP.

Golden State Acquisition Corp. (the "Company"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify:

FIRST: That the Board of Directors of the Company (the "Board")
adopted resolutions proposing and declaring advisable the amendment to the
Company's Certificate of Designations filed with the Delaware Secretary of State
on April 25, 1995 at 9:00 A.M. with respect to its 12% Senior Redeemable
Exchangeable Preferred Stock, $0.01 par value per share (the "Senior Preferred
Stock"), set forth below, and that such amendment was approved by a majority fo
the holders of the Senior Preferred Stock of the Company and notice was provided
to such holders pursuant to the applicable provisions of Section 22% of the
General Corporation Law of the State of Delaware.

SECOND: The definition of "Controlling Stockholder" contained in
Section 7(b) is hereby deleted in its entirety and replaced by the following:

"CONTROLLING STOCKHOLDER" shall mean SBIC Partners, L.P., a Texas
limited partnership, and its Affiliates.

THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware.

IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed this 24th day of October, 1996.

GOLDEN STATE ACQUISITION CORP.
a Delaware corporation

/s/ Jeffrey B. O'Neill
------------------------------
Jeffrey B. O'Neill
Chief Executive Officer

<PAGE>
GOLDEN STATE ACQUISITION CORP.

CERTIFICATE OF POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF JUNIOR EXCHANGEABLE PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF

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

PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

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

GOLDEN STATE ACQUISITION CORP. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to the authority conferred upon the
board of directors of the Corporation (the "Board of Directors") by its
Certificate of Incorporation (hereinafter referred to as the "Certificate of
Incorporation") and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, said Board of Directors, by unanimous
written consent dated April 20, 1995, duly approved and adopted the following
resolution (the "Resolution"):

RESOLVED, that, pursuant to the authority
vested in the Board of Directors by its Certificate
of Incorporation, the Board of Directors does hereby
create, authorize and provide for the issue of 6%
Junior Exchangeable Preferred Stock, par value
$0.01 per share, with an aggregate stated value of
$2,619,900, consisting initially of 523,980 shares,
having the designations, preferences, relative,
participating, optional and other special rights and
qualifications, limitations and restrictions thereof
that are set forth in the Certificate of
Incorporation and in this Resolution as follows:

1. DESIGNATION. The distinctive designation of such series is
"Junior Exchangeable Preferred Stock" (hereinafter in this Resolution called the
"Junior Preferred Stock"), par value $0.01 per share, which shall consist of
523,980 shares of such Junior Preferred Stock.

2. RANK. The Junior Preferred Stock shall, with respect to dividend
rights and rights of liquidation, winding up and dissolution, rank junior to the
Corporation's 100,000 shares of 12% senior redeemable exchangeable preferred
stock (the "Senior Preferred Stock") (plus such additional shares thereof as are
issued to the holder of such shares in accordance

<PAGE>

with the Senior Certificate of Designations), and shall rank senior to all other
equity securities of the Corporation, including all classes of the Corporation's
common stock and all subsequently issued preferred stock of the Corporation
(other than subsequently issued Senior Preferred Stock as referred to above).
All of such equity securities of the Corporation to which the Junior Preferred
Stock ranks senior are collectively referred to herein as the "Junior
Securities".

3. DIVIDENDS.

(a) With respect to each semi-annual dividend period
(hereinafter, referred to as a "Dividend Period"), the holders of the shares of
Junior Preferred Stock shall be entitled to receive when, as and if declared by
the Board of Directors and to the extent permitted under the General Corporation
Law of the State of Delaware, out of the Corporation's retained earnings,
surplus capital or other funds legally available therefor after taking into
account any permitted revaluation of the assets of the Corporation
(collectively, the "Legally Available Funds"), cumulative dividends payable in
cash on the shares of the Junior Preferred Stock for each such Dividend Period
at a rate per annum, in respect of such Dividend Period, equal to 6% of the
Liquidation Preference (as defined in Section 7(a) hereof) of each share of
Junior Preferred Stock for each Dividend Period. Dividend Periods shall
commence on each April 1 and October 1 of each year and shall end on and include
the day next preceding the first day of the next Divided Period. All dividends
described in this Section 3(a) shall be payable on each April 1 and October 1 of
each year (each of such dates being a "Dividend Payment Date"), commencing
October 1, 1995, with respect to the Dividend Period then ended. Such dividends
shall be paid to the holders of record, as they appear on the register of the
Corporation for the Junior Preferred Stock, at the close of business on each
April 1 and October 1 prior to the respective Dividend Payment Date. Each of
such semi-annual dividends shall be fully cumulative and shall accrue (whether
or not declared), without interest, from the first day of the Dividend Period,
and shall be computed on the basis of a 360 day year consisting of twelve 30 day
months. Dividends shall accrue on a daily basis without regard to the
occurrence of a Dividend Payment Date or the declaration of any dividend.
Dividends on the Junior Preferred Stock shall be payable only in cash.

(b) All dividends paid with respect to shares of the Junior
Preferred Stock pursuant to Section 3(a) shall be paid PRO RATA to the holders
entitled thereto. In the event that the Legally Available Funds of the
Corporation available for the payment of dividends shall be insufficient for the
payment of the entire amount of dividends payable for any Dividend Period with
respect to the Junior Preferred Stock, the amount of any Legally Available Funds
shall be allocated for the payment of dividends with respect to the Junior
Preferred Stock, the amount of any Legally Available Funds shall be allocated
for the payment of dividends with respect to the Junior Preferred Stock PRO RATA
based upon the Liquidation Preference of the outstanding shares of Junior
Preferred Stock.

2
<PAGE>

(c) (i) Holders of shares of the Junior Preferred Stock
shall be entitled to receive the dividends provided for in Section 3(a) hereof,
and any amounts which may be due under Section 11 hereof, in preference to and
in priority over any dividends upon any of the Junior Securities.

(ii) Notwithstanding any provision to the contrary
herein, no dividends shall be paid on the Junior Preferred Stock if such payment
would result in a default or event of default under the Credit Agreements;
PROVIDED, HOWEVER, that such failure to pay shall result in an Event of
Noncompliance.

(iii) So long as any shares of the Junior Preferred Stock
are outstanding, the Corporation shall not, and shall not permit any corporation
or other entity directly or indirectly controlled by the Corporation to, (A)
purchase or redeem any Junior Securities, or any warrants, rights, calls or
options exercisable for or convertible into any Junior Securities; or (B)
declare, pay or set apart for payment dividends on any of the Junior Securities
or make payments on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement of, any of
the Junior Securities or any warrants, rights, calls or options exercisable for
or convertible into any of the Junior Securities, or make distributions in
respect thereof, either directly or indirectly, and whether in cash, obligations
or shares of the Corporation or other property; PROVIDED, HOWEVER, that,
notwithstanding the foregoing, the Corporation may at any time, and may permit
any corporation or other entity directly or indirectly controlled by the
Corporation, to (1) redeem the Class E Common Stock as required by the
provisions of the Certificate of Incorporation, (2) make any required payments
to Jeffrey B. O'Neill pursuant to the terms of the SAR Agreement, (3) make
distributions or dividends in Junior Securities to the holders of Junior
Securities, (4) redeem Junior Securities issued to any of the Corporation's
executive officers or employees pursuant to any employee benefit, stock option,
stock appreciation or bonus plan, which redemptions shall have been approved by
a majority of the Board of Directors or any authorized subcommittee thereof, and
(5) make any required payments on or with respect to Junior Securities held by
executive officers or other management employees of the Corporation upon the
termination, retirement, death or disability of such executive officer or
management employee or otherwise as set forth in the Stockholder Agreement or
any employment agreement of the Corporation.

(d) Subject to the foregoing provisions of this Section 3 and
the other provisions of this Certificate of Incorporation, the Board of
Directors may declare, and the Corporation may pay or set apart for payment,
dividends and other distributions on any of the Junior Securities, and may
purchase or otherwise redeem any of the Junior Securities or any warrants,
rights or options exercisable for or convertible into any of the Junior
Securities, and the holders of the shares of the Junior Preferred Stock shall
not be entitled to share therein.

3
<PAGE>

4. EXCHANGE RIGHTS.

(a) Each holder of Junior Preferred Stock may, at any one time
in accordance with the terms of Section 10 below (or, if after receipt of any
such redemption notice, then at any one time prior to the date (which date shall
be no less than 30 days prior to the proposed redemption date) set forth in such
redemption notice as the last date on which such exchange right may be exercised
with respect to the Junior Preferred Stock being redeemed), exchange
(hereinafter, an "Exchange Right") all, but not less than all, of such holder's
Junior Preferred Stock into (x) fully paid and non-assessable shares of Class B
common stock, or (y) to the extent that all shares of Class B Common Stock have
been converted into shares of Class D common stock in accordance with the terms
of the Certificate of Incorporation, into fully paid and non-assessable shares
of Class D Common Stock. Upon the exercise of an Exchange Right, each share of
Junior Preferred Stock shall be exchanged by the holder of such share for shares
of Class B Common Stock or Class D Common, as applicable, subject to appropriate
adjustment in the event of a stock split, reverse stock split or similar
transaction.

(b) With respect to any shares of Junior Preferred Stock for
which a redemption notice has not been issued by the Corporation and deemed
received by the holders, any holder of shares of Junior Preferred Stock may
exchange such shares into shares of Class B Common Stock (references herein to
Class B Common Stock shall be deemed to include Class D Common Stock following
conversion) by delivering to the Corporation, during regular business hours at
the principal office of the Corporation, the certificate or certificates for the
shares of Junior Preferred Stock to be exchanged, duly endorsed for transfer to
the Corporation, accompanied by written notice stating that the holder elects to
exchange all of such shares. Exchange shall be deemed effective on the date
when such delivery of such certificate or certificates is made (the "Exchange
Date"). As promptly as practicable after the Exchange Date, the Corporation
shall issue and deliver to such holder: (i) a certificate or certificates
representing the number of whole shares of Class B Common Stock to which such
holder of Junior Preferred Stock is entitled; (ii) payment in an amount equal to
all accrued dividends, and other amounts which may be due under the provisions
of Section 11 hereof, if any, with respect to each share of Junior Preferred
Stock exchanged, which have not been paid prior thereto; PROVIDED, HOWEVER, that
to the extent the Corporation has insufficient Legally Available Funds to make
such payment or such payment is prohibited by the Credit Agreements, then such
payment shall be made in shares of preferred stock (other than Junior Preferred
Stock) of the Corporation; and (iii) a check of the Corporation for cash with
respect to any fractional interest in a share of Class B Common Stock as
provided in Section 4(c). Such holder shall be deemed to have become a
stockholder of record on the applicable Exchange Date unless the stock transfer
books of the Corporation are closed on such date, in which event such holder
shall be deemed to have become a stockholder of record on the next succeeding
date on which the transfer books are open. Such holder shall agree to be bound
by and entitled to all rights and interests under the Stockholder Agreement,
which is hereby incorporated by reference in its entirety and a copy of which is
annexed hereto as EXHIBIT A.

4
<PAGE>

(c) No fractional shares of Class B Common Stock or scrip shall
be issued upon exchange of shares of Junior Preferred Stock. The number of
whole shares of Class B Common Stock issuable upon exchange shall be computed on
the basis of the aggregate number of shares of Junior Preferred Stock so
surrendered. Instead of any fractional shares of Class B Common Stock which
would otherwise be issuable upon exchange of any shares of Junior Preferred
Stock, the Corporation shall pay a cash adjustment in respect of such fractional
interest equal to the fair market value of such fractional interest on the
Exchange Date, as such value is determined by the Board of Directors.

(d) The Corporation shall at all times reserve and keep
available, out of its authorized but unissued Class B Common Stock, solely for
the purpose of effecting the exchange of the Junior Preferred Stock, the full
number of shares of Class B Common Stock deliverable upon the exchange of all
Junior Preferred Stock from time to time outstanding.

(e) All shares of Class B Common Stock which may be issued upon
exchange of the shares of Junior Preferred Stock will, upon issuance by the
Corporation, be duly authorized, validly issued, fully paid and nonassessable
and free and clear of all liens and restrictions, other than liens that might
have been created or suffered by the holder of such Junior Preferred Stock and
restrictions on transfer imposed by the Securities Act or applicable state
securities laws.

5. EXCHANGE RATIO. Subject to the terms and conditions of this
Agreement, each holder of Junior Preferred Stock shall be entitled to exchange
each share of Junior Preferred Stock into .252367 shares of Class B Common Stock
or Class D Common Stock, as applicable.

6. PROTECTIVE PROVISIONS. In addition to any other rights provided
by law, so long as any shares of Junior Preferred Stock shall be outstanding,
the Corporation shall not, including without limitation in connection with any
refinancing of the Corporation's Indebtedness under the Credit Agreements or any
amendments to the Credit Agreements, without first obtaining the affirmative
vote or written consent of the holders of a majority of the Junior Preferred
Stock (voting together as a class for this purpose):

(a) amend or repeal any provision of, or add any provision to,
the Certificate of Incorporation, which provision adversely affects the rights,
remedies or preferences of the holders of Junior Preferred Stock;

(b) alter or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of the Junior Preferred
Stock hereunder or amend the Senior Certificate of Designations in a manner
which would adversely affect the Junior Preferred Stock;

(c) except for the Senior Preferred Stock, authorize or issue
shares of any class or series of Stock having any preference or priority as to
dividends, assets, redemption or

5
<PAGE>

liquidation (i) superior to any such preference or priority of the Junior
Preferred Stock, or (ii) on a parity with any such preference or priority of
Junior Preferred Stock; or

(d) reclassify shares of any Junior Securities into shares
having any preference or priority as to dividends, assets, redemption or
liquidation superior to or on a parity with any such preference or priority of
Junior Preferred Stock.

7. LIQUIDATION PREFERENCE.

(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation (a "Liquidation
Event"), the holders of shares of the Junior Preferred Stock then outstanding
shall be entitled to receive, prior to and in preference to any distribution of
any of the assets or surplus funds of the Corporation to the holders of the
Junior Securities, by reason of their ownership of such Junior Preferred Stock,
out of the assets of the Corporation available for distribution to its
stockholders, an amount in cash equal to $5.00 for each share of Junior
Preferred Stock outstanding (the "Liquidation Preference"), plus (to the extent
not declared and paid pursuant to the second succeeding sentence) an amount in
cash equal to all accrued but unpaid dividends thereon and any other amounts due
under Section 11 hereof (together, the "Liquidation Value") (subject to
appropriate adjustment pursuant to Section 4(a)) to the date fixed for
liquidation, dissolution or winding up before any payment shall be made or any
assets distributed to the holders of any of the Junior Securities. After
payment has been made to the holders of the Junior Preferred Stock of the full
amount to which they shall be entitled as aforesaid, the holders of shares of
Junior Securities shall be entitled to receive their respective pro-rata
portions of any and all remaining assets based on the number of shares of Junior
Securities then held by them. Upon the occurrence of a Liquidation Event, the
Corporation, by resolution of its Board of Directors, shall, to the extent of
any Legally Available Funds and prior to the filing of a certificate of
dissolution with respect to such transaction, declare a mandatory dividend on
the Junior Preferred Stock payable before any distribution is made to any holder
of any Junior Securities, in an amount equal to any accrued and unpaid dividends
on the Junior Preferred Stock as of such date, and if the Corporation does not
have sufficient Legally Available Funds to declare and pay all dividends accrued
at the time of such liquidation, dissolution or winding up, an amount equal to
any remaining accrued and unpaid dividends shall be added to the payment to be
received by the holder of the Junior Preferred Stock in such liquidation,
dissolution or winding up. If upon the occurrence of Liquidation Event, the
assets and funds of the Corporation, or proceeds thereof, are not sufficient to
permit the payment in full of the preferential liquidation payments payable to
the holders of the outstanding shares of the Junior Preferred Stock, then the
holders of all such shares shall share ratably in such distribution of assets
and funds of the Corporation in proportion to the amount that would be payable
on such distribution if the amounts to which the holders of outstanding shares
of the Junior Preferred Stock are entitled when paid in full.

6
<PAGE>

(b) If, upon the completion of the distributions contemplated
by paragraph (a) of this Section 7, assets remain in the Corporation, the
remaining assets legally available for the distribution, if any, shall be
divided ratably between the holders of the Corporation's Common Stock.

(c) The fair value of the assets or property to be distributed
in such event shall be determined in good faith by the Board of Directors of the
Corporation.

(d) Neither (i) the voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all the property or assets of the Corporation, nor (ii) the
consolidation or merger of the Corporation with one or more corporations or
other form of reorganization is effected with the effect that, immediately after
such transaction, the stockholders of the Corporation immediately prior to such
transaction hold less than a majority in interest of the total voting power
entitled to vote in the election of directors, managers or trustees of the
Corporation or such other Person surviving such transaction (each a "Change of
Control Event"), shall be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary, unless such Change of Control Event shall be in
connection with a dissolution or winding up of the business and operations of
the Corporation.

8. OPTIONAL REDEMPTION. The Junior Preferred Stock is redeemable in
cash at the option of the Corporation, in whole or in part, at any time or from
time to time, together with accrued and unpaid dividends thereon to the date
fixed for redemption, at a redemption price equal to the Liquidation Preference
per share as adjusted for any stock dividends, stock splits or other share
adjustments, plus any accrued and accumulated unpaid dividends or other amounts
due under Section 11 below (the "Redemption Price"). Any partial redemption
shall be PRO RATA.

9. MANDATORY REDEMPTION.

(a) To the extent of Legally Available Funds, the Corporation
shall redeem on December 31, 2001 and on December 31, 2002, (each such date
being referred to as a "Mandatory Redemption Date"), 50% of the then outstanding
shares of Junior Preferred Stock at a redemption price equal to the Liquidation
Preference per share (plus accrued and unpaid dividends through the date of
redemption), payable in cash. The shares to be redeemed shall be selected PRO
RATA by the Corporation.

(b) REDEMPTION UPON CHANGE OF CONTROL.

(i) If any Put Event shall occur, the Corporation shall:
(x) deliver to the holders of Junior Preferred Stock a Notice and Offer to
Redeem Preferred Stock pursuant to the provisions of this Section 9(b); and (y)
if such holder accepts redemption as to the Junior Preferred Stock it holds by
delivering a Response Notice pursuant to Section 3(d) below,

7
<PAGE>

redeem such Junior Preferred Stock as hereinafter provided. In the event of a
Put Event, the redemption price for a share of Junior Preferred Stock hereunder
shall be an amount equal to the Redemption Price (as defined in Section 8
herein).

(ii) Not later than thirty (30) days prior to the
effective date of a Put Event, the Corporation shall give written notice to each
holder of Junior Preferred Stock of the pendency thereof and the right of such
holders to elect to have their shares of Junior Preferred Stock redeemed
hereunder arising as a result thereof (a "Notice and Offer to Redeem Junior
Preferred Stock"). Such Notice and Offer to Redeem Junior Preferred Stock shall
state: (1) that such notice is delivered and such offer to redeem is made
pursuant to the provisions of this Certificate of Designations; (2) the date of
and a description of the circumstances surrounding such Put Event; (3) the date
by which a holder of Junior Preferred Stock must deliver a Response Notice
pursuant to clause (iv) below; (4) the date on which the Corporation shall
redeem the Junior Preferred Stock if the holder of Junior Preferred Stock
delivers a Response Notice pursuant to clause (iv) below and the Put Event
giving rise to the Notice and Offer to Redeem Junior Preferred Stock is
consummated, which redemption date shall be a Business Day prior to the date the
Put Event occurs (the "Special Redemption Date"); and (5) the amount of accrued
and unpaid dividends and other amounts to be paid with respect to shares of
Junior Preferred Stock held by such holder on such Special Redemption Date if
such shares of Junior Preferred Stock are redeemed hereunder; PROVIDED that,
notwithstanding the foregoing provisions of this sentence, the Special
Redemption Date specified in such Notice and Offer to Redeem Preferred Stock may
be postponed, by two (2) Business Days' prior written notice from the
Corporation to each holder of Junior Preferred Stock to be redeemed, to the
earlier subsequent date which allows compliance with the restrictions imposed by
the last sentence of clause (iii) below.

(iii) If the Corporation fails to deliver to each holder
of the Junior Preferred Stock notice of a Put Event as required by this Section
9(b), any holder of Junior Preferred Stock may, upon obtaining knowledge of a
pending or completed Put Event, notify the Corporation of such Put Event in
writing (the "Junior Preferred Stockholder Notice"), whereupon the Corporation
shall, and any holder of Junior Preferred Stock may, promptly notify each other
holder of Junior Preferred Stock of such pending or completed Put Event, the
nature thereof, and the date upon which it is scheduled to occur or did occur.
In such event, redemption hereunder shall occur not later than thirty (30) days
after the date of such Junior Preferred Stockholder Notice, unless the
Corporation and such holder agree to a different date or unless such redemption
is not accepted as provided in clause (iv) below. Notwithstanding any other
provision herein, a redemption of Junior Preferred Stock hereunder may only be
made, if, on the Special Redemption Date, such redemption is permitted by
applicable law.

(iv) To accept an offer of redemption of Junior Preferred
Stock hereunder, a holder thereof shall deliver to the Corporation, on or before
the tenth (10th) day following the date of receipt of the Notice and Offer to
Redeem, such holder's notice that it accepts redemption hereunder with respect
to the shares of Junior Preferred Stock designated therein (a "Response
Notice"). The Response Notice shall set forth the name of such holder and the
statement that it accepts redemption with respect to the shares of Junior
Preferred Stock designated

8
<PAGE>

therein. Promptly and in any event within two (2) Business Days after receipt
of such holder's Response Notice, the Corporation shall, by written notice to
such holder, acknowledge receipt thereof.

(v) The provisions of this Section 9(b) are applicable
to successive Put Events and no failure on the part of any holder to exercise
any right hereunder arising on account of any Put Event shall affect or impair
any other right of such holder hereunder upon the occurrence of any other or any
subsequent Put Event.

(c) Unless and until the Corporation has repaid in full all
Indebtedness or obtained the requisite waivers or consents under the Credit
Agreements to permit the repurchase of all Junior Preferred Stock as provided
for herein, the Corporation shall have no obligation to redeem or repurchase the
Junior Preferred Stock pursuant to paragraph (a) above.

(d) The Corporation shall comply with the notice provisions set
forth in Section 10(a) in redeeming such shares of Junior Preferred Stock.

(e) If, for any reason, the Corporation shall fail to discharge
its mandatory redemption obligations pursuant to this Section 9, such purchase
obligations shall be discharged as soon as the Corporation is able to discharge
such obligations. If and so long as any mandatory redemption obligations with
respect to the shares of the Junior Preferred Stock shall not be fully
discharged, the Corporation shall not, directly or indirectly:

(i) except with respect to any required redemptions of
the Class E Common Stock pursuant to the provisions of the Certificate of
Incorporation, declare or pay any dividend on any Junior Securities or make any
payment on account of, or set apart money for, a sinking or other analogous fund
for the purchase, redemption or other retirement of, or purchase, redeem or
retire, any Junior Securities, make any distribution in respect of Junior
Securities, either directly or indirectly and whether in cash or property or in
obligations or shares of the Corporation (other than in Junior Securities); or

(ii) except with respect to any required redemptions of
the Class E Common Stock pursuant to the provisions of the Certificate of
Incorporation, purchase or redeem (except in either case for consideration
payable in Junior Securities) any Junior Securities than outstanding. Dividends
shall continue to accrue on a cumulative basis with respect to any shares of
Junior Preferred Stock subject to a mandatory redemption obligation that has not
been discharged by the Corporation pursuant to this Section 9.

10. PROCEDURE FOR REDEMPTION. If Legally Available Funds are not
available at the time of any redemption date to redeem all of the shares of
Junior Preferred Stock then due to be redeemed, those funds which are legally
available will be used to redeem the maximum

9
<PAGE>

number of such shares ratably among the holders thereof. Shares of Junior
Preferred Stock which are subject to redemption, but which have not been
redeemed and for which the applicable redemption price has not been paid or set
aside with respect thereto due to insufficient Legally Available Funds shall
continue to be entitled to the dividend, exchange and other rights, preferences
and privileges of the Junior Preferred Stock until such shares have been
redeemed and the redemption price has been paid or set aside with respect
thereto.

(a) In the event the Corporation shall redeem shares of the
Junior Preferred Stock pursuant to Section 3(c)(iv), 8 or 9 hereof, written
notice of such redemption shall be given, by first class mail, postage prepaid,
mailed not less that 30 days nor more than 60 days prior to the applicable
redemption date, with contemporary facsimile transmission to holders who have
provided facsimile terminal numbers, to each holder of record of the shares to
be redeemed at such holder's address as the same appears on the stock register
or transfer books of the Corporation; PROVIDED, HOWEVER, that no failure to give
such notice nor any defect therein shall affect the validity of the proceeding
for the redemption of any shares of the Junior Preferred Stock to be redeemed,
except as to the holder to whom the Corporation has failed to give said notice
or except as to the holder whose notice was defective. Each such notice shall
state: (i) the applicable redemption date; (ii) the total number of shares of
Junior Preferred Stock to be redeemed and the number of shares of Junior
Preferred Stock to be redeemed from such holder; (iii) the date on which such
holder's exchange rights as to such shares will terminate; (iv) the applicable
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the applicable redemption price; and (v)
that dividends on the shares to be redeemed will cease to accrue upon such
redemption.

(b) Notice having been mailed as aforesaid, from and after the
applicable redemption date (unless default shall be made by the Corporation in
providing money for the payment of the applicable redemption price, together
with an amount equal to all accrued and unpaid dividends, plus any amounts which
may be due under Section 11 hereof, if any, to the redemption date, of the
shares called for redemption), dividends on the shares of the Junior Preferred
Stock so called for redemption shall cease to accrue, and said shares shall be
canceled and shall no longer be deemed to be outstanding, and all rights of the
holders thereof as stockholders of the Corporation (except the right to receive
from the Corporation the applicable redemption price and any accrued and unpaid
dividends without interest) shall cease. Upon surrender by any holder of Junior
Preferred Stock in accordance with said notice of the certificates for any
shares so redeemed (properly endorsed or assigned for transfer, if the Board of
Directors shall so require and the notice shall so state), such shares shall be
redeemed by the Corporation at the applicable redemption price. If fewer than
all the shares represented by any such certificate are redeemed, a new
certificate shall be issued, without cost to the holder thereof, representing
the shares which have not been redeemed.

10
<PAGE>

11. EVENTS OF NONCOMPLIANCE.

(a) An Event of Noncompliance shall be deemed to have occurred
if and only if (i) the Corporation fails to pay on any Dividend Payment Date the
full amount of dividends then accrued on the Junior Preferred Stock, whether or
not Legally Available Funds are available and whether or not such payment is
legally permissible or permissible under the Credit Agreements, or (ii) the
Corporation fails to make any redemption payment with respect to the Junior
Preferred Stock which it is obligated to make hereunder, whether or not Legally
Available Funds are available and whether or not such payment is legally
permissible or permissible under the Credit Agreements;

(b) With respect to any dividend payment or redemption payment,
if an Event of Noncompliance described in subsection 11(a)(i) has occurred and
has continued for an uninterrupted period of 30 consecutive days, any unpaid
dividend amounts shall earn interest at the rate of 8% per annum, compounded
annually, and the annual dividend rate payable on the Junior Preferred Stock
shall be increased to 8% per annum, effective commencing on the date on which
such Event of Noncompliance with respect to such dividend payment occurred and
continuing for so long as any amounts remain unpaid and are in arrears under
this Section 11. Notwithstanding anything to the contrary contained herein, the
Corporation shall not make any annual dividend payments based on a dividend rate
greater than the Base Rate until no defaults or events of default exist under
the Credit Agreements, it being acknowledged that an Event of Noncompliance
shall nonetheless have occurred.

12. DEFINITIONS. All capitalized terms used herein and not otherwise
defined herein shall have the meanings given to such terms below and shall be
equally applicable to both the singular and plural forms:

"AFFILIATE" shall mean, with respect to any Person, a
Person or entity that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such Person. The term "control" (including the terms "controlling," "controlled
by" and "under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting shares, by contract, or
otherwise.

"BUSINESS DAY" shall mean any day on which commercial banks
are not authorized or required to close in New York, New York or Boston,
Massachusetts.

"CLASS A COMMON STOCK" shall mean the Class A common stock
of the Corporation, par value $.01 per share.

"CLASS B COMMON STOCK" shall mean the Class B common stock
of the Corporation, par value $.01 per share.

11
<PAGE>

"CLASS D COMMON STOCK" shall mean the Class D common stock
of the Corporation, par value $.01 per share.

"CLASS E COMMON STOCK" shall mean 414,079 shares of the
Class E common stock of the Corporation, par value $.01 per share.

"COMMON STOCK" shall mean the Class A Common Stock, the
Class B Common Stock, the Class D Common Stock and the Class E Common Stock.

"CERTIFICATE OF INCORPORATION" shall mean the Corporation's
Certificate of Incorporation, as amended, modified or restated from time to
time.

"CREDIT AGREEMENTS" shall mean (a) that certain Securities
Purchase Agreement, dated the date hereof, between Golden State Vintners and
John Hancock Mutual Life Insurance Company, and (b) that certain Accounts
Receivable Credit Agreement, dated the date hereof, between the Golden State
Vintners and Sanwa Bank California, and all documents executed in connection
therewith, in each case, as they provide on the date hereof without amendment.

"INDEBTEDNESS" of any Person shall mean (i) any
indebtedness, contingent or otherwise, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit or
representing the balance deferred and unpaid of the purchase price of any
property or interest therein, except any such balance that constitutes a trade
payable, if and to the extent such indebtedness would appear as a liability upon
a balance sheet of such Person prepared in accordance with generally accepted
accounting principals, (ii) all capitalized lease obligations of such Person,
and (iii) all contingent liabilities, direct or indirect, on the part of such
Person for the payment, discharge or satisfaction of Indebtedness of others,
including any agreements, contingent or otherwise, to purchase such Indebtedness
of others.

"INTEREST EXPENSE", with respect to any Person for any
period, shall mean the aggregate of all interest paid or accrued by such Person
during such period in accordance with generally accepted accounting principles
(including without limitation the interest portion of Capitalized Lease
Obligations of such Person and capitalized interest).

"JUNIOR PREFERRED STOCK EXCHANGE AGREEMENT" shall mean that
certain Junior Preferred Stock Exchange Agreement between the Corporation and
certain signatories thereto, dated the date hereof.

"PERSON" shall mean all natural persons, corporations,
partnerships, joint ventures, associations, joint stock companies, business
trusts, unincorporated organizations, governments or other agencies or political
subdivisions thereof and other entities of any kind.

12
<PAGE>

"PUT EVENT" shall mean, with respect to the Junior
Preferred Stock, any event or transaction or series of related events or
transactions (whether occurring or obtaining by reason of any current or future
law or otherwise) in connection with or as a consequence of which any of the
following occur:

(i) at any time prior to the occurrence of either
of the events described in clauses (b) or (d) of the proviso to this sentence
below, at least a majority (by number of votes) of the outstanding shares of
Voting Stock of the Corporation (all classes of such Voting Stock being taken,
for purposes of this clause (i), as one class) shall not be or shall cease to be
"beneficially owned" (as such term is defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) by the Controlling Stockholder, either
directly or indirectly through an Affiliate;

(ii) at any time prior to the occurrence of either
of the events described in clauses (b) or (d) of the proviso to this sentence
below, the power to elect or appoint or cause the election or appointment of at
least a majority of the members of the full Board of Directors of the
Corporation shall not be or shall cease to be exercisable by the Controlling
Stockholder, either directly or indirectly through a corporation, partnership or
other entity, acting through its board of directors (or equivalent governing
body) in its sole discretion; or

(iii) any Person acquires a percentage of Voting
Stock greater than that held by the Controlling Stockholder; PROVIDED, HOWEVER,
that no Put Event shall be deemed to occur or have occurred: (a) if the holders
of the Senior Preferred Stock have the power to elect or appoint or cause the
election or appointment of at least a majority of the members of the full Board
of Directors of the Corporation as a result of any failure by the Corporation to
pay dividends or make mandatory redemptions of the Senior Preferred Stock; (b)
if the Corporation engages in an initial or secondary public offering of its
Common Stock and immediately after consummation of such public offering no
Person holds a greater percentage of Voting Stock of the Corporation than the
percentage of Voting Stock held by the Controlling Stockholder immediately prior
to the consummation of such public offering; (c) upon any transfer of Common
Stock by the Controlling Stockholder to any Affiliate of such Controlling
Stockholder; or (d) upon the occurrence of any merger or sale of all or
substantially all of the stock or assets of the Corporation with respect to
which prior approval has been obtained by the holders of a majority of the
Junior Preferred Stock. For purposes of this definition, the "Controlling
Stockholder" shall mean (x) prior to April 21, 2000, FAC, Ltd., a Cayman Islands
corporation ("FAC"), and (y) on or after April 21, 2000, collectively, FAC SBIC
Partners, L.P., a Texas limited partnership, Exeter Equity Partners, L.P., a
Delaware limited partnership, and Exeter Venture Lenders, L.P., a Delaware
limited partnership.

"SAR AGREEMENT" shall mean that Stock Appreciation Rights
Agreement entered into between the Corporation and Jeffrey B. O'Neill, dated the
date hereof.

13
<PAGE>

"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.

"SENIOR CERTIFICATE OF DESIGNATIONS" means the Certificate
of Powers, Designations, Preferences and Relative, Participating, Optional and
Other Special Rights of Convertible Stock and Qualifications, Limitations and
Restrictions Thereof governing the rights, preferences and privileges of the
Senior Preferred Stock as filed with the Office of the Secretary of the State of
Delaware.

"VOTING STOCK" shall mean the stock or other securities of
a corporation, partnership or other entity the holders of which are ordinarily,
in the absence of contingencies, entitled to elect members of the board of
directors or other governing body of such corporation, partnership or other
entity.

13. VOTING RIGHTS. Upon exchange of shares of Junior Preferred Stock
for shares of Class B Common Stock (the unissued Class B Common Stock for which
the Junior Preferred Stock is exchangeable and the Class B Common Stock issued
upon such exchange, the "Exchange Stock"), each holder of Exchange Stock shall
be entitled to the same voting rights of holders of Class B Common Stock as set
forth in the Certificate of Incorporation and shall be bound by and entitled to
all rights and interests under the Stockholder Agreement, as such Certificate of
Incorporation and Stockholder Agreement may be amended from time to time.

14. NO OTHER RIGHTS. Except as expressly set forth herein, the
holders of the Junior Preferred Stock shall have no voting or other rights other
than those provided by applicable law.

15. REACQUIRED SHARES. Shares of Junior Preferred Stock shall be
canceled and shall cease to be outstanding upon reacquisition including, without
limitation, reacquisition upon exchange, by the Corporation.

* * * * *

14
<PAGE>

IN WITNESS WHEREOF, said GOLDEN STATE ACQUISITION CORP. has caused this
Certificate to be signed by Mark D. McDonnell, its President, and attested by
Paul M. Smith, its Secretary, this 25th day of April, 1995.

GOLDEN STATE ACQUISITION CORP.

By: /s/ Mark D. Mcdonnell
----------------------------
Mark D. McDonnell
President

ATTEST:

By: /s/ Paul M. Smith
-----------------------------
Paul M. Smith

Corporate Seal

15
<PAGE>

CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF POWERS, DESIGNATIONS, ETC.
OF
6% JUNIOR EXCHANGEABLE PREFERRED STOCK
OF
GOLDEN STATE ACQUISITION CORP.

Golden State Acquisition Corp. (the "Company"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify:

FIRST: That the Board of Directors of the Company (the "Board")
adopted resolutions proposing and declaring advisable each of the amendments to
the Company's Certificate of Powers, Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of Junior Exchangeable
Preferred Stock and Qualifications, Limitations and Restrictions Thereof filed
with the Delaware Secretary of State on April 25, 1995 at 9:01 A.M. with respect
to its 6% Junior Exchangeable Preferred Stock, $0.01 par value per share (the
"Junior Preferred Stock"), set forth below, and that such amendments were
approved by a majority of the holders of the Junior Preferred Stock of the
Company and notice was provided to such holders pursuant to the applicable
provisions of Section 228 of the General Corporation Law of the State of
Delaware.

SECOND: The last clause of Section 1 shall be deleted in its entirety
and replaced with the following:

which shall consist of 178,105 shares of such Junior Preferred
Stock.

THIRD: The reference to "6%" in the first sentence of Section 3(a)
shall be deleted and replaced with the following:

8% from October 10, 1996 to April 1, 2000 and, on and after
April 1, 2000, 10%

FOURTH: The references to "8% per annum" in Section 11(b) shall be
deleted and each such reference shall be replaced with the following:

10% per annum from October 10, 1996 to April 1, 2000, and, on
and after April 1, 2000, 12% per annum

<PAGE>

FIFTH: The last sentence of the definition of "Put Event" contained
in Section 12 is hereby deleted in its entirety and replaced by the following:

For purposes of this definition, "Controlling Stockholder" shall
mean SBIC Partners, L.P., a Texas limited partnership, and its
Affiliates.

SIXTH: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware.

IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed this 29th day of October, 1996.

GOLDEN STATE ACQUISITION CORP.
a Delaware corporation

/s/ Jeffrey B. O'Neill
--------------------------------
Jeffrey B. O'Neill
Chief Executive Officer

<PAGE>

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of April 27, 1995, by and among Golden State Acquisition Corp., a
Delaware corporation (the "Company"), FAC, Ltd., a Cayman Islands corporation
("FAC"), John Hancock Mutual Life Insurance Company ("Hancock"), SBIC Partners,
L.P. ("SBIC Partners"), Exeter Equity Partners, L.P. and Exeter Venture Lenders
(collectively, "Exeter") and each of CGW Associates Limited Partnership,
Mid-State Horticultural Company, Jeffrey B. O'Neill, Massachusetts Mutual Life
Insurance Company, Massmutual Participation Investors, Massmutual Corporate
Investors, Ardshiel Inc. and Bank of America Illinois (collectively, the "Junior
Holders"). FAC, SBIC Partners, Exeter, Hancock and the Junior Holders are
collectively referred to in this Agreement as the "Stockholders" and
individually as a "Stockholder." Unless otherwise provided in this Agreement,
capitalized terms used herein shall have the meanings set forth in paragraph 8
hereof.

The Company and the Stockholders are parties to an Equity Purchase
Agreement, dated as of even date herewith (the "Purchase Agreement"). The
Company, Golden State Vintners, a California corporation, and Hancock are
parties to a Securities Purchase Agreement, dated the date hereof (the
"Securities Purchase Agreement"). The Company and the Stockholders are parties
to a Stockholder Agreement, dated as of even date herewith (the "Stockholder
Agreement"). In order to induce the Stockholders to enter into the Purchase
Agreement and the Stockholder Agreement and Hancock to enter into the Securities
Purchase Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement.

The parties hereto agree as follows:

1. DEMAND REGISTRATION RIGHTS.

(a) REQUESTS FOR REGISTRATION. Subject to the limitation and
restrictions set forth below, on any six occasions after the fifth anniversary
of the Closing, the holders of at least fifteen (15%) percent of the Registrable
Securities (hereinafter, the "Demanding Holders") may make a written request of
the Company for registration with the Commission under the Securities Act of all
or any portion of their Registrable Securities (hereinafter, a "Demand
Registration"); PROVIDED, HOWEVER, that to the extent any Stockholder is a
Demanding Holder with respect to any of its Registrable Securities on any two of
the six occasions permitted hereunder, such Stockholder shall not be permitted
to request additional Demand Registrations (whether or not such Stockholder
holds at such time in excess of 15% of the Registrable Securities), and the
Registrable Securities of such Stockholder shall not be included for purposes of
determining the requisite 15% threshold set forth above only in connection with
any subsequent Demand Registration requested by the other Stockholders. Each
request for a Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered and the anticipated per share
price range for such offering. Within ten days after receipt of any such
request, the Company shall give written

<PAGE>

notice of such requested registration to all other holders of Registrable
Securities and shall include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within 15 days after the receipt of the Company's notice.

Unless a registration is withdrawn pursuant to the request of the
Demanding Holders for any reason other than a material adverse change in the
Company or unfavorable conditions in the capital markets, a registration shall
not be counted as one of the permitted Demand Registrations (i) until it has
become effective, and (ii) unless the requesting party or parties are able to
register and sell at least 75% of the Registrable Securities requested to be
included in such registration.

(b) PRIORITY ON DEMAND REGISTRATIONS. If in any Demand
Registration the managing underwriter or underwriters thereof (or, in the case
of a Demand Registration not being underwritten, in the opinion of a majority of
the holders of Registrable Securities) advise the Company that in its or their
opinion the number of Registrable Securities and, if permitted hereunder, other
securities requested to be included in such offering exceeds the number of
Registrable Securities and other securities, if any, which can be sold therein
without adversely affecting the Company or the success of the offering, the
Company shall include in such registration the number of Registrable Securities
and other securities requested to be included in such registration, which in the
opinion of such underwriters can be sold without adversely affecting the Company
or the success of the offering as follows: (i) first, the Registrable Securities
requested to be included in such Demand Registration pro rata among the
Demanding Holders on the basis of the number of Registrable Securities requested
to be included, (ii) second, the Registrable Securities requested to be included
in such Demand Registration by other Stockholders pro rata among those
requesting inclusion in such Demand Registration on the basis of the number of
Registrable Securities requested to be included, and (iii) third, shares to be
issued and sold by the Company and requested to be included in such Demand
Registration.

(c) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company shall
not be obligated to effect any Demand Registration within 180 days after the
effective date of a previous Demand Registration or a previous registration in
which the holders of Registrable Securities were given piggyback rights pursuant
to paragraph 2 hereof.

(d) SELECTION OF UNDERWRITERS. The Company's board of
directors shall have the right to select the investment banker(s) and manager(s)
to administer the offering.

2
<PAGE>

2. PIGGYBACK REGISTRATIONS.

(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities with the Commission under the Securities Act
(other than pursuant to a Demand Registration) and the registration form to be
used may be used for the registration of Registrable Securities (a "Piggyback
Registration"), the Company shall give prompt written notice to all holders of
Registrable Securities, at least 60 days prior to the anticipated filing date,
of its intention to effect such a registration and shall include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 30 days after the receipt
of the Company's notice.

(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Stockholders as a part of the written notice given
pursuant to subsection 2(a). In such event, the right of any Stockholder to
registration pursuant to this Section 2 shall be conditioned upon such holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Stockholders, if
proposing to distribute their securities through such underwriting, shall
(together with the Company and the other Stockholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting.

(c) PRIORITY ON PIGGYBACK REGISTRATIONS. If the Company (in
the case of an offering not involving an underwriting) or the managing
underwriter (in the case of an underwritten offering) shall reasonably determine
(and notify the holders of Registrable Securities of such determination) that
the number or kind of securities proposed to be sold in such registration
(including the Registrable Securities to be included pursuant to subsection 2(a)
above) exceeds the number which can be sold in such offering without adversely
affecting the Company or the success of the offering, the Company shall include
in such registration the number of securities, if any, which in the opinion of
such underwriter or the Company, as the case may be, can be sold. The Company
shall so advise all holders of the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated (i)
first, to the Company, and (ii) second, pro rata among all holders of
Registrable Securities and other securities of the Company on the basis of the
number of shares requested to be included in such registration by each such
holder.

(d) SELECTION OF UNDERWRITERS. If any Piggyback Registration
is an underwritten offering, the selection of investment banker(s) and
manager(s) for the offering must be approved by the holders of a majority of the
Registrable Securities included in such Piggyback Registration, which approval
shall not be unreasonably withheld.

(e) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the

3
<PAGE>

Company shall not file or cause to be effective any other registration of any of
its equity securities or securities convertible or exchangeable into or
exercisable for its equity securities under the Securities Act (except on Form
S-8 or any successor form), whether on its own behalf or at the request of any
holder or holders of such securities, until a period of at least 180 days has
elapsed from the effective date of such previous registration.

3. HOLDBACK AGREEMENTS.

(a) Each holder of Registrable Securities shall not effect any
public sale or distribution (including sales pursuant to Rule 144), of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 180-day
period beginning on the effective date of any underwritten Demand Registration
or any underwritten Piggyback Registration (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.

(b) The Company shall not effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 270-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8 or any successor form), unless the underwriters managing the
registered public offering otherwise agree.

4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its commercially reasonable efforts to
effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof, and pursuant thereto
the Company shall as expeditiously as possible:

(a) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its commercially
reasonable efforts to cause such registration statement to become effective;

(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement;

(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other

4
<PAGE>

documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;

(d) use its commercially reasonable efforts to register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions as any seller reasonably requests and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company shall not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);

(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading and, at the request of any such seller, the Company shall prepare
a supplement or amendment to such prospectus and/or registration statement so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not contain an untrue statement of a material fact or omit
to state any fact necessary to make the statements therein not misleading;

(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the National Association of
Securities Dealers automated quotation system ("NASDAQ");

(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of the first
registration statement relating to Registrable Securities or securities of any
class of the Company;

(h) enter into such customary agreements (including, to the
extent applicable hereunder, underwriting agreements in customary form) and take
all such other actions as the holders of a majority of the Registrable
Securities being sold or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities
(including effecting a stock split or a combination of shares);

(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all

5
<PAGE>

information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;

(j) otherwise comply with all applicable rules and regulations
of the Commission with which the Company is required to comply, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and

(k) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any securities included in such registration statement for sale in any
jurisdiction, the Company shall use its commercially reasonable efforts promptly
to obtain the withdrawal of such order.

5. REGISTRATION EXPENSES.

(a) The Company shall pay all Registration Expenses (as defined
in subparagraph (b) below) in connection with any registration initiated as a
Demand Registration and all Piggyback Registrations whether or not such
registration has become effective and whether or not, in the case of a Demand
Registration, such registration is counted as one of the Demand Registrations.

(b) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), shall be borne by the Company, and the
Company shall pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed or on the NASDAQ.

(c) In connection with each Demand Registration and each
Piggyback Registration, the Company shall reimburse the holders of Registrable
Securities included in such registration for the reasonable fees and
disbursements of one counsel chosen by the holders of a majority of the
Registrable Securities included in such registration.

6
<PAGE>

6. INDEMNIFICATION.

(a) The Company agrees to indemnify, to the extent permitted by
applicable law, each holder of Registrable Securities, its officers and
directors and each Person who controls such holder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
(collectively "Losses") caused by any untrue or alleged untrue statement of
material fact contained in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading or any violation by the Company of
applicable federal and state securities laws, in each case, except insofar as
the same are caused by, contained in or arise out of or result from any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto to the person
asserting the claims from which such Losses arise after the Company has
furnished such holder with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company shall indemnify such
underwriters, their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the holders of Registrable
Securities.

(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by applicable law, shall indemnify
the Company, its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only to the
extent that such untrue statement or omission is contained in any information or
affidavit so furnished in writing by such holder; provided that the obligation
to indemnify shall be individual, not joint and several, for each holder and
shall be limited to the net amount of proceeds received by such holder from the
sale of Registrable Securities pursuant to such registration statement.

(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
written notice shall not impair any Person's right to indemnification hereunder
to the extent such failure has not materially prejudiced the indemnifying party)
and (ii) unless such indemnified party receives a written opinion of counsel to
the effect that a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to

7
<PAGE>

assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party shall not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent shall not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim shall not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless the indemnified party receives a written opinion of counsel
to the effect that a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim.

(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities. The
Company also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.

7. PARTICIPATION IN UNDERWRITTEN REGISTRATION. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements, and (iii) completes
and executes any other documents reasonably required in connection therewith.

8. DEFINITIONS.

"Business Day" means each day of the week from and including
Monday to and including Friday, except such day that is a legal holiday in New
York, New York or Boston, Massachusetts.

"Commission" means the Securities and Exchange Commission.

"Common Stock" means any share of the Company's Class A Common
Stock, par value $.0l per share, Class B Common Stock, par value $.01 per share,
Class D Common Stock, par value $.0l per share or Class E Common Stock, par
value $.0l per share.

"Person" means an individual, a partnership, a joint venture, a
corporation, a trust, a limited liability company, an unincorporated
organization or a government or any department or agency thereof.

"Registrable Securities" means, irrespective of which Person
actually holds such securities, (i) any shares of Common Stock acquired as of
the date hereof by any Stockholder

8
<PAGE>

pursuant to the Purchase Agreement, (ii) any shares of Common Stock acquired
hereafter by any Stockholder, and (iii) any capital stock of the Company issued
or issuable with respect to the securities referred to in clauses (i) or (ii)
above by way of a stock dividend, stock split, conversion or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Registrable Securities, such securities
will cease to be Registrable Securities when they have been distributed to the
public pursuant to an offering registered under the Securities Act or sold to
the public through a broker, dealer or market maker in compliance with Rule 144
(or any similar rule then in force) under the Securities Act. For purposes of
this Agreement, a Person will be deemed to be a holder of Registrable Securities
whenever such Person has the right to acquire such Registrable Securities (upon
conversion, or exercise in connection with a transfer of securities or
otherwise, but disregarding any restrictions or limitations upon the exercise of
such right), whether or not such acquisition has actually been effected.

"Securities Act" means the Securities Act of 1933, as amended.

9. MISCELLANEOUS.

(a) NO INCONSISTENT AGREEMENTS. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.

(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
shall not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).

(c) REMEDIES. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.

(d) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon the
prior written consent of the Company and holders of a majority of the
Registrable Securities; provided, however,

9
<PAGE>

that no such amendment or waiver shall adversely affect the rights hereunder of
any of the parties hereto without the prior written approval of such party.

(e) SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.

(f) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.

(g) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.

(h) DESCRIPTIVE-HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.

(i) GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.

(j) NOTICES. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid) or mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid. Such notices,
demands and other communications shall be sent to and to each of the Company,
SBIC Partners, Exeter, FAC and Hancock at the addresses indicated below:

10
<PAGE>

If to the Company, to:

Golden State Acquisition Corp.
Smith McDonnell Stone & Co. Inc.
450 Park Avenue, Suite 2102
New York, NY 10022
Attention: Mark D. McDonnell

with a copy, which will not constitute notice to the
Company, to:

Anderson Kill Olick & Oshinsky, P.C.
1251 Avenue of the Americas
New York, NY 10020
Attention: Ronald S. Brody, Esq.

If to Mid-State Horticultural Company, to:

Mid-State Horticultural Company
1905 Baker Street
San Francisco, CA 94115
Attention: Robert H. Setrakian

If to CGW Associates Limited Partnership, to:

CGW Associates Limited Partnership
c/o Ardshiel, Inc.
230 Park Avenue - Suite 2527
New York, NY 10169

with a copy, which will not constitute notice to CGW
Associates Limited Partnership, to:

Farella Braun & Martel
235 Montgomery Street
San Francisco, CA 94104
Attention: Frank Farella, Esq.

11
<PAGE>

If to SBIC Partners, to:

SBIC Partners, L.P.
201 Main Street, Suite 2302
Fort Worth, Texas 76102

with a copy, which will not constitute notice to SBIC
Partners, to:

Riordan & McKinzie
300 South Grand Avenue - 29th Floor
Los Angeles, CA 90071
Attention: Timothy F. Sylvester, Esq.

If to Exeter, to:

Exeter Venture Lenders, L.P.
10 East 53rd Street
New York, NY 10022
Attention: Timothy P. Bradley

with a copy, which will not constitute notice to Exeter, to:

Riordan & McKinzie
300 South Grand Avenue - 29th Floor
Los Angeles, CA 90071
Attention: Timothy F. Sylvester, Esq.

If to FAC, to:

Smith McDonnell Stone & Co. Inc.
450 Park Avenue, Suite 2102
New York, NY 10022
Attention: Mark D. McDonnell

with a copy, which will not constitute notice to FAC, to:

Anderson Kill Olick & Oshinsky, P.C.
1251 Avenue of the Americas
New York, NY 10020
Attention: Ronald S. Brody, Esq.

12
<PAGE>

If to Hancock, to:

John Hancock Mutual Life Insurance Company
200 Clarendon Street - 57th Floor
P.O. Box 111
Boston, MA 02117
Attention: Bond & Corporate Finance Dept.

and to:

John Hancock Mutual Life Insurance Company
1900 Point West Way
Suite 188
Sacramento, CA 95815
Attn: Portfolio Management & Investment Services T-57

with a copy, which will not constitute notice to Hancock, to:

Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, CA 94111-3143
Attention: Daniel R. Bedford

If to Bank of America Illinois:

Bank of America Illinois
231 South LaSalle Street
Chicago, IL 60697
Attention: Jeffrey Mann

If to Massachusetts Mutual Life Insurance Company:

Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111-0001
Attention: Wallace Rodger

13
<PAGE>

If to MassMutual Participation Investors:

MassMutual Participation Investors
1295 State Street
Springfield, Massachusetts 01111-0001
Attention: John Joyce

If to MassMutual Corporate Investors:

MassMutual Participation Investors
1295 State Street
Springfield, Massachusetts 01111-0001
Attention: John Joyce

If to Ardshiel, Inc., to:

Ardshiel, Inc.
230 Park Avenue, Suite 2527
New York, NY 10169
Attn: Geoffrey J.F. Gorman

If to Jeffrey B. O'Neill, to:

Jeffrey B. O'Neill
60 East Sir Francis Drake Blvd.
Larkspur, California 94939

or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.

* * * * *

14
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

GOLDEN STATE ACQUISITION CORP.

By:
---------------------------------
Its:
---------------------------------

FAC, LTD.

By:
---------------------------------
Its:
---------------------------------

EXECUTIVE

-------------------------------------
Jeffrey B. O'Neill

JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY

By:
---------------------------------
Its:
---------------------------------

EXETER EQUITY PARTNERS, L.P.

By: Exeter Equity Advisors, L.P.,
General Partner

By: Exeter Equity Advisors,
Inc., General Partner

By: /s/ Timothy P. Bradley
-------------------------
Timothy P. Bradley
Vice President

15
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

GOLDEN STATE ACQUISITION CORP.

By: /s/ Paul M. Smith
---------------------------------
Its: Secretary
---------------------------------

FAC,LTD.

By: /s/ Mark D. Mcdonnell
---------------------------------
Its:
---------------------------------

EXETER EQUITY PARTNERS, L.P.

By: Exeter Equity Advisors, L.P.,
General Partner

By: Exeter Equity Advisors,
Inc., General Partner

By:
---------------------
Timothy P. Bradley
Vice President

EXETER VENTURE LENDERS, L.P.

By: Exeter Venture Advisors, Inc.,
General Partner

By:
------------------------------
Timothy P. Bradley
Vice President

16
<PAGE>

EXETER VENTURE LENDERS, L.P.

By: Exeter Venture Advisors, Inc.,
General Partner

By:
------------------------------
Timothy P. Bradley
Vice President

SBIC PARTNERS, L.P.

By: Forrest Binkley & Brown, L.P.,
General Partner

By: Forrest Binkley & Brown
Venture Co., General
Partner

By:
------------------------------
Jeffrey J. Brown
Office of the
President

By: SL-SBIC PARTNERS, L.P.
General Partner

By: FW-SBIC, Inc.,
General Partner

By:
------------------------------
Name:
----------------------
Title:
----------------------

MID-STATE HORTICULTURAL COMPANY

By: /s/ Robert Setrakian
-----------------------------------
Its: President
-----------------------------------

CGW ASSOCIATES LIMITED PARTNERSHIP

By:
-----------------------------------
Its:
-----------------------------------

17
<PAGE>

MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY

By: /s/ John B. Jance
-----------------------------------
Name: John B. Jance
Title: Vice President

MASSMUTUAL PARTICIPATION INVESTORS

By: /s/ John B. Jance
-----------------------------------
Name: John B. Jance
Title: Vice President

MASSMUTUAL CORPORATE INVESTORS

By: /s/ John B. Jance
-----------------------------------
Name: John B. Jance
Title: Vice President

ARDSHIEL INC.

By:
-----------------------------------
Name:
Title:

18
<PAGE>
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY

By:
-----------------------------------
Name:
Title:

MASSMUTUAL PARTICIPATION INVESTORS

By:
-----------------------------------
Name:
Title:

MASSMUTUAL CORPORATE INVESTORS

By: -----------------------------------
Name:
Title:

ARDSHIEL INC.

By: /s/
-----------------------------------
Name:
Title: Attorney-in-Fact

BANK OF AMERICA ILLINOIS

By:
-----------------------------------
Name:
Title:

19
<PAGE>

BANK OF AMERICA ILLINOIS

By: /s/ Jeffrey M. Mann
-----------------------------------
Name: Jeffrey M. Mann
Title: Principal

------------------------------------------
Jeffrey B. O'Neill

JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY

By: /s/ Phillip Peters
-----------------------------------
Name: Phillip Peters
Title: Senior Agribusiness
Investment Officer

20
<PAGE>

MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY

By:
-----------------------------------
Name:
Title:

MASSMUTUAL PARTICIPATION INVESTORS

By:
-----------------------------------
Name:
Title:

MASSMUTUAL CORPORATE INVESTORS

By:
-----------------------------------
Name:
Title:

ARDSHIEL INC.

By: /S/
-----------------------------------
Name:
Title: Attorney-in-Fact

BANK OF AMERICA ILLINOIS

By:
-----------------------------------
Name:
Title:

------------------------------------------
Jeffrey B. O'Neill

<PAGE>

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the "Agreement") is entered into as of
October 10, 1996 by and among Golden State Acquisition Corp., a Delaware
corporation (the "Company"), and the parties listed on the signature pages
hereto, (collectively, the "Holders").

R E C I T A L S:

A. Pursuant to the terms and subject to the conditions of that certain
Stock Purchase Agreement dated of even date herewith (the "Stock Purchase
Agreement") by and among the Company, SBIC Partners, L.P. ("SBIC Partners") and
Jeffrey B. O'Neill, the execution and delivery of this Agreement is a condition
to the purchase and sale by the Holders of shares of the Company's Class B
Common Stock, $.01 par value per share (the "Class B Stock"), pursuant to the
terms of the Stock Purchase Agreement.

A G R E E M E N T:

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:

"Closing Date" shall mean October 10, 1996.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.

"Form S-3" shall mean such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.

"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by the Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such Prospectus.

<PAGE>

"Register", "registered" and "registration" shall mean and refer to a
registration effected by preparing and filing a Registration Statement and
taking all other actions that are necessary or appropriate in connection
therewith, and the declaration or ordering of effectiveness of such Registration
Statement by the SEC.

"Registration Expenses" shall have the meaning set forth in Section 7.

"Registrable Securities" shall mean Class B Stock and any securities
issued or issuable with respect to the Class B Stock by way of a stock dividend,
stock split, combination of shares, recapitalization, restructuring, merger,
consolidation or other reorganization of the Company, provided that such term
shall not include any such shares of Class B Stock sold to the public by a
Holder pursuant to a Registration Statement or to Rule 144 under the Securities
Act or sold by a Holder in a private transaction in which such Holder's rights
hereunder were not assigned.

"Registration Statement" shall mean any registration statement of the
Company in compliance with the Securities Act that covers Registrable Securities
pursuant to the provisions of this Agreement, including, without limitation, the
Prospectus, all amendments and supplements to such Registration Statement,
including all post-effective amendments, all exhibits and all material
incorporated by reference in such Registration Statement.

"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.

"SEC" shall mean the Securities and Exchange Commission.

"Stockholders Agreement" shall mean that certain Stockholders
Agreement dated of even date herewith by and among the Company and the parties
listed on the signature pages thereto, as amended, modified or restated from
time to time.

"Underwritten registration" or "underwritten offering" shall mean a
registration in which securities of the Company are sold to an underwriter or
through an underwriter as agent for reoffering to the public.

2. REQUEST FOR REGISTRATION. (a) Subject to the rights set forth in
Section 2(e) below, at any time after the earlier of two (2) years from the
Closing Date or six months after completion of an initial public offering of the
Company's securities, any Holder shall have the right to make a written request
for registration under the Securities Act of at least 15% of the Registrable
Securities (a "Demand Registration"). Upon receipt of a Demand Registration,
the Company shall, within ten (10) days, give written notice of such request to
each other Holder and shall, subject to the limitations of Section 2(b), file as
soon as practicable, and in any event within ninety (90) days of the receipt of
such Demand Registration, a Registration Statement covering all

<PAGE>

Registrable Securities that such Holders request to be included in such
Registration Statement, by written notice to the Company, to be registered
within thirty (30) days of the mailing of such notice by the Company, and shall
use its reasonable best efforts to cause such Registration Statement to become
effective as promptly as practicable after the filing thereof. The Holders
shall be entitled to two (2) Demand Registrations hereunder.

(b) If any Holder intends to distribute the Registrable Securities
covered by its Demand Registration by means of an underwriting, it shall so
advise the Company as a part of its request and the Company shall include such
information in the written notice delivered to each other Holder referred to in
Section 2(a). In such event, the right of any Holder to include such Holder's
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters, which underwriter or underwriters shall be chosen by SBIC
Partners. Notwithstanding any other provision of this Section 2, if the
underwriter advises SBIC Partners in writing that marketing factors require a
limitation of the number of shares to be underwritten, then SBIC Partners shall
so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated, among all Holders
thereof in proportion (as nearly as practicable) to the amount of Registrable
Securities requested to be included in the registration by each Holder, provided
that such shares of Registrable Securities to be included in such underwriting
shall not be reduced unless all of the securities of the Company and of all
other selling stockholders that are not Registrable Securities are first
entirely excluded from such underwriting.

(i) the requesting Holder withdraws its Demand Registration
in its entirety at any time prior to such effectiveness or

(ii) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied.

(d) Notwithstanding the foregoing, if the Company shall furnish to
the requesting Holder a certificate signed by the President or Chief Executive
Officer of the Company stating that, in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for a Registration Statement to be filed and it is therefore
essential to defer the filing of such Registration Statement, the Company shall
have the right to defer such filing for a period of not more than an additional
sixty (60) days after
3
<PAGE>

receipt of the Demand Registration, provided that the Company may not utilize
this right more than once in any twelve (12) month period.

(e) Notwithstanding anything contained in this Section 2 to the
contrary, any time after the Closing Date, on the written request of SBIC
Partners the Company shall, in consultation with SBIC Partners, engage a
reputable, nationally-recognized underwriter reasonably acceptable to the Board
of Directors of the Company and, with the advice and assistance of such
underwriter, the Company shall commence the preparation of a Registration
Statement with respect to shares of the Company's common stock and shall take
all such other actions and do such other things as may be necessary and
appropriate to register such shares with the SEC and to have such Registration
Statement declared effective as soon as possible thereafter. With respect to
such Registration Statement, SBIC Partners shall be permitted to include for
registration that number of shares of Common Stock that equal up to twenty
percent (20%) of the aggregate number of shares of the capital stock of the
Company held by SBIC Partners and its affiliates. Such registration of shares
shall not count as a Demand Registration for purposes of Section 2(a).

3. COMPANY REGISTRATION. If the Company shall determine to register any
shares of its capital stock of the same series and class as any of the
Registrable Securities (or securities convertible into or exchangeable or
exercisable for shares of such series and class) for its own account or for the
account of any stockholder (other than a registration effected pursuant to the
terms and provisions of Section 2 hereof and a registration relating either to
the sale of securities to employees of the Company pursuant to the Company's
1996 Stock Option Plan), the Holders shall be entitled to include Registrable
Securities in such registration (and related underwritten offering, if any) on
the following terms and conditions:

(a) The Company shall promptly give written notice of such
determination to each Holder and each such Holder shall have the right to
request, by written notice given to the Company within thirty (30) days of the
receipt by such Holder of such notice, that a specific number of Registrable
Securities held by such Holder be included in such Registration Statement;

(b) If the Registration Statement relates to an underwritten
offering, the notice called for by Section 3(a) shall specify the name of the
managing underwriter for such offering and the number of securities to be
registered for the account of the Company and for the account of any of the
other stockholders of the Company;

(c) If the Registration Statement relates to an underwritten
offering, each Holder to be included therein must (i)sell such person's
Registrable Securities on the same basis provided in the underwriting
arrangements approved by the Company and (ii) complete and execute all
questionnaires, powers of attorney, indemnities, hold-back agreements,
underwriting agreements and other documents required under the terms of such
underwriting arrangements or by the SEC;

4
<PAGE>

(d) If the managing underwriter for the underwritten offering under
the Registration Statement to be filed by the Company determines that inclusion
of all or any portion of the Registrable Securities in such offering would
adversely affect the ability of the underwriter for such offering to sell all of
the securities requested to be included for sale in such offering, the number of
shares that may be included in such registration in such offering shall be
allocated as follows: (i) first, the Company shall be permitted to include all
shares of capital stock to be registered thereby;(ii) second, the Holders, on a
pro rata basis based on the total number of shares of capital stock held
thereby, shall be allowed to include such amount of the Registrable Securities
as the managing underwriter deems appropriate, but in no instance shall such
Registrable Securities be reduced to less than twenty-five percent (25%) of the
aggregate number of shares registered pursuant to such Registration Statement;
and (iii) third, to any other selling stockholder exercising piggyback
registration rights in such amounts as may be deemed appropriate by such
managing underwriter.

(e) Except as otherwise set forth in Section 2(e), nothing contained
in this Section 3 shall require that the Company register any Registrable
Securities in an initial public offering;

(f) Holders shall have the right to withdraw their Registrable
Securities from the Registration Statement at any time prior to the effective
date thereof, but if the same relates to an underwritten offering, they may only
do so during the time period and on terms deemed appropriate by the underwriters
for such underwritten offering; and

(g) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section 3 prior to the effective date of
such registration, whether or not any Holder has elected to include such
securities in such registration.

4. FORM S-3 REGISTRATION.

(a) Each Holder shall, from time to time, subject to the provisions
of this Section 4, be entitled to request that the Company effect a registration
of all or such portion of Holder's Registrable Securities on Form S-3 as shall
be specified in such request.

(b) If the Company shall receive from any Holder a written request to
effect a registration on Form S-3, if the Company is then permitted to use such
form under the Securities Act and applicable rules and regulations of the SEC,
the Company will promptly give written notice of the proposed registration to
each other Holder.

(c) As soon as practicable after receipt of any written request
pursuant to Section 4(a), the Company shall effect such registration as would
permit or facilitate the sale and distribution of all or such portion of the
requesting Holder's Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of each other

5
<PAGE>

Holder joining in such request as are specified in a written request given to
the Company within thirty (30) days after receipt of such written notice from
the Company, provided that the Company shall not be obligated to effect any such
registration pursuant to this Section 4 (i) if the requesting Holder, together
with each other Holder of Registrable Securities, propose to sell Registrable
Securities at an aggregate price to the public of less than $500,000 or (ii) if
the Company shall furnish to the Holders a certificate signed by the President
or Chief Executive Officer stating that in the good faith judgment of the Board
of Directors, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
Registration Statement for a period of not more than sixty (60) days after
receipt of the request described in Section 4(a).

(d) Subject to Section 4(b), the Company shall file a Form S-3
Registration Statement covering the Registrable Securities as soon as
practicable after receipt of the request by the requesting Holder.

(e) At all times after the Company shall have become subject to the
reporting requirements of the Exchange Act, the Company shall use its best
efforts to make registrations on Form S-3 available for the sale of Registrable
Securities.

5. RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTRABLE SECURITIES.
Each Holder whose Registrable Securities are included (in whole or in part) in a
Registration Statement filed by the Company under Sections 2 or 3 for sale in an
underwritten offering agrees, if requested by the managing underwriter of such
offering, not to sell, make any short sale of, loan, grant any option for the
purchase of, dispose of or effect any public sale or distribution of securities
of the same series and class as (or securities exchangeable or exercisable for
or convertible into securities of the same series and class as) the Registrable
Securities included in the Registration Statement, including a sale pursuant to
Rule 144 under the Securities Act (except as part of such underwritten
registration), during the ten (10) day period prior to, and during the
ninety (90) day period (or shorter period requested by the underwriter)
beginning on the closing date of such underwritten offering, to the extent
timely notified in writing by the Company or the managing underwriter.

6. REGISTRATION PROCEDURES. In connection with the Company's
registration obligations pursuant to Sections 2, 3 or 4 hereof, the Company will
use its best efforts to effect such registration to permit the sale of the
Registrable Securities covered thereby in accordance with the intended method or
methods of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:

(a) prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities and use its best efforts to cause such
Registration Statement to become effective, and, upon the request of any Holder,
keep such registration statement effective

6
<PAGE>

for up to ninety (90) days, provided that, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, the Company
will furnish to the Holders of the Registrable Securities covered by such
Registration Statement, their counsel, and the underwriters, if any, and their
counsel, copies of all such documents proposed to be filed at least ten (10)
days prior thereto, and, with respect to any Registration Statement prepared to
be filed by the Company, the Company will not file any such Registration
Statement or amendment thereto or any Prospectus or any supplement thereto to
which any such Holder shall object within such ten (10) day period, provided,
further, that the Company will not name or otherwise provide any information
with respect to any Holder in any Registration Statement or Prospectus without
the consent of such Holder, unless required to do so by the Securities Act and
the rules and regulations thereunder;

(b) prepare and file with the SEC such amendments, post-effective
amendments and supplements to the Registration Statement and the Prospectus as
may be necessary to comply with the provisions of the Securities Act and the
rules and regulations thereunder with respect to the disposition of all
securities covered by such Registration Statement;

(c) promptly notify the selling Holders (i) when the Prospectus or
any Prospectus supplement or post-effective amendment has been filed, and, with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective,(ii) of any request by the SEC for amendments or
supplements to the Registration Statement or the Prospectus or for additional
information,(iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose, (iv)if at any time the representations and warranties of the
Company contemplated by Section 6(k) cease to be true and correct,(v) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (vi)of the
happening of any event which makes any statement made in the Registration
Statement, the Prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes in the Registration
Statement, the Prospectus or any document incorporated therein by reference in
order to make the statements therein not misleading;

(d) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment;

(e) if requested by a selling Holder, immediately incorporate in a
Prospectus supplement or post-effective amendment such information as a majority
of the Holders agree should be included therein relating to the sale of the
Registrable Securities, including, without limitation, information with respect
to the number of Registrable Securities being sold, the purchase price being
paid therefor and any other terms of the distribution of the Registrable
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement

7
<PAGE>

or post-effective amendment as promptly as practicable after being notified of
the matters to be incorporated in such Prospectus supplement or post-effective
amendment;

(f) furnish to each selling Holder, without charge, at least one
signed copy of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference);

(g) deliver to each selling Holder, without charge, such reasonable
number of conformed copies of the Registration Statement (and any post-effective
amendment thereto) and such number of copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto (and any
documents incorporated by reference therein) as such Holder may reasonably
request, all in full conformity with the Securities Act; the Company consents to
the use of the Prospectus or any amendment or supplement thereto by each of the
selling Holders in connection with the offer and sale of the Registrable
Securities covered by the Prospectus or any amendment or supplement thereto;

(h) prior to any offering of Registrable Securities covered by a
Registration Statement, register or qualify or cooperate with the selling
Holders in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as any such selling Holder reasonably requests, and use its best
efforts to keep each such registration or qualification effective, including
through new filings, or amendments or renewals, during the period such
Registration Statement is required to be kept effective pursuant to the terms of
this Agreement; and do any and all other acts or things necessary or advisable
to enable the disposition in all such jurisdictions reasonably requested by the
Holders of the Registrable Securities covered by such Registration Statement,
provided that under no circumstances shall the Company be required in connection
therewith or as a condition thereof to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions;

(i) cooperate with the selling Holders and the managing underwriter
or underwriters to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, free of any and all
restrictive legends, such certificates to be in such denominations and
registered in such names as the managing underwriter or underwriters, if any, or
such Holders may request;

(j) upon the occurrence of any event contemplated by
Section 6(c)(vi) above, prepare a supplement or post-effective amendment to the
Registration Statement or the Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities, the Prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;

8
<PAGE>

(k) (i) make such representations and warranties to the selling
Holders as are customarily made by issuers to underwriters in primary
underwritten offerings; (ii) obtain opinions of counsel to the Company and
updates thereof, addressed to each selling Holder and covering such matters as
are customarily the subject of opinions of issuer's counsel provided to
underwriters in underwritten public offerings; (iii) obtain "cold comfort"
letters and updates thereof from the Company's independent certified public
accountants addressed to the selling Holders, such letters to be in customary
form and covering matters of the type customarily requested in "cold comfort"
letters by underwriters in connection with underwritten public offerings; and
(iv) deliver such documents and certificates as may be requested by the
Requisite Holders to evidence compliance with clause (i) above and with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company with the selling Holders (the above shall be done at
each closing under such underwriting or similar agreement or as and to the
extent required thereunder);

(l) make generally available to the Holders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act, no later than
sixty (60) days after the end of any twelve (12) month period (or ninety (90)
days, if such period is a fiscal year)(i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in a firm or
best efforts underwritten offering, or, if not sold to underwriters in such an
offering,(ii) beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the Registration Statement, which
statements shall cover said twelve (12) month period;

(m) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by each Registration Statement from and
after a date not later than the effective date of such Registration Statement;

(n) use its best efforts to cause all Registrable Securities covered
by each Registration Statement to be listed, subject to notice of issuance,
prior to the date of the first sale of such Registrable Securities pursuant to
such Registration Statement, on each securities exchange on which the Common
Stock issued by the Company is then listed, and admitted to trading on the
Nasdaq Stock Market, if the Common Stock is then admitted to trading on the
Nasdaq Stock Market; and

(o) enter into such agreements (including underwriting agreements in
customary form containing, among other things, reasonable and customary
indemnities) and take such other actions as a majority of the Holders shall
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities.

Each Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 6(c)(vi) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities under
the Prospectus related to the applicable Registration Statement until such
Holder's receipt of the copies of the supplemented or amended

9
<PAGE>

Prospectus contemplated by Section 6(j) hereof, or until it is advised in
writing by the Company that the use of the Prospectus may be resumed. It shall
be a condition precedent to the obligations of the Company to take any action
pursuant to this Section 6 with respect to the Registrable Securities of any
selling Holder that such Holder shall furnish to the Company such information
regarding itself and the Registrable Securities held by it as shall be required
by the Securities Act to effect the registration of such Holder's Registrable
Securities.

7. REGISTRATION EXPENSES. All expenses incident to any registration to
be effected hereunder and incident to the Company's performance of or compliance
with this Agreement, including without limitation all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, National Association of Securities
Dealers, Inc., stock exchange and qualification fees, fees and disbursements of
the Company's counsel and of independent certified public accountants of the
Company (including the expenses of any special audit required by or incident to
such performance), the fees of counsel representing the Holders in such
offering, expenses of the underwriters that are customarily requested in similar
circumstances by such underwriters (excluding discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Registrable Securities), all
such expenses being herein called "Registration Expenses," will be borne by the
Company. The Company will also pay its internal expenses, the expense of any
annual audit and the fees and expenses of any person retained by the Company.

8. INDEMNIFICATION.

(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless each Holder of Registrable Securities, its officers,
directors, partners and employees and each person who controls such Holder
(within the meaning of Section 15 of the Securities Act) from and against any
and all losses, claims, damages and liabilities (including any investigation,
legal or other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim asserted) to
which such Holder may become subject under the Securities Act, the Exchange Act
or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities arise out of
or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
prospectus or any amendment or supplement thereto, (ii)the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act or
any state securities or blue sky laws in connection with the Registration
Statement, Prospectus or preliminary prospectus or any amendment or supplement
thereto, provided that the Company will not be liable to any Holder to the
extent that such loss, claim, damage or liability arises from or is based upon
any untrue statement or omission based upon written information furnished to the
Company by such Holder.

10
<PAGE>

(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. Each Holder
of Registrable Securities whose Registrable Securities are sold under a
Prospectus which is a part of a Registration Statement agrees to indemnify and
hold harmless the Company, its directors and each officer who signed such
Registration Statement and each person who controls the Company (within the
meaning of Section 15 of the Securities Act), and each other Holder of
Registrable Securities whose Registrable Securities are sold under the
Prospectus which is a part of such Registration Statement (and such holder's
officers, directors and employees and each person who controls such holder
within the meaning of Section 15 of the Securities Act), under the same
circumstances as the foregoing indemnity from the Company to each Holder of
Registrable Securities to the extent that such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement of a
material fact or omission of a material fact that was made in the Prospectus,
the Registration Statement, or any amendment or supplement thereto, in reliance
upon and in conformity with information relating to such holder furnished in
writing to the Company by such Holder expressly for use therein, provided that
in no event shall the aggregate liability of any selling Holder of Registrable
Securities exceed the amount of the net proceeds received by such Holder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation. The Company and the selling Holders shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as customarily furnished by such persons in similar circumstances.

(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person entitled to
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party, provided, however, that any person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such person and not of the
indemnifying party unless (A) the indemnifying party has agreed to pay such fees
or expenses,(B) the indemnifying party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such person or (C)
in the reasonable judgment of such person and the indemnifying party, based upon
advice of their respective counsel, a conflict of interest may exist between
such person and the indemnifying party with respect to such claims (in which
case, if the person notifies the indemnifying party in writing that such person
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such person). If such defense is not assumed by the indemnifying
party, the indemnifying party will not be subject to any liability for any
settlement made without its consent (but such consent will not be unreasonably
withheld). No indemnified party will be required to consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by all claimants or plaintiffs to such indemnified party
of a release from all liability in respect to such claim or litigation. Any
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees

11
<PAGE>

and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim. As used in this Section 8(c),
the terms "indemnifying party", "indemnified party" and other terms of similar
import are intended to include only the Company (and its officers, directors and
control persons as set forth above) on the one hand, and the Holders (and their
officers, directors, partners, employees, attorneys and control persons as set
forth above) on the other hand, as applicable.

(d) CONTRIBUTION. If for any reason the foregoing indemnity is
unavailable, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other, or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such proportion as
is appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other but
also the relative fault of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. Notwithstanding the
foregoing, no Holder shall be required to contribute any amount in excess of the
amount such Holder would have been required to pay to an indemnified party if
the indemnity under Section 8(b) hereof was available. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligation of any person to
contribute pursuant to this Section 8(d) shall be several and not joint.

(e) TIMING OF PAYMENTS. An indemnifying party shall make payments of
all amounts required to be made pursuant to the foregoing provisions of this
Section 8 to or for the account of the indemnified party from time to time
promptly upon receipt of bills or invoices relating thereto or when otherwise
due or payable.

(f) SURVIVAL. The indemnity and contribution agreements contained in
this Section 8 shall remain in full force and effect regardless of any
investigation made by or on behalf of a participating Holder, its officers,
directors, partners, attorneys, agents or any person, if any, who controls such
Holder as aforesaid, and shall survive the transfer of such Registrable
Securities by such Holder.

9. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of a Registration Statement pursuant to the terms of this
Agreement:

(a) the Company shall, with respect to a Registration Statement filed
pursuant to Sections 2 and 4, give the Holders of such Registrable Securities so
registered, their underwriters, if any, and their respective counsel and
accountants the opportunity to participate in the preparation of such
Registration Statement (other than reports and proxy statements

12
<PAGE>

incorporated therein by reference and lawfully and properly filed with the SEC)
and each Prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto; and

(b) the Company shall give the Holders of such Registrable Securities
so registered, their underwriters, if any, and their respective counsel and
accountants such reasonable access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holders or such underwriters, to
conduct a reasonable investigation within the meaning of Section 11(b)(3) of the
Securities Act.

10. RULE 144. The Company covenants that it will file, on a timely
basis, the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder, and it
will take such further action as any Holder may reasonably request (including,
without limitation, compliance with the current public information requirements
of Rule 144(c) and Rule 144A under the Securities Act), all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
conditions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time,(b) Rule 144A under the Securities Act, as such
Rule may be amended from time to time or (c)any similar rule or regulation
hereafter adopted by the SEC. Upon the request of any Holder, the Company will
deliver to such holder a written statement verifying that it has complied with
such information and requirements.

11. NO INCONSISTENT AGREEMENTS. The Company will not enter into any
agreement offering registration rights of the nature set forth herein without
the consent of SBIC Partners, which consent may be withheld, in the sole
discretion thereof.

12. ASSIGNMENT OF RIGHTS. The Holders may assign their rights under the
Agreement to (a) any transferee of the Registrable Securities of any Holder, if
such transferee has acquired at least five percent (5%) of any class, series or
type of the Registrable Securities originally held by such Holder and such
transferee has executed this Agreement and agreed to be bound by the terms
hereof (it being understood, however, that any such transferring Holder shall
retain all of such Holder's rights hereunder with respect to all Registrable
Securities not so transferred by such transferring Holder) or (b) any
stockholder, subsidiary, partner, nominee or affiliate of the Holders or any
such transferee.

13. SPECIFIC PERFORMANCE. Each Holder, in addition to being entitled to
exercise all rights provided herein or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of

13
<PAGE>

the provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.

14. NOTICES. All notices required or permitted under the terms of this
Agreement shall be delivered in the manner called for in the Stockholders
Agreement.

15. SUCCESSORS AND ASSIGNS. Subject to Section 11, this Agreement shall
inure to the benefit of the successors and assigns of the Holders, such that the
rights under this Agreement shall inure to the benefit of and be binding upon
subsequent holders of Registrable Securities without the need for an express
assignment. This Agreement shall inure to the benefit of and be binding upon
the Company and any corporation resulting from any merger or consolidation of
the Company with or into such corporation (in which the Company is not the
surviving corporation) or any corporation whose securities are issued in
exchange for the Company's shares of Common Stock.

16. SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and shall supersede and
preempt any prior understandings, agreements or representations, written or
oral, by or among the parties hereto.

18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be original, and all of which together shall
constitute one instrument.

19. AMENDMENT. Any provision of this Agreement may be amended, waived or
modified only by a writing signed by the Company and each Holder.

20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.

14
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.

COMPANY: GOLDEN STATE ACQUISITION CORP.,
a Delaware corporation

By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------

HOLDERS: SBIC PARTNERS, L.P.,
a Texas limited partnership

By: Forrest Binkley & Brown L.P.,
General Partner

By: Forrest Binkley & Brown
Venture Co.,
General Partner

By:
--------------------------------
Jeffrey J. Brown
Office of the President

---------------------------------
Jeffrey B. O'Neill

15
<PAGE>

GOLDEN STATE ACQUISITION CORP.
SUPPLEMENTAL SIGNATURE PAGE
TO
REGISTRATION RIGHTS AGREEMENT

SUBSEQUENT CLOSING -- NOVEMBER 26, 1996

By their execution hereof, GOLDEN STATE ACQUISITION CORP., a Delaware
corporation (the "Company"), and each of the undersigned (each, a "Holder" and
collectively, the "Holders"), hereby become parties to the Registration Rights
Agreement dated as of October 10, 1996 (the "Registration Rights Agreement") by
and among the Company, SBIC Partners, L.P. and Jeffrey B. O'Neill. As of the
date hereof, the Company and the Holders each acknowledge and agree to the
provisions, terms and conditions of the Registration Rights Agreement with
respect to the shares of the Company's Class K Common Stock set forth opposite
each Holder's name on Exhibit B hereto.

IN WITNESS WHEREOF, this Supplemental Signature Page has been executed
and delivered as of the date forth set forth above.

GOLDEN STATE ACQUISITION CORP.

By:
----------------------------------
Jeffrey B. O'Neill
President

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

<PAGE>

HOLDERS: R&M PARTNERS/GSV, G.P.

By:
---------------------------------------
Jeffrey L. DuRocher
General Partner

Address: Riordan & McKinzie
300 South Grand Avenue
29th Floor
Los Angeles, CA 90071
Telephone: (213) 629-4824
Facsimile: (213) 229-8550

--------------------------------------------
Victor Palmieri

Address: The Palmieri Company
245 Park Avenue, 35th Floor
New York, New York 10167
Telephone: (212) 972-8060
Facsimile: (212) 972-7924

--------------------------------------------
Peter Mullin

Address: Mullin Consulting Inc.
644 South Figueroa Street
Los Angeles, CA 90017
Telephone: (213) 488-8500
Facsimile: (213) 622-4800

<PAGE>

EXHIBIT B

SCHEDULE OF SUBSEQUENT HOLDERS
<TABLE>
<CAPTION>

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Number of Shares of
Holder Class K Common Stock
------ --------------------
- ------------------------------------------------------------------------------
<S> <C>
R&M Partners/GSV, G.P. 20,661
- ------------------------------------------------------------------------------
Peter Mullin 6,887
- ------------------------------------------------------------------------------
Victor Palmieri 6,887
- ------------------------------------------------------------------------------
TOTAL 34,435
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

</TABLE>

<PAGE>

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

This Amended and Restated Stockholders Agreement (this "Agreement") is
made as of October 10, 1996, by and among Golden State Acquisition Corp., a
Delaware corporation (the "Company"), and the parties listed on the signature
pages hereto (collectively, the "Stockholders").

R E C I T A L S:

A. The parties hereto entered into that certain Stockholders
Agreement dated as of April 27, 1995 (the "Original Stockholders Agreement").

B. The parties to the Original Stockholders Agreement desire to
amend and restate such agreement on the terms and subject to the conditions set
forth herein.

C. The execution and delivery of this Agreement is a condition to
the purchase and sale by certain parties hereto of shares of the capital stock
of the Company pursuant to the terms of that certain Stock Purchase Agreement
dated of even date herewith (the "Stock Purchase Agreement").

A G R E E M E N T:

NOW, THEREFORE, in consideration of the foregoing promises, and such
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:

1. CORPORATE GOVERNANCE.

(a) From and after the Closing Date and until the
termination of this Agreement, each Stockholder entitled to vote its shares of
capital stock shall take all actions within such Stockholder's control, and the
Company shall take all actions within its control, in each case, so that:

(i) The Board shall be comprised of
five (5) directors;

(ii) The Board shall consist of three (3) individuals
to be designated by SBIC Partners, which individuals initially shall be Jeffrey
J. Brown, Nicholas B. Binkley and Douglas R. Wolter and (A) one (1) individual
designated by O'Neill, which individual shall initially be Jeffrey B. O'Neill
and (B) one (1) individual designated by Exeter, which individual shall
initially be Keith R. Fox;

(iii) If any of the individuals set forth in
Section 1(a)(ii) dies, becomes disabled, resigns, is removed from the Board or
sought to be removed by the party

<PAGE>

designating such individual or is otherwise unable to continue to serve as a
director, the party designating such individual shall have the right to
designate a replacement therefor and shall notify each other member of the Board
of the identity of such replacement, and each Stockholder shall, in any case,
vote in favor of the action recommended by such party;

(iv) Hancock shall, in accordance with the terms and
conditions of the Certificate of Designations of 12% Senior Redeemable
Exchangeable Preferred Stock of the Company, be entitled, under certain
circumstances, to designate up to three individuals to the Board, in which case
the Board shall adopt a resolution of the Board of Directors of the Company
authorizing an increase in the size of the Board to provide for such additional
members;

(v) The composition of the board of directors of each
of the Company's subsidiaries, including without limitation Golden State
Vintners ("GSV") (each, a "Sub Board"), shall be the same as that of the Board;

(vi) All committees of the Board and all Sub Boards
shall contain at least a majority of members designated by SBIC Partners; and

(vii) Any committee of the Board or a Sub Board shall be
created only upon, and may be disbanded only upon, the approval of a majority of
the Board of the applicable entity.

(b) The Company shall pay the reasonable out-of-pocket
expenses incurred by each director in connection with attending the meetings of
the Board, any Sub Board, any committee thereof and related Company matters.
Additionally, except with respect to O'Neill, each director shall be entitled to
an annual fee of $12,500, payable on the last day of each month in twelve equal
installments (commencing on the first month in which such director's term
commences), for each month in which such director serves on the Board, which
monthly fee shall be pro-rated to take into account the actual number of days
served. Each director shall also be entitled to receive all perquisites,
including, without limitation, any stock options, granted or provided to other
members of the Board.

(c) If any party fails to designate a representative to fill
a directorship pursuant to the terms of this Section 1, the election of an
individual to such directorship shall be accomplished in accordance with the
Company's Bylaws and applicable law.

(d) The prior written consent of SBIC Partners, which
consent shall be subject to the sole discretion of SBIC Partners, shall be
required with respect to the following actions by the Company or GSV and any
subsidiary of either entity (each, "Subsidiary"):

2
<PAGE>

(i) The merger, consolidation, sale of assets or
stock, dissolution or liquidation of the Company or GSV or any Subsidiary,
including without limitation, an initial public offering of shares of Common
Stock;

(ii) Any amendment to (A) the Company's Certificate of
Incorporation or Bylaws, (B) GSV's Articles of Incorporation or Bylaws or
(C) the Articles or Certificate of Incorporation, as the case may be, or any
other charter document of any Subsidiary;

(iii) The acquisition by the Company, GSV or any
Subsidiary, or investment in, any other business entity;

(iv) Any material change in the Company's, GSV's or any
Subsidiary's business as presently conducted;

(v) Any loan or guarantee by the Company, GSV or any
Subsidiary, or the material increase in the indebtedness of the Company, GSV or
any Subsidiary; and

(vi) (A) The making of any loan, advance or guarantee
to, or for the benefit of, (B) the sale, lease, transfer or other disposition of
any of the Company's, GSV's or any Subsidiary's properties or assets to, or for
the benefit of or (C) the purchase or lease of any property or assets from, or
the entering into or amending of any contract, agreement or understanding with,
or for the benefit of, any Affiliate of the Company, GSV or any Subsidiary
including, without limitation, any Stockholder or such Stockholder's Affiliates.

(e) The rights of any Stockholder under this Section 1 shall
terminate at such time as any Stockholder and its permitted transferees hold in
the aggregate less than 10% of the shares of Common Stock or Junior Preferred
Stock, as the case may be, initially held by such Persons on the date hereof.

(f) The Stockholders hereby authorize the Board to increase
the size of the Board as required by Section 1(a)(iv).

2. REPRESENTATIONS AND WARRANTIES; ACKNOWLEDGMENT. Each
Stockholder represents and warrants that (a) such Stockholder is the record
owner of the securities of the Company set forth opposite such Stockholder's
name on the Schedule of Stockholders attached hereto as Schedule A,(b) this
Agreement has been duly authorized, executed and delivered by such Stockholder
and constitutes the valid and binding obligation of such Stockholder,
enforceable against such Stockholder in accordance with its terms and (c) such
Stockholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement. Each

3
<PAGE>

Stockholder acknowledges and agrees that such Stockholder will not grant any
proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement,
unless required to do so by any law or regulation applicable to such
Stockholder.

3. PREEMPTIVE RIGHTS

(a) Except for issuances of equity securities of the Company
or options or other rights to acquire equity securities of the Company (i) in
connection with a registered public offering, (ii) to employees of the Company
or GSV pursuant to options or under a stock option plan approved by the Board of
Directors, (iii) to any financial institution in connection with the incurrence
of Indebtedness by the Company or GSV, (iv) as payment of all or a portion of
the purchase price of any business or assets thereof acquired by the Company, or
(v) upon the exercise of any option or other right described in any of clauses
(i) through (iv) above, if the Company authorizes the issuance or sale of any
equity securities of the Company or any securities containing options or rights
to acquire any equity securities of the Company (other than as a dividend on
shares of Common Stock outstanding), the Company shall first offer to sell to
each Stockholder, at the same price and on the same terms, a portion of such
securities, options or rights (the "New Securities") equal to the quotient of
(i) the number of shares of Common Stock or Junior Preferred Stock held by such
Stockholder divided by (ii) the total number of shares of Common Stock
outstanding on a fully diluted bases after giving effect to all shares of Common
Stock issuable upon conversion of any convertible securities or the exercise of
any option, warrant or similar right, whether or not such conversion right or
option, warrant or similar right is then exercisable, provided that holders of
non-voting securities shall be only entitled pursuant to this Section 3 to
acquire non-voting securities of the same class held thereby and, in that
regard, the term "New Securities" shall include such appropriate number of
non-voting securities to be acquired by such Stockholder holding non-voting
securities, in lieu of a like number of voting securities, as the case may be.

(b) In order to exercise its purchase rights pursuant to
this Section 3, a Stockholder must, within twenty (20) days after receipt of
written notice from the Company describing in reasonable detail the New
Securities being offered, the purchase price thereof, the payment terms and such
Stockholder's percentage allotment, deliver a written notice to the Company
describing its election. If all of the New Securities offered to the
Stockholders are not fully subscribed by the Stockholders, the remaining New
Securities shall be reoffered by the Company to the Stockholders purchasing
their full allotment upon the terms set forth in this Section 3 until either all
such New Securities have been subscribed for or no Stockholder subscribes for
additional New Securities, except that such Stockholder must give written notice
of its election to purchase such reoffered New Securities within ten (10) days
after receipt of notice of any such reoffer.

4
<PAGE>

(c) During the 180 days after the expiration of the offering
periods described above, the Company shall be entitled to sell any New
Securities which the Stockholders have not elected to purchase, on terms and
conditions no more favorable to the purchasers thereof than those offered to the
Stockholders. Any New Securities offered or sold by the Company after such
180-day period must be reoffered to the Stockholders pursuant to the terms of
this Section 3.

(d) If the New Securities possess voting rights, a
Stockholder may request, and the Company shall issue to the requesting
Stockholder, in place of the New Securities such Stockholder would be entitled
to purchase pursuant to this Section 3, securities that are identical to the New
Securities except that such securities (i) will be non-voting and (ii) will be
convertible into New Securities at the request of the Stockholder on a
share-for-share basis.

4. RESTRICTIONS ON TRANSFER.

(a) TRANSFER OF SECURITIES. Subject to the provisions of
this Section 4, each Stockholder and its Affiliates may sell, transfer, assign,
pledge or otherwise dispose of, whether with or without consideration and
whether voluntarily or involuntarily or by operation of law (collectively, a
"Transfer"), shares of Common Stock or Junior Preferred Stock held by them at
any time, provided that no Stockholder may Transfer or offer to Transfer any
such shares to any third party purchaser engaged, directly or indirectly, in a
business in competition with the business of the Company, GSV or any Subsidiary,
including without limitation, the business of (A) growing wine grapes on a
long-term contract basis, (B) processing, custom crushing and selling commodity
and premium wine grapes, (C) producing proprietary case goods, (D) bottling wine
for unrelated third parties on a contract basis or (E) bottling and selling wine
on a retail or wholesale basis. Prior to transferring any shares of Common
Stock or Junior Preferred Stock to any Person in accordance with the provisions
of this Section 4(a), the transferring holders of such securities shall cause
the prospective transferee to execute and deliver to the Company, for the
benefit of the Company and the other Stockholders, a counterpart of this
Agreement pursuant to which such transferee agrees to be bound as a
"Stockholder" by the provisions of this Agreement.

(b) CO-SALE RIGHT.

(i) With respect to any proposed Transfer of shares of
Common Stock or Junior Preferred Stock (collectively, the "Transfer Securities")
by any Stockholder or any of its Affiliates (collectively, the "Selling Group"),
to a Person (the "proposed purchaser"), other than pursuant to an Exempt
Transfer, as defined below, and other than with respect to any Transfer of
shares of Class E Common Stock by Hancock or its affiliates, all other
Stockholders (collectively, the "Co-Sale Stockholders") shall each have the
right (the "Co-Sale Right") to require the proposed purchaser to purchase from
each of

5
<PAGE>

them (in lieu of a portion of the Transfer Securities to be sold by the Selling
Group) up to the number of shares of Common Stock or Junior Preferred Stock, as
the case may be, owned by each such Co-Sale Stockholder that equals the sum of
(A) the number determined by multiplying the total number of Transfer Securities
by the Pro Rata Portion of such Co-Sale Stockholder and (B) any additional
shares of Common Stock or Junior Preferred Stock such Co-Sale Stockholder shall
be entitled to Transfer pursuant to Section 4(b)(ii) if any other Co-Sale
Stockholder elects not to exercise its rights hereunder. Any shares of Common
Stock or Junior Preferred Stock purchased from Co-Sale Stockholders pursuant to
this Section 4(b) shall be paid for at the same price per share and upon the
same terms and conditions as those in the proposed transfer, it being agreed,
however, that such terms and conditions do not include the making of any
representations and warranties, indemnities or other similar agreements other
than representations and warranties with respect to title of the shares being
sold and authority to sell such shares and indemnities directly related thereto.
The Selling Group shall notify each Co-Sale Stockholder in writing of each such
proposed transfer, which notice (a "Notice of Transfer") shall be delivered at
least forty-five (45) days prior to such proposed transfer and shall set forth:
(1) the number of shares of Common Stock or Junior Preferred Stock proposed to
be transferred, (2) the name and address of the proposed purchaser, (3) the
proposed amount and form of consideration and terms and conditions of payment
and purchase offered by such proposed purchaser and (4) that the proposed
purchaser has been informed of the Co-Sale Right provided for in this
Section 4(b) and has agreed to purchase shares of Common Stock or Junior
Preferred Stock in accordance with the terms of this Agreement.

(ii) The Co-Sale Right may be exercised by any Co-Sale
Stockholder by delivery of a written notice to the Selling Group (the "Co-Sale
Notice") within thirty (30) days following its receipt of the Notice of
Transfer. The Co-Sale Notice shall state the number of shares of Common Stock
or Junior Preferred Stock that such Co-Sale Stockholder proposes to include in
the proposed transfer, as determined in Section 4(b)(i), plus the number of
additional shares of Common Stock or Junior Preferred Stock, if any, that such
Co-Sale Stockholder would be willing to sell to the proposed purchaser in the
event that any of the other Co-Sale Stockholders elect not to fully exercise
their Co-Sale Rights. If any other Co-Sale Stockholder has not fully exercised
its Co-Sale Rights, the maximum amount of additional shares of Common Stock or
Junior Preferred Stock that each such Co-Sale Stockholder shall be entitled to
sell pursuant to Section 4(b)(i) shall be determined by multiplying the total
number of shares of Common Stock or Junior Preferred Stock that, under the
formula described in Section 4(b)(i), all Co-Sale Stockholders not electing to
sell shares in such proposed transfer could have elected to sell to the proposed
purchaser but elected not to so sell, by a fraction, the numerator of which is
the shares of Common Stock or Junior Preferred Stock owned by the Co-Sale
Stockholder electing to sell additional shares of Common Stock or Junior
Preferred Stock and the denominator of which is the total number of shares of
Common Stock or Junior Preferred Stock owned by all Co-Sale Stockholders that
delivered Co-Sale Notices.

6
<PAGE>

(iii) If any Co-Sale Notice is received by the Selling
Group from any Co-Sale Stockholder during the thirty (30) day period referred to
above and the proposed purchaser does not purchase all of the shares of Common
Stock or Junior Preferred Stock set forth in each such Co-Sale Notice received
by the Selling Group on the same terms and conditions as specified in the Notice
of Transfer, then the Selling Group shall not be permitted to sell any Transfer
Securities to the proposed purchaser in the proposed transfer or grant any
rights with respect thereto. If no Co-Sale Notices are received by the Selling
Group during the thirty (30) day period referred to above, the Selling Group
shall have the right, for a period of forty-five (45) days after the expiration
of the thirty (30) day period during which a Notice of Transfer can be delivered
by a Co-Sale Stockholder, to transfer the Transfer Securities specified in the
Notice of Transfer referred to in the last sentence of the preceding paragraph
on terms and conditions no more favorable than those stated in the Co-Sale
Notice and in accordance with the provisions of this Section 4.

(iv) Each Co-Sale Stockholder electing to participate
in a proposed Transfer shall deliver to the purchaser specified in the Notice of
Transfer, against payment of the total purchase price for the securities to be
purchased at the price per share specified in such Notice of Transfer (with such
price per share to be determined as if all shares of Junior Preferred Stock are
converted into shares of Common Stock in the manner set forth in the Junior
Certificate of Designation), a certificate or certificates representing the
number of shares of Common Stock or Junior Preferred Stock, as the case may be,
which it has elected to sell pursuant to this Section 4(b), together with
appropriate instruments of transfer duly endorsed in blank.

(i) Except with respect to an Exempt Transfer, if any
Stockholder or its respective Affiliates (each a "proposed seller") wishes to
Transfer all or any portion of their respective shares of Common Stock or Junior
Preferred Stock (collectively, the "Offered Securities"), then the proposed
seller shall notify the Board of Directors in writing of its desire to Transfer
such Offered Securities, such notice (the "Proposal Notice") to set out with
particularity the identity and number of Offered Securities that the proposed
seller wishes to Transfer. The Company shall have a period of five (5) days, if
the Proposal Notice is from Hancock, or twenty (20) days for any other Proposal
Notice to inform the proposed seller, in writing (the "Purchase Proposal"), of
the price (the "Proposed Purchase Price") that the Company would be willing to
pay, in cash, for the number of Offered Securities set forth in the Proposal
Notice. The Company may assign to any third party, including without
limitation, any Stockholder (collectively, an "Assignee"), the right to make a
Purchase Proposal to the proposed seller within such twenty (20) day period.

(ii) Notwithstanding anything set forth in
Section 4(c)(i) to the contrary, if SBIC Partners is the proposed seller, then
the SBIC Partners designees on the

7
<PAGE>

Board of Directors shall only have one (1) vote with respect to the terms and
conditions of the Purchase Proposal, if any, to be made by the Company to such
proposed seller with respect to the Offered Securities.

(iii) The proposed seller shall have the right, within
twenty (20) days after the receipt of the Purchase Proposal to accept such
proposal and to transfer the Offered Shares to the Company or the Assignee, as
the case may be. If the proposed seller accepts such Purchase Proposal, the
Company or the Assignee, as the case may be, and the proposed seller shall enter
into a stock purchase agreement with respect to the Transfer of the Offered
Shares, such agreement to be on terms and conditions reasonably acceptable to
such parties, it being understood that such proposed seller shall not be
required to make any representations, warranties or indemnities thereunder,
except with respect to title to the Offered Shares and authority to sell such
shares.

(iv) If the proposed seller does not accept the
Purchase Proposal, the proposed seller shall have the right, for a period of
ninety (90) days after receipt of the Purchase Proposal (the "Sale Period"), to
Transfer all, but not less than all, of the Offered Securities set forth in the
Proposal Notice to any third party for an aggregate price for such Offered
Securities that is greater than the Proposed Purchase Price and on terms that
are at least as favorable as set forth in the Purchase Proposal. If the
proposed seller is not able to consummate such purchase and sale prior to the
expiration of the Sale Period, the proposed seller shall not be entitled to
Transfer any of its shares of Common Stock or Junior Preferred Stock without
first complying with the requirements of Section 4(c)(i).

(v) The provisions of this Section 4(c) and of
Section 4(b) shall not apply to Transfers by and between any Stockholder and its
respective Affiliates, so long as each such transferee has agreed in writing to
be bound by this Agreement, or to Transfers by the Stockholders or any of their
respective Affiliates pursuant to an effective registration statement under the
Securities Act (each, an "Exempt Transfer").

(d) RIGHTS TO COMPEL SALE.

(i) If SBIC Partners (also referred to herein
sometimes as the "Transferring Stockholder"), proposes to Transfer all, but not
less than all, of any shares of Common Stock held by it to another Person (other
than an Affiliate), then the Transferring Stockholder may, at its option,
require the remaining Stockholders and their respective Affiliates
(collectively, the "Remaining Stockholders"), subject to the rights of the
holders of Class E Common Stock under the Hancock Securities Purchase Agreement,
to sell all of the shares of Common Stock and/or Junior Preferred Stock owned by
them (collectively, the "Designated Securities") to such Person for the same
consideration on a per share basis (determined as if all shares of Junior
Preferred Stock were converted to Common Stock in the manner set forth in the
Junior Certificate of Designation) and otherwise on the same

8
<PAGE>

terms and conditions upon which the Transferring Stockholder is selling its
Common Stock and/or Junior Preferred Stock, provided that any Remaining
Stockholders selling equity securities of the Company pursuant to this
Section 4(d) will not be required to make any representations, warranties or
indemnities in connection with such sale other than representations and
warranties with respect to title of the shares being sold and authority to sell
such shares and indemnities directly related thereto.

(ii) The Transferring Stockholder shall send written
notice of the exercise of its rights pursuant to this Section 4(d) to each of
the Remaining Stockholders, which notice of transfer shall be delivered at least
thirty (30) days prior to such Transfer, and shall also set forth the
consideration per share of Designated Securities to be paid by the third party
purchaser and the other terms and conditions of such Transfer. On or prior to
the closing date of such Transfer, each of the Remaining Stockholders shall
deliver to the purchaser of the Designated Securities certificates representing
the Designated Securities held by such Remaining Stockholders, together with
appropriate instruments of transfer, duly endorsed in blank, and with all other
documents required to be executed in connection with such transaction, against
payment of the total purchase price for the Designated Securities to be
purchased (at the price per share specified in the Notice of Transfer referred
to in this Section 4(d)) in accordance with instructions delivered by such
Remaining Stockholder to the Transferring Stockholder not later than the day
immediately preceding the closing of such Transfer. In the event that a
Remaining Stockholder should fail to deliver such certificates to the purchaser
of the Designated Securities in the manner set forth above, the Company shall
cause the books and records of the Company to show that such Designated
Securities are bound by the provisions of this Section 4(d) and that such
Designated Securities shall be transferred only to the third party purchaser
upon surrender for transfer by the holder thereof.

(iii) Simultaneously with the consummation of the sale
of equity securities of the Company held by the Transferring Stockholder and of
Designated Securities held by the Remaining Stockholders pursuant to this
Section 4(d), the Company shall furnish such evidence of the completion and time
of completion of such sale or other disposition and the terms thereof as may be
reasonably requested by such Remaining Stockholders.

(e) CONDITIONS TO THE COMPANY'S EFFECTING A TRANSFER. The
Company agrees not to effect any Transfer of shares of Common Stock or Junior
Preferred Stock by any Stockholder pursuant to the provisions of this Section 4
until the Company has received evidence reasonably satisfactory to the Company
that the rights granted to certain of the Stockholders pursuant to this
Section 4, if applicable to such Transfer, have been complied with in all
respects. Any Person purchasing any shares of Common Stock or Junior Preferred
Stock pursuant to this Section 4 shall deliver to the Company, as a precondition
to consummating such purchase and sale,(i) an appropriate investment
representation as required by counsel to the Company, (ii) written evidence
reasonably satisfactory to the

9
<PAGE>

Company to the effect that (A) such Person is an "accredited investor," as such
term is defined under Rule 501 under the Securities Act, and that (B) such
Person has consented to be bound by the terms of this Agreement to the same
extent as the seller of such securities and (iii) in the case of any Transfer to
any transferee any other documentation, approval, consent, notice or opinion of
counsel that may be reasonably requested by the Company or required by this
Agreement or applicable law in order to effectuate the purchase and sale of such
securities.

5. SALE OF THE COMPANY

(a) Any time after the Closing Date, at the request of SBIC
Partners, the Company shall engage a reputable, nationally-recognized
underwriter reasonably acceptable to the Board, and, with the assistance of such
underwriter and the advise of SBIC Partners, the Company shall (i) solicit
interests in and initiate discussions with potential purchasers of the assets or
capital stock of the Company and/or GSV or (ii) reorganize, recapitalize or
refinance the senior or subordinated debt or the equity of the Company in a
manner reasonably acceptable to SBIC Partners (collectively, a "Sale of the
Company"). In connection with such a Sale of the Company, except as otherwise
set forth in this Section 5(a), all shares of Common Stock shall be treated
equally, share and share alike. Each holder of Common Stock and Junior
Preferred Stock shall vote for, consent to, and raise no objections against,
such Sale of the Company. If the Sale of the Company is structured as (ix) a
merger or consolidation, each holder of Common Stock and Junior Preferred Stock
shall waive any dissenters rights, appraisal rights or similar rights in
connection with such merger or consolidation or (x) a sale of Stock, each holder
of Common Stock and Junior Preferred Stock shall agree to sell all of its shares
of Common Stock and Junior Preferred Stock and rights to acquire shares of
Common Stock on the terms and conditions approved by SBIC Partners. Each holder
of Common Stock and Junior Preferred Stock shall take all necessary or desirable
actions in connection with the consummation of the Sale of the Company as
requested by SBIC Partners. The obligations of any holder of Class E Common
Stock shall be subject to the right of such holder under the Hancock Securities
Purchase Agreement. The obligations of the holders of Junior Preferred Stock in
this Section 5(a) shall be subject to the rights of such holders to cause the
Company to redeem their shares in accordance with the provisions of the Junior
Certificate of Designations.

(b) The obligations of the holders of Common Stock and
Junior Preferred Stock with respect to the Sale of the Company are subject to
the satisfaction of the following conditions: (i) upon the consummation of the
Sale of the Company, each holder of Common Stock and Junior Preferred Stock
shall receive the same form of consideration and the amount of consideration as
set forth in Section 6 below; (ii) if any holders of a class of Common Stock or
Junior Preferred Stock are given an option as to the form and amount of
consideration to be received, each holder of such class of Common Stock and
Junior Preferred Stock shall be given the same option; and (iii) each holder of
then currently

10
<PAGE>

exercisable rights to acquire shares of a class of Common Stock and Junior
Preferred Stock shall be given an opportunity to either (A) exercise such rights
prior to the consummation of the Sale of the Company and participate in such
sale as holders of such class of Common Stock and Junior Preferred Stock or
(B) upon the consummation of the Sale of the Company, receive in exchange for
such rights consideration equal to the amount determined by multiplying (1) the
same amount of consideration per share of Common Stock and Junior Preferred
Stock received by holders of such class of Common Stock and Junior Preferred
Stock in connection with the sale of the Company less the exercise price per
share of Common Stock and Junior Preferred Stock of such rights to acquire such
class of Common Stock and Junior Preferred Stock by (2) the number of shares of
such class of Common Stock and Junior Preferred Stock represented by such
rights.

6. DISTRIBUTION UPON SALE OF THE COMPANY. In the event of a Sale
of the Company, each Stockholder shall receive in exchange for its Common Stock
and Junior Preferred Stock the same portion of the aggregate consideration from
such Sale of the Company that such Stockholder would have received if such
aggregate consideration had been distributed by the Company in complete
liquidation pursuant to the rights and preferences set forth in the Company's
Certificate of Incorporation as in effect immediately prior to such Sale of the
Company. Each holder of Common Stock and Junior Preferred Stock shall take all
necessary or desirable actions in connection with the distribution of the
aggregate consideration from such Sale of the Company as requested by the
Company.

7. LEGEND. Each certificate evidencing all of the Company's
outstanding Common Stock and Junior Preferred Stock held by each of the
Stockholders, each certificate issued in exchange for any Junior Preferred Stock
held by any Stockholder and each certificate issued upon exercise of any option,
warrant, convertible securities and other rights to acquire shares of Common
Stock or Junior Preferred Stock held by any Stockholder shall be stamped or
otherwise imprinted with a legend in substantially the following form:

"THE SECURITIES REPRESENTED HEREBY (A) HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION REGISTERED UNDER SUCH ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION THEREFROM UNDER SAID ACT OR THE
RULES AND REGULATIONS PROMULGATED THEREUNDER AND (B) ARE SUBJECT TO
THE PROVISIONS, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER, SET
FORTH IN THAT CERTAIN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
DATED AS OF OCTOBER 10, 1996 BY AND AMONG THE COMPANY AND THE
SIGNATORIES THERETO. A COPY OF SUCH STOCKHOLDERS AGREEMENT SHALL BE
FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON
WRITTEN REQUEST."

11
<PAGE>

The legend immediately set forth above shall be removed from the certificates
evidencing any shares of capital stock upon an Initial Public Offering.

8. TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any shares of Common Stock or Junior Preferred Stock in
violation of any provision of this Agreement shall be void, AB INITIO, and the
Company shall not record such Transfer on its books or treat any purported
transferee(s) of such Common Stock or Junior Preferred Stock as the owner of
such shares for any purpose.

9. DEFINED TERMS. For purposes of this Agreement, the following
terms shall have the following meanings:

"Affiliate" shall mean, with respect to any Person, (i) any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such Person, (ii) any spouse, immediate family
member or other relative who has the same principal residence of any Person
described in clause (i) above, (iii) any trust in which any such Persons
described in clause (i) or (ii) above has a beneficial interest and (iv) any
corporation or other organization of which any such Persons described in clause
(i) or (ii) above collectively own more than 50% of the equity of such entity.
For purposes of this definition, ownership of 10% or more of the voting common
equity of a Person shall be deemed to be control of such Person.

"Certificate" shall mean the Certificate of Incorporation of
the Company, as originally filed with the Delaware Secretary of State on
April 18, 1995 and as amended to date.

"Closing Date" shall mean October 10, 1996.

"Common Stock" shall mean, collectively: (i) the Class B
Common Stock and the Class E Common Stock of the Company, in each case,
purchased or otherwise acquired by any Stockholder; (ii) any equity securities
issued or issuable directly or indirectly with respect to the common stock
referred to in clause (i) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization; and (iii) any other shares of any class or series of
common stock of the Company held by a Stockholder.

"Exeter" shall collectively mean Exeter Equity Partners, L.P.,
a Delaware limited partnership, and Exeter Venture Lenders, L.P., a Delaware
limited partnership.

"Hancock" shall mean the John Hancock Mutual Life Insurance
Company.

12
<PAGE>

"Hancock Securities Purchase Agreement" shall mean that
certain Securities Purchase Agreement dated April 21, 1995, as amended from time
to time, by and among Hancock, GSV and the Company.

"Indebtedness" shall mean all indebtedness for borrowed money,
all indebtedness under revolving credit agreements, all capitalized lease
obligations and all guarantees of any of the foregoing.

"Initial Public Offering" shall mean the consummation of an
initial public offering of at least twenty percent (20%) of the Company's Common
Stock that results in gross proceeds to the Company of at least Thirty-Five
Million Dollars ($35,000,000).

"Junior Certificate of Designation" shall mean the Certificate
of Powers, Designations, Preferences and Relative, Participatory, Optional and
Other Special Rights of Junior Exchangeable Preferred Stock and Qualifications,
Limitations and Restrictions thereof, as filed with the Delaware Secretary of
State on April 25, 1995.

"Junior Preferred Stock" shall mean the 6% Junior Exchangeable
Preferred Stock of the Company, par value $0.01 per share.

"O'Neill" shall mean Jeffrey B. O'Neill, an individual.

"Person" shall mean any corporation, partnership, limited
liability company, trust, individual, unincorporated organization or a
governmental agency or political subdivision thereof, as the context may
require.

"Pro Rata Portion" shall mean, with respect to each
Stockholder, the proportion that the number of shares of Common Stock issued to
and held, or issuable upon conversion of shares of Junior Preferred Stock, such
conversion of shares to be determined as if all such shares of Junior Preferred
Stock were converted into shares of Common Stock in the manner set forth in the
Junior Certificate of Designation.

"SBIC Partners" shall mean SBIC Partners, L.P., a Texas
limited partnership, and each Affiliate thereof.

10. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company and SBIC Partners,
provided that no such modification, amendment or waiver shall adversely affect
the rights hereunder of any Stockholder vis-a-vis the other Stockholders without
the approval in writing of such affected Stockholders. The failure of any party
to enforce any of the provisions of this Agreement shall in no way be

13
<PAGE>

construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.

11. TERMINATION. This Agreement shall terminate on the
consummation of an Initial Public Offering.

12. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or Rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.

13. ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way individually without limitation, the Original Stockholders Agreement,
which shall for all intents and purposes be null and void hereafter.

14. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Junior Preferred Stock or Common Stock, respectively, and the
respective successors and assigns of each of them, so long as they hold Junior
Preferred Stock or Common Stock, respectively.

15. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.

16. REMEDIES. The Company and the Stockholders shall be entitled
to enforce their rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor, whether at law or in equity. The parties
hereto agree and acknowledge that money damages would not be an adequate remedy
for any breach of the provisions of this Agreement and that the Company or any
Stockholder may in its sole discretion apply to any

14
<PAGE>

court of law or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting a bond or other security) in order to enforce
or prevent any violation of the provisions of this Agreement.

17. NOTICES. Any notice provided for in this Agreement shall be
in writing and shall be either personally delivered, mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) or sent via facsimile to any recipient, in the case of the Company, at
the address and facsimile number on the signature page hereto, and, with respect
to all other requests, at the address and facsimile number indicated beneath
such recipient's name on SCHEDULE A hereto and to any subsequent holder of
Common Stock or Junior Preferred Stock, as the case may be, subject to this
Agreement at such address as indicated by the Company's records, or at such
address and facsimile number or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.
Notices shall be deemed to have been given hereunder when delivered personally,
three days after deposit in the U.S. mail, one day after deposit with a
reputable overnight courier service and one day after confirmation of facsimile
transmission is received.

18. GOVERNING LAW. All issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of California, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of California or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.

19. DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.

COMPANY: GOLDEN STATE ACQUISITION CORP.,
a Delaware corporation

By:
-------------------------------------
Name: Jeffrey B. O'Neill
Title: Chief Executive Officer

Address:

60 East Sir Francis Drake Blvd., Suite 302
Larkspur, CA 94939
Fax No.: (415) 461-4497

STOCKHOLDERS:

SBIC PARTNERS: SBIC PARTNERS, L.P.,
a Texas limited partnership

By: Forrest Binkley & Brown L.P.,
General Partner

By: Forrest Binkley & Brown Venture Co.,
General Partner

By:
-------------------------------
Jeffrey J. Brown
Office of the President

O'NEILL: -----------------------------------
Jeffrey B. O'Neill

16
<PAGE>

HANCOCK: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

By:
-------------------------------
Phillip Peters, Senior
Investment Officer

HOLDERS OF JUNIOR
PREFERRED STOCK:
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY

By:
-------------------------------
John B. Joyce, Vice President

MASSMUTUAL PARTICIPATION INVESTORS

By:
-------------------------------
John B. Joyce, Vice President

MASSMUTUAL CORPORATE INVESTORS

By:
-------------------------------
John B. Joyce, Vice President

BANKAMERICA INVESTMENT CORPORATION

By:
-------------------------------
Jeffrey M. Mann, Principal

JEFFREY B. O'NEILL
ROBIN BOARD

By:
-------------------------------
Jeffrey B. O'Neill

17
<PAGE>

115595.3

18
<PAGE>

SCHEDULE A

SCHEDULE OF STOCKHOLDERS

Name of Stockholder Capital Stock
--------------------------------- --------------------------

SBIC Partners, L.P. 1,398,663 shares of
201 Main Street, Class B Common Stock
Suite 2302
Fort Worth, TX 76102
Attn: Jeffrey Brown
Fax No.: (817) 338-2047

Jeffrey B. O'Neill 206,611 shares of Class B
60 East Sir Francis Drake Common Stock
Blvd., Suite 302
Larkspur, CA 94939 33,315 shares of Junior
Fax No.: (415) 461-4497 Preferred Stock

Exeter Equity 310,291 shares of
Partners, L.P. Class B Common Stock
Exeter Venture
Lenders, L.P.
10 East 53rd Street
New York, NY 10022
Attn: Ruth R. Fox
Fax No.: (212) 872-1198

John Hancock Mutual 100,000 shares of Senior
Life Insurance Company Preferred Stock
200 Clarendon Street
57th Floor 414,079 shares of
P. O. Box 111 Series E
Boston, MA 02117 Common Stock
Attn: Bond and
Corporate Finance
Fax No.: (617) 572-9268

Copy to: 1900 Point West Way
Suite 1888
Sacramento, CA 95815
Attn: Office Manager

19
<PAGE>

Fax No.: (916) 922-4777

Name of Stockholder Capital Stock
--------------------------------- --------------------------

Massachusetts Mutual Life 43,823 shares of Junior
Insurance Company Preferred Stock
1295 State Street
Springfield, MA 01111-0001
Attn: Wallace Roger
Fax No.: (413) 744-6127

Massachusetts Participation 5,056 shares of Junior
Investors Preferred Stock
1295 State Street
Springfield, MA 01111-0001
Attn: John B. Joyce
Fax No.: (413) 744-6127

Massachusetts Corporate 10,113 shares of Junior
Investors Preferred Stock
1295 State Street
Springfield, MA 01111-0001
Attn: John B. Joyce
Fax No.: (413) 744-6127

BankAmerica Investment 52,621 shares of Junior
Corporation Preferred Stock
231 South LaSalle Street
Chicago, IL 60697
Attn: Jeffrey M. Mann
Fax No.: (312) 828-6298

Ms. Robin Board 33,177 shares of Junior
c/o Jeffrey B. O'Neill Preferred Stock

Jeffrey B. O'Neill 33,315 shares of Junior
Preferred Stock

20
<PAGE>

GOLDEN STATE ACQUISITION CORP.
SUPPLEMENTAL SIGNATURE PAGE
TO
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

SUBSEQUENT CLOSING -- NOVEMBER 26, 1996

By their execution hereof, GOLDEN STATE ACQUISITION CORP., a
Delaware corporation (the "Company"), and each of the undersigned (each, a
"Stockholder" and collectively, the "Stockholders"), hereby become parties to
the Amended and Restated Stockholders Agreement dated as of October 10, 1996
(the "Stockholders Agreement") by and among the Company, and the parties set
forth on the signature page thereof. As of the date hereof, the Company and the
Stockholders each acknowledge and agree to the provisions, terms and conditions
of the Stockholders Agreement with respect to the shares of the Company's
Class K Common Stock set forth opposite each Stockholder's name on Exhibit B
hereto.

IN WITNESS WHEREOF, this Supplemental Signature Page has been
executed and delivered as of the date forth set forth above.

GOLDEN STATE ACQUISITION CORP.

By:
-------------------------------------
Jeffrey B. O'Neill
President

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

<PAGE>

STOCKHOLDERS: R&M PARTNERS/GSV, G.P.

By:
-------------------------------------
Jeffrey L. DuRocher
General Partner

Address: Riordan & McKinzie
300 South Grand Avenue
29th Floor
Los Angeles, CA 90071
Telephone: (213) 629-4824
Facsimile: (213) 229-8550

-------------------------------------------
Victor Palmieri

Address: The Palmieri Company
245 Park Avenue, 35th Floor
New York, New York 10167
Telephone: (212) 972-8060
Facsimile: (212) 972-7924

-------------------------------------------
Peter Mullin

Address: Mullin Consulting Inc.
644 South Figueroa Street
Los Angeles, CA 90017
Telephone: (213) 488-8500
Facsimile: (213) 622-4800

<PAGE>

EXHIBIT B

SCHEDULE OF SUBSEQUENT STOCKHOLDERS

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Number of Shares of
Stockholder Class K Common Stock
----------- --------------------
- ------------------------------------------------------------------------------
<S> <C>
R&M Partners/GSV, G.P. 20,661
- ------------------------------------------------------------------------------
Peter Mullin 6,887
- ------------------------------------------------------------------------------
Victor Palmieri 6,887
- ------------------------------------------------------------------------------
TOTAL 34,435
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

</TABLE>

<PAGE>

GOLDEN STATE ACQUISITION CORP.

1996 STOCK OPTION PLAN

Section 1. DESCRIPTION OF PLAN. This is the 1996 Stock Option
Plan, dated December 3, 1996 (the "Plan"), of Golden State Acquisition Corp., a
Delaware corporation (the "Company"). Under this Plan, officers, key employees
and consultants of the Company or any of its subsidiaries and members of the
Board of Directors of the Company, to be selected as set forth below, may be
granted options ("Options") to purchase shares of the Company's Class B Common
Stock, par value $.01 per share (the "Class B Common Stock"). For purposes of
this Plan, the term "subsidiary" means any directly or indirectly majority or
wholly owned entity of the Company (individually, a "Subsidiary" and
collectively, the "Subsidiaries"). It is intended that the Options under this
Plan will either qualify for treatment as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and be
designated "Incentive Stock Options" or not qualify for such treatment and be
designated "Nonqualified Stock Options." Incentive Stock Options may only be
granted to employees.

Section 2. PURPOSE OF PLAN. The purpose of the Plan and of
granting Options to specified persons is to further the growth, development and
financial success of the Company and its Subsidiaries by providing additional
incentives to certain officers, key employees, consultants and members of the
Board of Directors (or equivalent bodies) of the Company or its Subsidiaries.
By assisting such persons in acquiring shares of Class B Common Stock, the
Company can ensure that such persons will themselves benefit directly from the
Company's and its Subsidiaries' growth, development and financial success.

Section 3. ELIGIBILITY. The persons who shall be eligible to
receive grants of Options under the Plan shall be (a) the officers, key
employees and consultants of the Company and the Subsidiaries; provided that
bona fide services shall be rendered to the Company or its Subsidiaries by such
consultant and such services shall not have been in connection with the offer
and sale of securities in a capital-raising transaction and (b) members of the
Board of Directors (or equivalent bodies) of the Company or its Subsidiaries. A
person who holds an Option is herein referred to as a "Participant," and more
than one Option may be granted to any Participant. The aggregate fair market
value (determined as of the time an Option is granted) of the Class B Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by any Participant in any calendar year under this Plan and any other
incentive stock option plans (which qualify under Section 422 of the Code) of
the Company or any Subsidiary shall not exceed $100,000.

<PAGE>

Section 4. ADMINISTRATION.

(a) The Plan shall be administered by a committee
(the "Committee") to be composed of not less than two members of the Board,
at least one of which shall be a Board designee of SBIC Partners, L.P. until
such time as the Company registers shares of its equity securities under the
Securities Act of 1933, as amended. Subject to the preceding sentence,
members of the Committee shall be appointed, both initially and as vacancies
occur, by the Board, to serve at the pleasure of the Board. On and after the
first date that the Company becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to the
extent possible and advisable, the Committee may be constituted so as to
permit this Plan to comply with Rule 16b-3 promulgated under Section 16 of
the Exchange Act and Section 162(m) of the Code. The Committee shall meet at
such times and places as it determines and may meet through a telephone
conference call. A majority of its members shall constitute a quorum, and
the decision of a majority of those present at any meeting at which a quorum
is present shall constitute the decision of the Committee. A memorandum
signed by all of its members shall constitute the decision of the Committee
without necessity, in such event, for holding an actual meeting.

(b) The Committee is authorized and empowered to
administer the Plan and, subject to the Plan, (i) to select the Participants,
to determine the number of shares of Class B Common Stock which may be
purchased and in general to grant Options and to extend the time period
during which a Nonqualified Stock Option may be exercised; (ii) to determine
the dates upon which Options shall be granted and the terms and conditions
thereof in a manner not inconsistent with the Plan, which terms and
conditions need not be identical as to the various Options granted; (iii) to
determine which Options are to be Incentive Stock Options and which Options
are to be Nonqualified Stock Options; (iv) to interpret the Plan; (v) to
prescribe, amend and rescind rules relating to the Plan; (vi) to authorize
any person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option previously granted by the Committee; (vii)
to determine the rights and obligations of Participants under the Plan;
(viii) to specify the purchase price to be paid by Participants for shares of
Class B Common Stock; (ix) to accelerate the time during which an Option may
be exercised in accordance with the provisions of Section 16 hereof, and to
otherwise accelerate the time during which an Option may be exercised (but
not reduce the time of exercise for Options which have vested), in each case
notwithstanding the provisions in the Option Agreement (as defined in Section
13) stating the time during which it may be exercised; and (x) to make all
other determinations deemed necessary or advisable for the administration of
the Plan. The good faith interpretation and construction by the Committee of
any provision of the Plan or of any Option granted under it shall be final,
conclusive and binding. No member of the Committee shall be liable for any
action or determination made with respect to the Plan or any Option granted
hereunder.

Section 5. SHARES SUBJECT TO PLAN. The aggregate amount of shares
of Class B Common Stock for which Options may be granted pursuant to the Plan
shall be 308,250. The

2
<PAGE>

number of shares of Class B Common Stock which may be purchased by a Participant
upon exercise of each Option shall be determined by the Committee and set forth
in each Option Agreement. Upon the expiration or termination, in whole or in
part, for any reason of an outstanding Option or any portion thereof which shall
not have vested or shall not have been exercised in full or in the event that
any shares of Class B Common Stock acquired pursuant to the Plan are reacquired
by the Company, (a) any shares of Class B Common Stock which have not been
purchased or (b) the shares of Class B Common Stock reacquired, as the case may
be, shall again become available for the granting of additional Options under
the Plan. Notwithstanding the preceding sentence, shares subject to a
terminated option shall continue to be considered to be outstanding for purposes
of determining the maximum number of shares that may be issued to a single
Participant. Similarly, the repricing of an Option will be considered the grant
of a new Option for this purpose.

Section 6. OPTION PRICE. Except as provided in Section 11 or
Section 12 hereof, the purchase price per share (the "Option Price") of the
shares of Class B Common Stock underlying each Option shall be determined by the
Committee but shall not be less than 100 percent of the fair market value of
such shares on the date of grant of Option, provided that if the Participant is
a 10-percent stockholder of the Company (as defined in Code Section 422(b)(6))
at the time such Participant is granted an Incentive Stock Option, the Option
Price shall be not less than 110 percent of said fair market value. Such fair
market value shall be determined by the Committee (i) if the Company's
securities are traded on a national securities exchange or on the National
Association of Securities Dealers Automated Quotation System (or a similar
successor system), on the basis of the reported closing sales price on such date
or, in the absence of a reported sales price on such date, on the basis of the
average of the reported closing bid and asked price on such date, or (ii) in the
absence of both a reported sales price and a reported bid and asked price under
clause (i), the Committee shall determine such fair market value on the basis of
such evidence as it deems appropriate, in its sole discretion.

Section 7. RESTRICTIONS ON GRANTS; VESTING OF OPTIONS.
Notwithstanding any other provisions set forth herein or in any Option
Agreement, no Options may be granted under the Plan subsequent to 10 years from
the date hereof. The vesting of all Options may be based on the passage of
time. The Committee shall determine the vesting schedule applicable to each
Option or group of Options in a schedule, a copy of which shall be filed with
the records of the Committee and attached to each Option Agreement to which the
same applies. The vesting schedule need not be identical for all Options granted
hereunder. The Committee may periodically review the vesting criteria
applicable to any Option or Options then outstanding and, in its sole good faith
judgment, may adjust the same to reflect unanticipated major events, including
but not limited to superior individual performance, catastrophic occurrences,
mergers and acquisitions.

Section 8. EXERCISE OF OPTIONS. Once vested, and prior to its
termination date, an Option may be exercised by the Participant by giving
written notice to the Company specifying

3
<PAGE>

the number of shares of Class B Common Stock to be purchased and accompanied by
payment of the full purchase price therefor in cash, by check or in such other
form of lawful consideration as the Committee may approve from time to time,
including without limitation and in the sole discretion of the Committee, the
assignment and transfer by the Participant to the Company of outstanding shares
of Class B Common Stock theretofore held by the Participant in a manner intended
to comply with the provisions of Rule l6b-3 under the Exchange Act, if
applicable. After giving due considerations of the consequences under Section
16 of the Exchange Act and under the Code, the Committee may also authorize the
exercise of Options by the delivery to the Company or its designated agent of an
irrevocable written notice of exercise form together with irrevocable
instructions to a broker-dealer to sell or margin a sufficient portion of the
shares of Class B Common Stock and to deliver the sale or margin loan proceeds
directly to the Company to pay the exercise price of the Option. Once vested,
and prior to its termination date, an Option may only be exercised by the
Participant or in the event of death of the Participant, by the person or
persons (including the deceased Participant's estate) to whom the deceased
Participant's rights under such Option shall have passed by will or the laws of
descent and distribution. Notwithstanding the foregoing, in the event of
disability (within the meaning of Section 22(e)(3) of the Code) of a
Participant, a designee of the Participant (or the legal representative of the
Participant if the Participant has no designee) may exercise the Option on
behalf of such Participant (provided such Option would have been exercisable by
such Participant) until the right to exercise such Option expires, as set forth
in such Participant's particular Option Agreement or this Plan.

Section 9. ISSUANCE OF CLASS B COMMON STOCK. The Company's
obligation to issue shares of Class B Common Stock upon exercise of an Option is
expressly conditioned upon the compliance by the Company with any registration
or other qualification obligations with respect to such shares of Class B Common
Stock under any federal and state law or rulings and regulations of any
government regulatory body and/or the making of such investment representations
or other representations and undertakings by the Participant (or the
Participant's designee, legal representative, heir or legatee, as the case may
be) in order to comply with the requirements of any exemption from any such
registration or other qualification obligations with respect to such shares of
Class B Common Stock which the Company in its sole discretion shall deem
necessary or advisable. Such required representations and undertakings may
include representations and agreements that such Participant (or the
Participant's designee, legal representative, heir or legatee): (a) is
purchasing such shares of Class B Common Stock for investment and not with any
present intention of selling or otherwise disposing of such shares of Class B
Common Stock; and (b) agrees to have a legend placed upon the face and reverse
of any certificates evidencing such shares of Class B Common Stock (or, if
applicable, an appropriate data entry made in the ownership records of the
Company) setting forth (i) any representations and undertakings which such
Participant has given to the Company or a reference thereto, and (ii) that,
prior to effecting any sale or other disposition of any such shares of Class B
Common Stock, the Participant must furnish to the Company an opinion of counsel,
satisfactory to the Company and its counsel, to the effect that such sale or
disposition will not violate the applicable

4
<PAGE>

requirements of federal and state laws and regulatory agencies, provided that
any such legend or data entry shall be removed when no longer applicable without
the necessity of an opinion of counsel. Inability of the Company to obtain,
from any regulatory body having jurisdiction, authority reasonably deemed by the
Company's counsel to be necessary for the lawful issuance and sale of any shares
of Class B Common Stock hereunder shall relieve the Company of any liability in
respect of the nonissuance or sale of such shares of Class B Common Stock as to
which such requisite authority shall not have been obtained. Any shares of
Class B Common Stock issued by the Company upon exercise of an Option granted
hereunder may be subject to a right of first refusal of the Company with respect
to all shares of Class B Common Stock proposed to be transferred by Participant,
as described in Section 13 hereof and certain other restrictions set forth in
each particular Option Agreement.

Section 10. NONTRANSFERABILITY. An Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent or distribution. Any permitted
transferee shall be required prior to any transfer of an Option or shares of
Class B Common Stock acquired pursuant to the exercise of an Option to execute a
written undertaking to be bound by the provisions of the applicable Option
Agreement.

Section 11. RECAPITALIZATION, REORGANIZATION; MERGER OR
CONSOLIDATION.

(a) Subject to Section 11(b) hereof, if the outstanding shares of
Class B Common Stock of the Company are exchanged for different securities of
the Company through a reorganization, recapitalization or reclassification or if
the number of outstanding shares is changed through a stock split or stock
dividend, an appropriate adjustment shall be made (i) in the number or kind of
shares which may be purchased pursuant to the exercise of Options, as provided
in Section 5 hereof, and (ii) in the number, exercise price, or kind of
securities subject to any outstanding Option granted under the Plan. Any such
adjustment in an outstanding Option, however, shall be made without change in
the total price applicable to the unexercised portion of the Option but with a
corresponding adjustment in the price for each share covered by the Option. In
making such adjustments, or in determining that no such adjustments are
necessary, the Committee may rely upon the advice of counsel and accountants to
the Company, and the good faith determination of the Committee shall be final,
conclusive and binding. No fractional shares of stock shall be issued or
issuable under the Plan on account of any such adjustment.

(b) Subject to Section 16 hereof (i) upon the dissolution,
liquidation or sale of all or substantially all of the business, properties and
assets of the Company, (ii) upon any reorganization, merger, consolidation or
exchange of securities in which the Company does not survive, (iii) upon any
reorganization, merger, consolidation or exchange of securities in which the
Company does survive and any of the Company's stockholders have the opportunity
to receive cash, securities and/or other property in exchange for their shares
of the capital stock of the Company or (iv) upon any acquisition by any person
or group (as defined in Section 13(d) of the Exchange Act) of beneficial
ownership of more than 50% of the Company's then outstanding

5
<PAGE>

shares of the capital stock of the Company (each of the events described in
clauses (i), (ii), (iii) or (iv) is referred to herein as an "Extraordinary
Event"), the Plan and each outstanding Option shall terminate. In such event,
each Participant who is not tendered an option by the surviving entity in
accordance with all of the terms of the immediately succeeding sentence, or who
does not accept any such substituted option which is so tendered, shall have the
right until 10 days before the effective date of such Extraordinary Event to
exercise, in whole or in part, any unexpired Option or Options issued to the
Participant, to the extent that said Option is then vested and exercisable
pursuant to the provisions of said Option or Options and of Section 7 of the
Plan. The Company shall use its reasonable best efforts to cause the surviving
entity in any Extraordinary Event to tender to any Participant an option or
options to purchase other securities of the surviving entity on the same basis
as any Participant may purchase shares of Class B Common Stock hereunder and
under the applicable Option Agreement (including satisfaction of similar vesting
provisions). The Company shall use its reasonable best efforts to cause such
new option or options to contain such terms and provisions as shall
substantially preserve the rights and benefits of any Option then outstanding
under the Plan with any reasonable changes to take into account the
circumstances of the surviving entity.

(c) The grant of an Option under the Plan shall not affect in
any way the right or power of the Company to make adjustments, reclassifications
or changes in its capital or business structures or to merge, consolidate,
dissolve or liquidate or to sell or transfer all or any part of its business or
assets.

Section 12. SUBSTITUTE OPTIONS. If the Company at any time should
succeed to the business of another entity through a merger, consolidation,
corporate reorganization or exchange, or through the acquisition of stock or
assets of such entity or its subsidiaries or otherwise, Options may be granted
under the Plan to option holders of such entity or its subsidiaries, in
substitution for options to purchase interests in such entity held by them at
the time of succession. The Committee, in its sole and absolute discretion,
shall determine the extent to which such substitute Options shall be granted (if
at all), the person or persons to receive such substitute Options (who need not
be all option holders of such entity), the number of Options to be received by
each such person, the Option Price of such Option (which may be determined
without regard to Section 6 hereof) and the terms and conditions of such
substitute Options; provided, however, that the Option Price of each such
substituted Option which is an Incentive Stock Option shall be an amount such
that, in the sole and absolute judgment of the Committee (and in compliance with
Section 424(a) of the Code), the economic benefit provided by such Option is not
greater than the economic benefit represented by the option in the acquired
entity as of the date of the Company's acquisition of such entity.

Section 13. OPTION AGREEMENT. Each Option granted under the Plan
shall be evidenced by a written option agreement (an "Option Agreement")
executed by the Company and the Participant which (a) shall contain each of the
provisions and agreements herein specifically required to be contained therein;
(b) shall indicate whether such Option is to be an Incentive

6
<PAGE>

Stock Option or a Nonqualified Stock Option, and if an Incentive Stock Option
shall contain terms and conditions permitting such Option to qualify for
treatment as an incentive stock option under Section 422 of the Code; (c) may
contain provisions which give the Company a right of first refusal to purchase
any shares of Class B Common Stock issued pursuant to the exercise of Options
granted under the Plan which a Participant proposes to sell and (d) may contain
such other terms and conditions as the Committee deems desirable and which are
not inconsistent with the Plan.

Section 14. RIGHTS AS A STOCKHOLDER. No Participant (or any legal
representative, heir or legatee) shall have any rights as a stockholder of the
Company with respect to any shares of Class B Common Stock covered by any Option
until the date of the issuance of a stock certificate to such person upon the
due exercise of such Option. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as expressly provided in Section 11
hereof.

Section 15. TERMINATION OF OPTIONS. Each Option granted under the
Plan shall set forth a termination date thereof, in addition to any other
termination events set forth in the Plan and in each particular Option
Agreement, which, with respect to Nonqualified Stock Options, shall be no later
than ten (10) years from the date such Option is granted and with respect to
Incentive Stock Options, if the Participant is a 10-percent stockholder of the
Company (as described in Section 422(b)(6) of the Code) at the time such Option
is granted, the Option shall terminate no later than five years from the date of
the grant thereof. An Incentive Stock Option shall contain any termination
events required by Section 422 of the Code. The termination of employment or
engagement in another relationship of a Participant (by death or otherwise)
shall not accelerate or otherwise affect the number of shares with respect to
which an Option may be exercised, and the Option may only be exercised with
respect to that number of shares which could have been purchased under the
Option had the Option been exercised by the Participant on the date of such
termination.

Section 16. ACCELERATION OF OPTIONS. Notwithstanding the
provisions of Sections 7, 11 or 15 hereof, or any provision to the contrary
contained in a particular Option Agreement, the Committee, in its sole
discretion, at any time, or from time to time, may elect to accelerate the
vesting of all or any portion of any Option then outstanding. The decision by
the Committee to accelerate an Option or to decline to accelerate an Option
shall be final, conclusive and binding. In the event of the acceleration of the
exercisability of Options as the result of a decision by the Committee pursuant
to this Section 16, each outstanding Option so accelerated shall be exercisable
for a period of at least five days from and after the date of such acceleration
and upon such other terms and conditions as the Committee may determine in its
sole discretion, provided that such terms and conditions (other than terms and
conditions relating solely to the acceleration of exercisability and the related
termination of an Option) may not adversely affect the rights of any Participant
without the consent of the Participant so adversely affected. Any

7
<PAGE>

outstanding Option which has not been exercised by the holder at the end of such
period shall terminate automatically and become null and void.

Section 17. WITHHOLDING OF TAXES. The Company or a Subsidiary, as
the case may be, may deduct and withhold from the wages, salary, bonus and other
income paid by the Company (or such Subsidiary) to the Participant the requisite
tax upon the amount of taxable income, if any, recognized by the Participant in
connection with the exercise in whole or in part of any Option, or the sale of
shares of Class B Common Stock issued to the Participant upon the exercise of an
Option, as may be required from time to time under any federal or state tax laws
and regulations. This withholding of tax shall be made from the Company's (or
such Subsidiary's) concurrent or next payment of wages, salary, bonus or other
income to the Participant or by payment to the Company (or such Subsidiary) by
the Participant of the required withholding tax, as the Committee may determine,
provided that, in the sole discretion of the Committee, the Participant may pay
such tax by reducing the number of shares of Class B Common Stock issued upon
exercise of an Option (for which purpose such shares of Class B Common Stock
shall be valued at fair market value as determined in good faith by the
Committee, which determination shall be final, conclusive and binding).

Section 18. EFFECTIVENESS AND TERMINATION OF THE PLAN. The Plan
shall be effective on the date on which it is adopted by the Board. The Plan
shall terminate, in addition to the other termination events set forth in the
Plan, at the earliest of the time when all shares of Class B Common Stock which
may be issued hereunder have been so issued, provided that the Board may in its
sole discretion terminate the Plan at any other time. Subject to Section 11
hereof, no such termination shall in any way affect any Option then outstanding.

Section 19. TIME OF GRANTING OPTIONS. The date of grant of an
Option shall, for all purposes, be the date on which the Committee makes the
determination granting such Option. Notice of the determination shall be given
to each Participant to whom an Option is so granted within a reasonable time
after the date of such grant.

Section 20. REPURCHASE RIGHT. All shares of Class B Common Stock
acquired on the exercise of any Options granted under this Plan shall be subject
to certain rights of the Company and its assigns to repurchase such shares in
accordance with the terms set forth in each Option Agreement.

Section 21. AMENDMENT OF PLAN. The Board of Directors may make
such amendments to the Plan and, with the consent of each Participant adversely
affected, the Committee may make such changes in the terms and conditions of
granted Options as it shall deem advisable. Such amendments and changes shall
include, but not be limited to, acceleration of the time at which an Option may
be exercised, but may not, without the approval of the stockholders (a) increase
the maximum number of shares subject to Options, except pursuant to

8
<PAGE>

Section 11 hereof, or (b) change the designation of the class of employees
eligible to receive Incentive Stock Options.

Section 22. TRANSFERS AND LEAVES OF ABSENCE. For purposes of the
Plan, (a) a transfer of a Participant's employment or consulting relationship,
without an intervening period, between the Company and a Subsidiary shall not be
deemed a termination of employment or a termination of a consulting relationship
and (b) a Participant who is granted in writing a leave of absence shall be
deemed to have remained in the employ of, or in a consulting relationship with,
the Company (or a Subsidiary, whichever is applicable) during such leave of
absence except that for purposes of exercising an Incentive Stock Option, the
Participant will be considered to have terminated employment on the 91st day of
the leave, unless his or her right to re-employment is guaranteed by statute or
contract.

Section 23. NO OBLIGATION TO EXERCISE OPTION. The granting of an
Option shall impose no obligation on the Participant to exercise such Option.

Section 24. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board, the members of the
Committee shall be indemnified by the Company to the fullest extent permitted by
law against the reasonable expenses, including reasonable attorneys' fees,
actually and necessarily incurred in connection with the defense of any action,
suit or proceeding, or in connection with any appeal thereof, to which they or
any of them may be a party by reason of any action taken or any failure to act
under or in connection with the Plan or any Option granted thereunder, and
against all amounts paid by them in satisfaction of a judgment in any such
action, suit or proceeding except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Committee member is not
entitled to indemnification under applicable law, provided that within 60 days
after institution of any such action, suit or proceeding such Committee member
shall in writing offer the Company the opportunity, at the Company's expense, to
handle and defend the same.

Section 25. GOVERNING LAW. The Plan and any Option granted
pursuant to the Plan shall be construed under and governed by the laws of the
State of Delaware without regard to conflict of law provisions thereof.

Section 26. NOT AN EMPLOYMENT OR OTHER AGREEMENT. Nothing
contained in the Plan or in any Option Agreement shall confer, intend to confer
or imply any rights of employment or any rights to a consulting or other
relationship or rights to continued employment by, or rights to a continued
consulting or other relationship with, the Company or any Subsidiary in favor of
any Participant or limit the ability of the Company, any Subsidiary or any other
entity to terminate, with or without cause, in its sole and absolute discretion,
the employment of, or consulting or other relationship with, any Participant,
subject to the terms of any written employment or consulting agreement to which
a Participant is a party.

9
<PAGE>

128665.3

<PAGE>

GOLDEN STATE ACQUISITION CORP.

INCENTIVE STOCK OPTION AGREEMENT

THIS INCENTIVE STOCK OPTION AGREEMENT (this "Agreement") is entered
into as of _____________, 199__ by and between Golden State Acquisition Corp., a
Delaware corporation (the "Company"), and _____________ ("Optionee") pursuant to
the Golden State Acquisition Corp., 1996 Stock Option Plan dated December 3,
1996 (the "Plan"). All capitalized terms not otherwise defined herein shall
have the meanings set forth in the Plan.

R E C I T A L S:

A. Optionee is an officer or employee of the Company or of a direct
or indirect subsidiary of the Company (individually, a "Subsidiary" and
collectively, the "Subsidiaries").

B. The Company desires to grant Optionee the right to purchase
shares of the Company's Class B Common Stock, par value $.01 per share (the
"Class B Common Stock"), pursuant to the terms and conditions of this Agreement
and the Plan.

A G R E E M E N T:

NOW, THEREFORE, in consideration of the covenants hereinafter set
forth, the parties agree as follows:

1. OPTION; NUMBER OF SHARES. The Company hereby grants to Optionee
the right (the "Option") to purchase up to a maximum of _______ shares (the
"Shares") of Common Stock at a price of $________ per share (the "Option Price")
to be paid in accordance with Section 6 hereof. This Option and the right to
purchase all or any portion of the Shares are subject to the terms and
conditions stated in this Agreement and in the Plan. It is intended that the
Option will qualify for treatment as an incentive stock option under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").

2. VESTING CRITERIA. The Option shall vest in equal annual
installments with respect to 25% of the Shares on each of the first, second,
third and fourth anniversaries of this Option. Such vesting installments shall
be cumulative, such that this Option may be exercised as to any or all of the
Shares covered by an installment at any time or times after that installment
becomes exercisable and until this Option expires or terminates.

<PAGE>

3. TERM OF AGREEMENT. This Option, and Optionee's right to exercise
this Option, shall terminate when the first of the following occurs:
(a) termination pursuant to Sections 11, 15 or 16 of the Plan; (b) the
expiration of ten (10) years from the date hereof; or (c) 90 days after the
date of termination of Optionee's employment or other relationship with the
Company and the Subsidiaries, unless such termination results from Optionee's
death or disability (within the meaning of Section 22(e)(3) of the Code) or
Optionee dies within 90 days after the date of termination of Optionee's
employment or consulting relationship with the Company and the Subsidiaries, in
which case this Agreement and the Option shall terminate 180 days after the date
of termination of Optionee's employment or other relationship with the Company
and the Subsidiaries.

4. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP. The termination
for any reason of Optionee's employment or other relationship with the Company
and the Subsidiaries shall not accelerate the vesting of the Option or affect
the number of Shares with respect to which the Option may be exercised, and this
Option may only be exercised with respect to that number of Shares which could
have been purchased under the Option had the Option been exercised by Optionee
on the date of such termination.

5. DEATH OF OPTIONEE; NO ASSIGNMENT. The rights of Optionee under
this Agreement may not be assigned or transferred except by will, by the laws of
descent or distribution and may be exercised during the lifetime of Optionee
only by such Optionee, provided that in the event of disability (within the
meaning of Section 22(e)(3) of the Code) of Optionee, a designee of Optionee (or
the Optionee's legal representative if Optionee has not designated anyone) may
exercise the Option on behalf of Optionee (provided the Option would have been
exercisable by Optionee) until the right to exercise the Option expires pursuant
to Section 3 hereof. Any attempt to sell, pledge, assign, hypothecate, transfer
or otherwise dispose of the Option in contravention of this Agreement or the
Plan shall be void and shall have no effect. If Optionee should die while
Optionee is engaged in an employment or other relationship with the Company
and/or any Subsidiary, and provided Optionee's rights hereunder shall have
vested, in whole or in part, pursuant to Section 2 hereof, Optionee's designee,
legal representative, or legatee, the successor trustee of Optionee's inter
vivos trust or the person who acquired the right to exercise the Option by
reason of the death of Optionee (individually, a "Successor") shall succeed to
Optionee's rights under this Agreement. After the death of Optionee, only a
Successor may exercise the Option, provided that any Shares received by such
Successor following such exercise shall be subject to Section 13.

6. EXERCISE OF OPTION. On or after the vesting of the Option in
accordance with Section 2 hereof and until termination of the Option in
accordance with Section 3 hereof, the Option may be exercised by Optionee (or
such other person specified in Section 5 hereof) to the extent exercisable as
determined under Section 2 hereof, upon delivery of the following to the Company
at its principal executive offices:

2
<PAGE>

(a) a written notice of exercise which identifies this Agreement
and states the number of Shares (which may not be less than 100) or all of the
Shares (if less than 100 Shares then remain covered by the Option) then being
purchased;

(b) a check, cash or any combination thereof in the amount of
the aggregate Option Price (or payment of the aggregate Option Price in such
other form of lawful consideration as the Committee may approve from time to
time under the provisions of Section 8 of the Plan);

(c) a check or cash in the amount reasonably requested by the
Company to satisfy the Company's withholding obligations under federal, state or
other applicable tax laws with respect to the taxable income, if any, recognized
by Optionee in connection with the exercise, in whole or in part, of the Option
(unless the Company and Optionee shall have made other arrangements for
deductions or withholding from Optionee's wages, bonus or other income paid to
Optionee by the Company or any Subsidiary, provided such arrangements satisfy
the requirements of applicable tax laws); and

(d) a written representation and undertaking, if requested by
the Company pursuant to Section 8(b) hereof, in such form and substance as the
Company may require, setting forth the investment intent of Optionee, or a
Successor, as the case may be, and such other agreements, representations and
undertakings as described in the Plan.

7. REPRESENTATIONS AND WARRANTIES OF OPTIONEE.

(a) Optionee represents and warrants that the Option is being
acquired by Optionee for Optionee's personal account, for investment purposes
only, and not with a view to the distribution, resale or other disposition
thereof.

(b) Optionee acknowledges that the Company may issue Shares upon
the exercise of the Option without registering such securities under the Act on
the basis of certain exemptions from such registration requirement.
Accordingly, Optionee agrees that Optionee's exercise of the Option may be
expressly conditioned upon Optionee's delivery to the Company of such
representations and undertakings as the Company may reasonably require in order
to secure the availability of such exemptions, including a representation that
Optionee is acquiring the Shares for investment and not with a present intention
of selling or otherwise disposing of such Shares.

(c) Optionee acknowledges receipt of this Agreement granting the
Option, and the Plan, and understands that all rights and liabilities connected
with the Option are set forth herein and in the Plan.

3
<PAGE>

8. NO RIGHTS AS A STOCKHOLDER. Optionee shall have no rights as a
stockholder of any shares of Common Stock covered by the Option until the date
(the "Exercise Date") an entry evidencing such ownership is made in the stock
transfer books of the Company. Except as may be provided under Section 11 of
the Plan, the Company will make no adjustment for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the Exercise Date.

9. LIMITATION OF COMPANY'S LIABILITY FOR NONISSUANCE. Inability of
the Company to obtain, from any regulatory body having jurisdiction, authority
reasonably deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares of Common Stock hereunder and under the Plan
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.

10. CONFIDENTIALITY. Optionee agrees to hold in the strictest of
confidence all material information, including without limitation all financial
information, provided to Optionee by the Company, and further agrees not to use
such information for any purpose adverse to the Company, not to duplicate such
information or to deliver such information to any other person.

11. THIS AGREEMENT SUBJECT TO PLAN. This Agreement is made under the
provisions of the Plan and shall be interpreted in a manner consistent with it.
To the extent that any provision in this Agreement is inconsistent with the
Plan, the provisions of the Plan shall control. A copy of the Plan is available
to Optionee at the Company's principal executive offices upon request and
without charge. The good faith interpretation of the Committee of any provision
of the Plan, the Option or this Agreement, and any determination with respect
thereto or hereto by the Committee, shall be final, conclusive and binding on
all parties.

12. RESTRICTIVE LEGENDS. Optionee hereby acknowledges that federal
securities laws and the securities laws of the state in which Optionee resides
may require the placement of certain restrictive legends upon the Shares issued
upon exercise of the Option, and Optionee hereby consents to the placing of any
such legends upon certificates evidencing the Shares as the Company, or its
counsel, may reasonably deem necessary; provided, however, that any such legend
or legends shall be removed when no longer applicable.

13. REPURCHASE BY THE COMPANY.

(a) REPURCHASE OPTION. If Optionee's employment with the
Company or any Subsidiary terminates for any reason (including, without
limitation, on the death, disability, retirement, voluntary resignation or
dismissal by the Company, with or without cause), the Company or one or more
designated assignees (each, an "Assignee") shall have the option (the
"Repurchase Option") to purchase from Optionee all or any portion of the Shares
then held by

4
<PAGE>

Optionee for a period of 180 days after the date of such termination (the
"Termination Date"). The purchase price for any such Shares to be purchased
pursuant to the Repurchase Option shall equal the greater of (i) the Option
Price or (ii) the fair market value of the Shares, as determined in good faith
by the Company's Board of Directors.

(b) ADJUSTMENTS OF OPTION PRICE UNDER REPURCHASE OPTION. The
purchase price for any Shares to be purchased pursuant to the Repurchase Option
shall be increased or decreased, as may be appropriate, to reflect any
subdivision or combination of the Shares or any dividend or distribution with
respect to the Shares which has been paid in additional shares of the capital
stock of the Company.

(c) EXERCISE OF REPURCHASE OPTION. The Repurchase Option shall
be exercised by the Company or any Assignee by delivery to Optionee, within the
180-day period specified in SECTION 13(B) above, of (i) a written notice
specifying the number of Shares to be purchased and (ii) a check in the amount
of the purchase price, calculated as provided in this SECTION 13, for all Shares
to be purchased.

(d) TERMINATION OF REPURCHASE OPTION. The Repurchase Option
shall terminate and have no further force or effect on and after the
effectiveness of the Company's first registration of shares of its equity
securities pursuant to the Securities Act of 1933, as amended.

14. NOTICES. All notices, requests and other communications
hereunder shall be in writing and, if given by telecopy, shall be deemed to have
been validly delivered 12 hours after confirmation of transmission to the fax
numbers set forth below, if sent during usual business hours; if given by
personal delivery, shall be deemed to have been validly served, given or
delivered upon actual delivery; and, if mailed, shall be deemed to have been
validly served, given or delivered three business days after deposit in the
United States mails, as registered or certified mail, with proper postage
prepaid and addressed to the party or parties to be notified, at the following
addresses (or such other address(es) as a party may designate for itself by like
notice):

If to the Company:

Golden State Acquisition Corp.
60 East Sir Francis Drake Boulevard, Suite 302
Larkspur, CA 94939
Fax No.: (415) 461-4497

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<PAGE>

If to Optionee:

__________________________
__________________________
__________________________
Fax No.: ________________

15. NOT AN EMPLOYMENT OR OTHER AGREEMENT. Nothing contained in this
Agreement shall confer, intend to confer or imply any rights to an employment or
other relationship or rights to a continued employment or other relationship
with the Company and/or any Subsidiary in favor of Optionee or limit the ability
of the Company and/or any Subsidiary to terminate, with or without cause, in its
sole and absolute discretion, the employment or other relationship with
Optionee, subject to the terms of any written employment or other agreement to
which Optionee is a party.

16. NOTICE OF DISQUALIFYING DISPOSITION OF SHARES. If the Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to exercise
of this Option on or before the later of (a) the date two years after the date
of this Option, or (b) the date one year after the date of exercise pursuant to
which such Shares were acquired, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that the Optionee
may be subject to income tax withholding by the Company on the compensation
income recognized by the Optionee by reason of such disposition.

17. GOVERNING LAW. This Agreement shall be construed under and
governed by the laws of the State of Delaware without regard to the conflict of
law provisions thereof.

18. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original and both of which together shall be
deemed one Agreement.

6
<PAGE>

IN WITNESS WHEREOF, the Company and Optionee have executed this
Agreement as of the date first above written.

THE COMPANY:

GOLDEN STATE ACQUISITION CORP.
a Delaware corporation

By:
-------------------------------
Jeffrey J. Brown
Chairman of the Board

OPTIONEE:

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

<PAGE>

GOLDEN STATE ACQUISITION CORP.

NONQUALIFIED STOCK OPTION AGREEMENT

THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is entered
into as of _____________, 199__ by and between Golden State Acquisition Corp., a
Delaware corporation (the "Company"), and _____________ ("Optionee") pursuant to
the Golden State Acquisition Corp., 1996 Stock Option Plan dated December 3,
1996 (the "Plan"). All capitalized terms not otherwise defined herein shall
have the meanings set forth in the Plan.

R E C I T A L S:

A. Optionee is an officer, employee or consultant of the Company or
of a direct or indirect subsidiary of the Company (individually, a "Subsidiary"
and collectively, the "Subsidiaries") or an independent member of the Board of
Directors or Board of Representatives of the Company and/or its Subsidiaries.

A G R E E M E N T:

NOW, THEREFORE, in consideration of the covenants hereinafter set
forth, the parties agree as follows:

1. OPTION; NUMBER OF SHARES. The Company hereby grants to Optionee
the right (the "Option") to purchase up to a maximum of _______ shares (the
"Shares") of Common Stock at a price of $________ per share (the "Option Price")
to be paid in accordance with Section 6 hereof. This Option and the right to
purchase all or any portion of the Shares are subject to the terms and
conditions stated in this Agreement and in the Plan. It is intended that the
Option will not qualify for treatment as an incentive stock option under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").

<PAGE>

3. TERM OF AGREEMENT. This Option, and Optionee's right to
exercise this Option, shall terminate when the first of the following occurs:
(a) termination pursuant to Sections 11, 15 or 16 of the Plan; (b) the
expiration of ten (10) years from the date hereof; or (c) 90 days after the
date of termination of Optionee's employment or other relationship with the
Company and the Subsidiaries, unless such termination results from Optionee's
death or disability (within the meaning of Section 22(e)(3) of the Code) or
Optionee dies within 90 days after the date of termination of Optionee's
employment or consulting relationship with the Company and the Subsidiaries,
in which case this Agreement and the Option shall terminate 180 days after
the date of termination of Optionee's employment or other relationship with
the Company and the Subsidiaries.

2
<PAGE>

7. REPRESENTATIONS AND WARRANTIES OF OPTIONEE.

(c) Optionee acknowledges receipt of this Agreement granting the
Option, and the Plan, and understands that all rights and liabilities connected
with the Option are set forth herein and in the Plan.

3
<PAGE>

13. REPURCHASE BY THE COMPANY.

4
<PAGE>

If to the Company:

Golden State Acquisition Corp.
60 East Sir Francis Drake Boulevard, Suite 302
Larkspur, CA 94939
Fax No.: (415) 461-4497

5
<PAGE>

If to Optionee:

__________________________
__________________________
__________________________
Fax No.: ________________

16. GOVERNING LAW. This Agreement shall be construed under and
governed by the laws of the State of Delaware without regard to the conflict of
law provisions thereof.

17. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original and both of which together shall be
deemed one Agreement.

6
<PAGE>

IN WITNESS WHEREOF, the Company and Optionee have executed this
Agreement as of the date first above written.

THE COMPANY:

GOLDEN STATE ACQUISITION CORP.
a Delaware corporation

By:
---------------------------
Jeffrey J. Brown
Chairman of the Board

OPTIONEE:

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

<PAGE>
INDEMNITY AGREEMENT

THIS INDEMNITY AGREEMENT, dated as of ____________, 1998, between Golden
State Vintners, Inc., a Delaware corporation (the "Corporation"), and
________________________ (the "Indemnitee").

W I T N E S S E T H:

WHEREAS, Indemnitee is a member of the board of directors of the
Corporation (the "Board of Directors") or is an officer of the Corporation, and
in such capacity has performed and is continuing to perform valuable services
for the Corporation;

WHEREAS, Indemnitee is willing to serve, continue to serve, and take on
additional responsibilities as a member of the Board of Directors and/or officer
for or on behalf of the Corporation on the condition that he or she be
indemnified as herein provided; and

WHEREAS, it is intended that Indemnitee shall be paid promptly by the
Corporation all amounts necessary to effectuate in full the indemnity provided
herein:

NOW THEREFORE, in consideration of the premises and the covenants in this
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows:

1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve as a director or
officer of the Corporation so long as he or she is duly appointed or elected and
qualified in accordance with the applicable provisions of the Certificate of
Incorporation and Bylaws of the Corporation and until such time as he or she
resigns or fails to stand for election or is removed from his or her position.
Indemnitee may at any time and for any reason resign or be removed from such
position (subject to any other contractual obligation or other obligation
imposed by operation of law), in which event the Corporation shall have no
obligation under this Agreement to continue Indemnitee in any such position.

2. INDEMNIFICATION. The Corporation shall indemnify Indemnitee against
Expenses and Liabilities in connection with any Proceeding arising out of acts
or omissions of Indemnitee occurring during Indemnitee's service as a director
or as an officer of the Corporation to the fullest extent permitted by
applicable law or the Certificate of Incorporation in effect on the date hereof
or as such law or Certificate of Incorporation may from time to time be amended
(but, in the case of any such amendment, only to the extent such amendment
permits the Corporation to provide broader indemnification rights than the law
or Certificate of Incorporation permitted the Corporation to provide before such
amendment). The right to indemnification provided in the Certificate of
Incorporation shall be presumed to have been relied upon by Indemnitee in
serving or continuing to serve the Corporation and shall be

<PAGE>

enforceable as a contract right. Without diminishing the scope of the
indemnification provided by this Section 2, the Corporation shall indemnify
Indemnitee whenever he or she is or was a party or is threatened to be made a
party to any Proceeding, including without limitation any such Proceeding
brought by or in the right of the Corporation, because he or she is or was a
director or officer of the Corporation or because of anything done or not done
by Indemnitee in such capacity, against Expenses and Liabilities actually and
reasonably incurred by Indemnitee or on his or her behalf in connection with
such Proceeding, including the costs of any investigation, defense, settlement
or appeal, except that no indemnification shall be made with respect to any
claim, issue or matter if Indemnitee was finally adjudged to be liable to the
Corporation by a court of competent jurisdiction due to his or her gross
negligence or willful misconduct unless and to the extent that a Delaware Court
of Chancery or the court in which the action was heard determines that
Indemnitee is entitled to indemnification for such amounts as the court deems
proper. In addition to, and not as a limitation of the foregoing, the rights of
indemnification of Indemnitee provided under this Agreement shall include those
rights set forth in Sections 3, 6, 8 and 12 below.

3. ADVANCEMENT OF EXPENSES. All reasonable Expenses incurred by or on
behalf of Indemnitee shall be advanced from time to time by the Corporation to
Indemnitee within thirty (30) days after the Corporation's receipt of a written
request for an advancement of Expenses, whether prior to or after final
disposition of a Proceeding (except to the extent that there has been a Final
Adverse Determination that Indemnitee is not entitled to be indemnified for such
Expenses), including without limitation any Proceeding brought by or in the
right of the Corporation. The written request for an advancement of any and all
Expenses under this Section 3 shall contain reasonable detail of the Expenses
incurred by Indemnitee. The Indemnitee hereby undertakes to repay the amounts
advanced only if, and to the extent that, it is ultimately determined that
Indemnitee is not entitled to be indemnified pursuant to the terms of this
Agreement.

4. LIMITATIONS. The foregoing indemnity and advancement of Expenses
shall apply only to the extent that Indemnitee has not been indemnified and
reimbursed pursuant to such insurance as the Corporation may maintain for
Indemnitee's benefit, or otherwise; provided, however, that notwithstanding the
availability of such other indemnification and reimbursement, Indemnitee may
claim indemnification and advancement of Expenses pursuant to this Agreement by
assigning to the Corporation, at its request, Indemnitee's claims under such
insurance to the extent Indemnitee has been paid by the Corporation.

5. INSURANCE AND FUNDING. The Corporation may purchase and maintain
insurance to protect itself and/or Indemnitee against any Expenses and
Liabilities in connection with any Proceeding to the fullest extent permitted by
applicable laws. The Corporation may create a trust fund, grant an interest or
use other means (including, without limitation, a letter of credit) to ensure
the payment of such amounts as may be necessary to effect indemnification or
advancement of Expenses as provided in this Agreement.

2
<PAGE>

6. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.

(a) NOTIFICATION OF PROCEEDING. Whenever Indemnitee believes that he
or she is entitled to indemnification pursuant to this Agreement, Indemnitee
shall submit a written request for indemnification to the Corporation. Any
request for indemnification shall include sufficient documentation or
information reasonably available to Indemnitee to support his or her claim for
indemnification. Indemnitee shall submit such claim for indemnification
promptly after receipt by the Indemnitee of notice of the commencement of any
Proceeding, any judgment, order, settlement, dismissal, arbitration award,
conviction, acceptance of a plea of nolo contendere or its equivalent, final
termination or other disposition or partial disposition of any Proceeding. The
omission so to notify the Corporation will not relieve it from any liability
which it may have to Indemnitee if such omission does not prejudice the
Corporation's rights. If such omission does prejudice the Corporation's rights,
the Corporation will be relieved from liability only to the extent of such
prejudice, and such omission will not relieve the Corporation from any liability
which it may have to Indemnitee otherwise than under this Agreement.

(b) REQUEST FOR INDEMNIFICATION. The Corporation shall provide any
indemnification requested by Indemnitee not later than ninety (90) days after
the Corporation's receipt of the written request of the Indemnitee for such
indemnification, unless a good faith determination is made within said 90-day
period (i) by the Board of Directors by a majority vote of a quorum thereof
consisting of Disinterested Directors; or (ii) in the event such a quorum is not
obtainable, at the election of the Corporation, either by independent legal
counsel in a written opinion or by a panel of arbitrators, one of whom is
selected by the Corporation, another of whom is selected by the Indemnitee and
the last of whom is selected by the first two arbitrators so selected, that the
Indemnitee is not or (subject to final judgment or other final adjudication as
provided in Section 10(a) below) ultimately will not be entitled to
indemnification hereunder.

(c) APPLICATION FOR ENFORCEMENT. Notwithstanding a determination
under Section 6(b) above that the Indemnitee is not entitled to indemnification
with respect to any specific proceeding, the Indemnitee shall have the right to
apply to any court of competent jurisdiction for the purpose of enforcing the
Indemnitee's right to indemnification pursuant to this Agreement. Neither the
failure of the Corporation (including its Board of Directors or independent
legal counsel or the panel of arbitrators) to have made a determination prior to
the commencement of such action that the Indemnitee is entitled to
indemnification hereunder, nor an actual determination by the Corporation
(including its Board of Directors or independent legal counsel or the panel of
arbitrators) that the Indemnitee is not entitled to indemnification hereunder,
shall be a defense to the action or create any presumption that the Indemnitee
is not entitled to indemnification hereunder.

(d) INDEMNIFICATION OF CERTAIN EXPENSES. The Corporation shall
indemnify the Indemnitee against all expenses incurred in connection with any
hearing or proceeding under this Section 6 if the Indemnitee prevails in such
hearing or proceeding.

3
<PAGE>

(e) LIMITATION. If a determination that Indemnitee is entitled to
indemnification has been made pursuant to this Section 6 hereof or otherwise
pursuant to the terms of this Agreement, the Corporation shall be bound by such
determination in the absence of (i) a misrepresentation or omission of a
material fact by Indemnitee or (ii) a specific finding (which has become final)
by an appropriate court of the State of Delaware that all or any part of such
indemnification is expressly prohibited by law.

7. MODIFICATION, WAIVER, TERMINATION AND CANCELLATION. No supplement,
modification, termination, cancellation or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver.

8. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Corporation effectively to
bring suit to enforce such rights.

9. DEFENSE OF CLAIM.

(a) ASSUMPTION OF DEFENSE. In the event that the Corporation shall
be obligated to pay the Expenses and Liabilities of any Proceeding against the
Indemnitee, the Corporation, jointly with any other indemnifying party similarly
notified, will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Indemnitee; provided, however, that the Corporation
shall not be entitled to assume the defense of any Proceeding if Indemnitee
shall have reasonably concluded that there may be a conflict of interest between
the Corporation and Indemnitee with respect to such Proceeding. After notice
from the Corporation to Indemnitee of its election to assume the defense
thereof, the Corporation will not be liable to Indemnitee under this Agreement
for any Expenses subsequently incurred by Indemnitee in connection with the
defense thereof, other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ his or her own
counsel in such Proceeding but the fees and expenses of such counsel incurred
after notice from the Corporation of its assumption of the defense thereof shall
be at the expense of Indemnitee unless:

(i) The employment of counsel by Indemnitee has been authorized
by the Corporation;

(ii) Indemnitee shall have reasonably concluded that counsel
engaged by the Corporation may not adequately represent Indemnitee; or

4
<PAGE>

(iii) The Corporation shall not in fact have employed counsel to
assume the defense in such Proceeding or shall not in fact have assumed such
defense and be acting in connection therewith with reasonable diligence; in each
of which cases the fees and expenses of such counsel shall be at the expense of
the Corporation.

(b) SETTLEMENT. The Corporation shall not settle any Proceeding in
any manner which would impose any penalty or limitation on Indemnitee without
Indemnitee's written consent; provided, however, that Indemnitee will not
unreasonably withhold his or her consent to any proposed settlement.

10. EXCEPTIONS.

(a) CERTAIN MATTERS. Any provision herein to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to the terms of
this Agreement to indemnify the Indemnitee on account of any Proceeding with
respect to (i) remuneration paid to the Indemnitee if it is determined by final
judgment or other final adjudication that such remuneration was in violation of
law; (ii) which final judgment is rendered against the Indemnitee for an
accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Corporation or any affiliate of the Corporation pursuant to
the provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or similar provisions of any federal, state or local statute; or
(iii) which (but only to the extent that) it is determined by final judgment or
other final adjudication that the Indemnitee's conduct was in bad faith,
knowingly fraudulent or deliberately dishonest. For purposes of the foregoing
sentence, a final judgment or other adjudication may be reached in either the
underlying Proceeding or action in connection with which indemnification is
sought or a separate proceeding or action to establish rights and liabilities
under this Agreement.

(b) CLAIMS INITIATED BY THE INDEMNITEE. Any provision herein to the
contrary notwithstanding, the Corporation shall not be obligated pursuant to the
terms of this Agreement to indemnify or advance expenses to the Indemnitee with
respect to Proceedings initiated or brought voluntarily by the Indemnitee and
not by way of defense, except with respect to Proceedings brought to establish
or enforce a right to indemnification under this Agreement or any other statute
or law or otherwise as required under Section 145 of the Delaware General
Corporation Law, but such indemnification or advancement of Expenses may be
provided by the Corporation in specific cases if the Board finds it to be
appropriate. Any provision herein to the contrary notwithstanding, the
Corporation shall not be obligated pursuant to the terms of this Agreement to
indemnify the Indemnitee for any Expenses incurred by the Indemnitee with
respect to any Proceeding instituted by the Indemnitee to enforce or interpret
this Agreement if the Indemnitee does not prevail in such Proceeding.

(c) UNAUTHORIZED SETTLEMENTS. Any provision herein to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to the terms of
this Agreement to indemnify the Indemnitee under this Agreement for any amounts
paid in settlement of a Proceeding effected without the Corporation's written
consent. Neither the Corporation nor the

5
<PAGE>

Indemnitee shall unreasonably withhold consent to any proposed settlement;
provided, however, that the Corporation may in any event decline to consent to
(or to otherwise admit or agree to any liability for indemnification hereunder
in respect of) any proposed settlement if the Corporation determines in good
faith (pursuant to Section 6(b) above) that the Indemnitee is not or ultimately
will not be entitled to indemnification hereunder.

(d) SECURITIES ACT LIABILITIES. Any provision herein to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to the terms of
this Agreement to indemnify the Indemnitee or otherwise act in violation of any
undertaking appearing in and required by the rules and regulations promulgated
under the Securities Act of 1933, as amended (the "Act"), in any registration
statement filed with the Securities and Exchange Commission under the Act. The
Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K
currently generally requires the Corporation to undertake in connection with any
registration statement filed under the Act to submit the issue of the
enforceability of the Indemnitee's rights under this Agreement in connection
with any liability under the Act on public policy grounds to a court of
appropriate jurisdiction and to be governed by any final adjudication of such
issue. The Indemnitee specifically agrees that any such undertaking shall
supersede the provisions of this Agreement and to be bound by any such
undertaking.

11. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:

(a) If to Indemnitee, to:

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

(b) If to the Corporation, to:

Golden State Vintners, Inc.
500 Drake's Landing Road
Greenbrae, California 94904
Attention: Secretary

or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.

6
<PAGE>

12. NONEXCLUSIVITY. The rights of Indemnitee hereunder shall not be
deemed exclusive of any other rights to which Indemnitee may now or in the
future be entitled under the Delaware General Corporation Law, the Corporation's
Certificate of Incorporation or Bylaws, or any agreements, vote of stockholders,
resolution of the Board of Directors or otherwise.

13. CERTAIN DEFINITIONS.

(a) "Disinterested Director" shall mean a director of the Corporation
who is not or was not a party to the Proceeding in respect of which
indemnification is being sought by Indemnitee.

(b) "Expenses" shall include all direct and indirect costs
(including, without limitation, attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees,
all other disbursements or out-of-pocket expenses and reasonable compensation
for time spent by Indemnitee for which he or she is otherwise not compensated by
the Corporation) actually and reasonably incurred in connection with a
Proceeding or establishing or enforcing a right to indemnification under this
Agreement, applicable law or otherwise; provided, however, that "Expenses" shall
not include any Liabilities.

(c) "Final Adverse Determination" shall mean that a determination
that Indemnitee is not entitled to indemnification shall have been made pursuant
to Section 6 hereof and either (1) a final adjudication in a Delaware court
pursuant to Section 8(a) hereof shall have denied Indemnitee's right to
indemnification hereunder, or (2) Indemnitee shall have failed to file a
complaint in a Delaware court pursuant to Section 8(a) for a period of one
hundred twenty (120) days after the determination made pursuant to Section 6
hereof.

(d) "Indemnification Period" shall mean the period of time during
which Indemnitee shall continue to serve as a director or as an officer of the
Corporation, and thereafter so long as Indemnitee shall be subject to any
possible Proceeding arising out of acts or omissions of Indemnitee as a director
or as an officer of the Corporation.

(e) "Liabilities" shall mean liabilities of any type whatsoever
including, but not limited to, any judgments, fines, ERISA excise taxes and
penalties, penalties and amounts paid in settlement (including all interest
assessments and other charges paid or payable in connection with or in respect
of such judgments, fines, penalties or amounts paid in settlement) of any
Proceeding.

(f) "Proceeding" shall mean any threatened, pending or completed
action, claim, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative, including any and all appeals
therefrom.

7
<PAGE>

14. BINDING EFFECT, DURATION AND SCOPE OF AGREEMENT. This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Corporation), spouses, heirs
and personal and legal representatives. This Agreement shall continue in effect
during the Indemnification Period, regardless of whether Indemnitee continues to
serve as a director or as an officer.

15. SEVERABILITY. If any provision or provisions of this Agreement (or
any portion thereof) shall be held to be invalid, illegal or unenforceable for
any reason whatsoever:

(a) the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby; and

(b) to the fullest extent legally possible, the provisions of this
Agreement shall be construed so as to give effect to the intent of any provision
held invalid, illegal or unenforceable.

16. GOVERNING LAW AND INTERPRETATION OF AGREEMENT. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of Delaware, as applied to contracts between Delaware residents entered
into and to be performed entirely within Delaware. If the laws of the State of
Delaware are hereafter amended to permit the Corporation to provide broader
indemnification rights than said laws permitted the Corporation to provide prior
to such amendment, the rights of indemnification and advancement of expenses
conferred by this Agreement shall automatically be broadened to the fullest
extent permitted by the laws of the State of Delaware, as so amended.

17. CONSENT TO JURISDICTION. The Corporation and Indemnitee each
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement. The Corporation and Indemnitee each agree that
any action instituted under this Agreement shall be brought only in the state
courts of the State of Delaware.

18. ENTIRE AGREEMENT. This Agreement represents the entire agreement
between the parties hereto, and there are no other agreements, contracts or
understandings between the parties hereto with respect to the subject matter of
this Agreement, except as specifically referred to herein or as provided in
Section 12 hereof.

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<PAGE>

19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement.

COMPANY: GOLDEN STATE VINTNERS, INC.

--------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------

INDEMNITEE:
--------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------

<PAGE>

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the 27th
day of April, 1995 (the "Effective Date"), by and between GOLDEN STATE
ACQUISITION CORP., a Delaware corporation, (the "Company") and JEFFREY B.
O'NEILL ("Executive").

W I T N E S S E T H

WHEREAS, the Company wishes to retain the advantage of Executive's years of
professional experience, familiarity with the Company's affairs and business
knowledge and ability for the period and under the terms and conditions
hereinafter specified;

WHEREAS, the Board of Directors of the Company (the "Board") has determined
that it is in the best interest of the Company to enter into this Agreement with
Executive; and

WHEREAS, Executive is willing to enter into this Agreement.

NOW, THEREFORE, in consideration of the premises and agreements set forth
herein and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. EMPLOYMENT.

The Company hereby employs Executive as President and Chief Executive
Officer of the Company on the terms and conditions contained herein and
Executive agrees to be so employed.

2. TERM.

The period of employment covered by this Agreement will commence on the
date hereof and will continue to and include March 31, 2000, unless sooner
terminated under Section 5 below or extended pursuant to this Section 2. This
Agreement will extend automatically on a year to year basis beyond March 31,
2000 unless either party provides the other party with written notice of
termination not earlier than eighteen months and not later than twelve months
prior to the intended termination date (e.g. not earlier than October 1, 1998
and not later than March 31, 1999 with respect to a March 31, 2000 termination
date).

3. DUTIES.

During the period of employment hereunder, Executive agrees to work full
time for the Company (subject to seven (7) weeks of paid vacation annually and
all national holidays) and to perform competently all such duties related to
being the Chief Executive Officer of the Company as the Board reasonably may
assign from time to time to him. Executive may carry forward up to four weeks
of unused vacation for any one calendar year into subsequent calendar years.
The

<PAGE>

Company shall at all times cause Executive to be elected to its Board of
Directors. Executive's duties will be performed in and from the various Company
offices in Cutler, California, St. Helena, California, or Larkspur, California,
in Executive's reasonable discretion. Such duties can be competently carried
out in any such location. Executive's authority shall be consistent with that
afforded typically to chief executive officers in the wine industry; provided,
however, that all such authority shall be within guidelines set forth in the
Company's business plan, as such plan is developed and amended from time to time
by the Board, in its reasonable discretion. Additionally, Executive shall be
entitled to hire and fire all personnel of the Company; provided, that Executive
will secure the consent of the Board prior to hiring or firing key executives.

Executive will devote his diligent efforts, energies and abilities to the
proper and efficient performance of his duties. The Company acknowledges that
Executive, over several years, has been a one-third (1/3) owner in and an
officer and director of The Grape Group, Inc., a company that owns vineyards and
sells wine grapes. Executive will continue to be associated with The Grape
Group, Inc., but Executive will give the Board of Directors notice of any
prospective acquisition of vineyard related property by The Grape Group, Inc.
During the term of this Agreement, Executive will exert his diligent efforts to
convince The Grape Group, Inc. to offer the Company a right of first refusal
respecting such property prior to its acquisition. Executive is also a part
owner, officer and director of SE Vineyards which owns approximately 300 acres
of vineyards in Kern County and may continue to be so associated throughout the
term of this Agreement. Executive also has engaged in speculative winemaking in
the past for which the Company was the processor, and he has advised John
Simpson and Bill Hagopian on the sale of wine grapes. Except as set forth
above, Executive will not engage (including, for this purpose, serving as an
officer, director or owner of any non-publicly traded company) in speculative
winemaking or any other wine or grape-related activities in the future that are
competitive from time-to-time with the business of the Company without the prior
consent of the Board of Directors.

Nothing in this Agreement shall preclude the Executive from devoting
reasonable periods of time required for serving, as appropriate, as a member of
a board of directors of other non-competitive companies (provided, that, with
respect to such service, Executive shall have first obtained the consent of the
Company's Board which shall not be unreasonably withheld) and from engaging in
charitable and public service activities provided such service or activities do
not interfere with the performance of his duties and responsibilities under this
Agreement.

4. COMPENSATION.

In consideration of the services rendered by the Executive to the Company
under the terms of this Agreement, the Company will pay a fixed salary as
determined from time to time by the Board but not less than Three Hundred
Thousand Dollars ($300,000.00) per year, payable pro rata on the Company's
regular pay day for its employees. Increases in such salary will be in the
discretion of the Board; provided, however, that Executive's salary will be
increased each January 1, beginning January 1, 1996. Executive's salary shall
be increased to a minimum

2
<PAGE>

amount calculated as follows: Executive's existing salary from time to time
multiplied by a fraction the numerator of which is the final Consumer Price
Index published for the immediately preceding calendar year and the denominator
of which is the final Consumer Price Index published for the second immediately
preceding calendar year.

For the purposes of this Agreement, the term "Consumer Price Index" shall
mean the U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price
Index, All Urban Consumers, All Items (1982-1984 = 100), San
Francisco-Oakland-San Jose Area. If the 1982-1984 base of the Consumer Price
Index is changed, the new base shall be converted to the 1982-1984 base in
accordance with the U.S. Department of Labor's conversion factor, and the base
as so converted shall be used. If the U.S. Department of Labor ceases to
publish the Consumer Price Index, then the successor index designated by the
U.S. Department of Labor or, if no successor index is so designated, the most
nearly comparable index, as mutually determined by Executive and the Company
shall be used.

With respect to the fiscal year of the Company ending June 30, 1995,
Executive shall be entitled to a bonus to be determined pursuant to the terms of
his existing employment agreement with the Company dated as of January 1, 1991
which is incorporated herein.

Additionally, during the term of this Agreement, commencing with the fiscal
year ending June 30, 1996, Executive will be paid an annual bonus payment equal
to a percentage (as determined by the table set forth below) of the Company's
and its wholly-owned subsidiaries', if any, "net earnings" before payment of
taxes, interest, amortization, payment of extraordinary transaction fees,
payment of advisory fees or other fees or payments to affiliates of the Company
and depreciation in excess of Seven Million Five Hundred Thousand Dollars
($7,500,000.00) which sum will be subject to good faith renegotiation in the
event the Company either sells or acquires any significant assets (other than
the acquisition of (i) property from The Grape Gourp or (ii) the Reedly facility
from Heublein Inc.

<TABLE>
<CAPTION>
Net Earnings in
Percentage Excess of $7.5 million
- ---------- ----------------------
<S> <C>
2.5% $7.5 million--$8,499,999
3% $8.5 million--$9,499,999
4% $9.5 million--$10,499,999
4.5% $10.5 million-$11,499,999
5% $11.5 million-$12,499,999
5.5% $12.5 million-$13,499,999
6% $13.5 million and higher.

</TABLE>

The net earnings of the Company will be determined for the annual period
beginning July 1 and ending June 30 of the following year by the Company's
independent public accountants and will be conclusive and binding on the parties
and will be paid within five (5)

3
<PAGE>

business days of said audit release. In the event Executive's employment ceases
prior to the end of any complete year for any reason other than for "cause" as
defined in Section 5(a) of this Agreement or Executive's voluntary termination
of this Agreement as set forth in Section 5(b) of this Agreement, Executive will
be paid the pro rata portion of such annual payment based on the actual number
of days of the year employed.

All amounts payable hereunder which are or may become subject to
withholding under pertinent provisions of law or regulation shall be reduced for
applicable income and/or employment taxes required to be withheld.

The Company will provide Executive with exclusive use of a residence
adjacent to the Cutler winery in order to encourage Executive to spend more time
near the operations of the Company.

5. TERMINATION OF EMPLOYMENT.

(a) Executive's employment hereunder may be terminated by the Company
for "cause" at any time during the term hereof upon not less than thirty (30)
days written notice to Executive. The term cause as used in this Agreement
means the commission of or pleading nolo contendere to a felony or any
misdemeanor involving dishonesty related and detrimental to the Company or the
good faith determination of at least two-thirds of the actual number of
Directors of the Board then in office (excluding Executive for this purpose)
that the Executive either: (i) has committed an act of willful misconduct,
dishonesty or fraud to the material detriment of the Company; or (ii) has
willfully and persistently failed materially to perform his duties to the
Company despite repeated written warnings from the Board of Directors.

(b) The Agreement may be terminated at any time by Executive without
cause on ninety (90) days written notice by the Executive to the Company.

(c) Upon termination of the Executive's employment pursuant to
Section 5(a) above, or upon the death or permanent disability of Executive or
upon termination of this Agreement by Executive without cause pursuant to
Section 5(b) above, Executive will be entitled only to the unpaid compensation
provided for in Section 4 hereof for the period of time ending with the date of
termination and to reimbursement for such expenses as he may have incurred on
behalf of the Company prior to the date of termination in accordance with any
reasonable reimbursement policy of the Company. Said payments will discharge in
full all liabilities of the Company to Executive pursuant to Section 4.
Additionally, upon any termination for cause by Company or Executive's
termination of this Agreement without cause, the Company shall be entitled
within sixty days of any such termination to purchase and Executive shall be
entitled to cause the Company to purchase, any shares of the Company's common
stock held by Executive at a per share price equal to the then applicable Per
Share Fair Market Value with 20% of the aggregate purchase price payable in cash
within ten days of the determination of the Per Share Fair Market Value and with
the remainder to be evidenced by a promissory note at prime (as

4
<PAGE>

announced by Wells Fargo Bank NA, San Francisco main branch, as of the date of
termination) requiring payment annually of four equal installments of principal
and all accrued interest.

For purposes of this Agreement, the term "Per Share Fair Market Value"
shall be determined as follows:

If the shares of the Company are publicly traded as of termination,
the Per Share Fair Market Value shall be deemed to be an amount equal to the
average closing price of the shares as reported by the Wall Street Journal for
the thirty trading days prior to the public announcement of Executive's
termination. If the shares are not publicly traded as of termination, promptly
after termination, the parties will meet and attempt to reach an agreement on
the Per Share Fair Market Value. Beginning ten (10) days subsequent to the
Closing Date, either party may at any time initiate by written notice to the
other party (the "Valuation Notice") a formal valuation procedure (the
"Valuation") which is detailed below.

(i) On the twentieth business day following the delivery of the
Valuation Notice or such other date as is mutually agreed to by the parties, the
parties will meet at the Marin County offices of the Company and simultaneously
exchange a proposed Per Share Fair Market Value and an explanation (not to
exceed 25 pages) of the justification for that Per Share Fair Market Value (a
"Valuation Proposal"). If a party fails to submit a Valuation Proposal on the
specified date, the sole Valuation Proposal submitted shall be deemed the Per
Share Fair Market Value. The Company shall provide Executive with such
financial and other information as is reasonably necessary for the Executive to
prepare his Valuation Proposal.

(ii) If the difference between the Valuation Proposal is less
than ten percent (10%), the average of the two proposals shall be the Per Share
Fair Market Value.

(iii) If the parties have not been able to reach agreement on the
Adjustment Value within a ten business day period following the exchange of
Valuation Proposals, either party may inform the other that it wishes the value
to be established by appraisal and may propose an arbitrator with not less than
five years experience in valuing private companies affiliated with any of the
ten largest Bay Area accounting firms as set forth in the most recent edition of
the BOOK OF LISTS published by the SAN FRANCISCO BUSINESS TIMES from time to
time (the "Ten Firms") other than any accounting firm that has performed work
for either party during the prior twelve months. The other party shall then
within ten (10) business days either accept or reject the proposed arbitrator.
In the event the other party rejects the first party's choice, the American
Arbitration Association (San Francisco office) shall select an individual to
conduct the arbitration with qualifications which meet the specifications set
forth above. The arbitrator will be provided with the Valuation Proposals and
shall select one of the two Valuation Proposals within thirty (30) days of
receipt of the Valuation Proposals. The arbitrator shall not have the right to
propose a middle ground or a value other than that set forth in one of the
Valuation Proposals.

5
<PAGE>

(iv) The parties will each pay their own costs relating to
preparing the Valuation Proposals. The party whose Valuation Proposal is not
selected shall pay the entire fee of the arbitrator and any fee imposed by the
American Arbitration Association.

(v) All decisions of the arbitrator with respect to the
Adjustment Value shall be final and binding on the parties hereto and may be
enforced in any court with jurisdiction.

(d) This Agreement may be terminated at any time by Executive for
cause on thirty (30) days written notice of resignation by the Executive to the
Company.

(e) In the event the Company actually or constructively (including,
without limitation, material varying of Executive's duties or responsibilities
hereunder, the sale of substantially all of the Company's assets, or a change in
control of the ownership of the Company) terminates Executive's employment
hereunder without cause or if Executive terminates this Agreement with cause
pursuant to Section 5(d) above, then (i) if such termination occurs subsequent
to the third anniversary of the Effective Date, the Company must pay Executive a
lump sum severance payment equal to $300,000 within ten (10) days after such
termination and deliver to Executive a promissory note of the Company in the
original principal amount of $300,000 which such note shall provide for interest
at prime (as announced by Wells Fargo Bank NA, San Francisco main branch, as of
the date of termination) and for payment of the entire principal balance and all
accrued interest on the first anniversary of Executive's termination, (ii) if
such termination occurs prior to the third anniversary of the execution of this
Agreement, then within ten (10) days thereafter the Company must pay Executive a
lump sum severance payment equal to $450,000 and deliver to Executive a
promissory note of the Company in the original principal amount of $450,000
which such note shall provide for interest at prime (as announced by Wells Fargo
Bank NA, San Francisco main branch, as of the date of termination) and for
payment of the entire principal balance and all accrued interest on the first
anniversary of Executive's termination. In addition to any other remedy of
Executive at law or in equity, the note shall provide for default interest at
prime plus 300 basis points in the event the Company does not pay the note when
due. Additionally, in the event the Company terminates this Agreement pursuant
to this Section 5(e) (including any constructive termination), upon the death or
permanent disability of Executive, if either party terminates this Agreement
pursuant to Section 2 or Executive terminates this Agreement with cause pursuant
to Section 5(d), Executive shall be entitled to cause the Company to purchase
any shares of the Company's Common Stock held by Executive at the Per Share Fair
Market Value in cash in a lump sum payment within ten (10) business days after
the determination of the Per Share Fair Market Value. Additionally, with
respect to any such termination, Executive (and the members of his immediate
family, if applicable) shall be entitled to continue to participate for lesser
of the remainder of the initial term of this Agreement (as it may be extended
pursuant to Section 2 hereof) or three years in the Company's medical insurance,
dental insurance, group life insurance and disability insurance programs. If
such participation is not permitted under the terms of such plans, the Company
shall be obligated to purchase or to reimburse Executive for comparable
coverage.

6
<PAGE>

6. STOCK APPRECIATION RIGHTS.

Executive will have the rights described in the Stock Appreciation Rights
Agreement attached hereto as Exhibit A regardless of termination of his
employment hereunder for any reason. These rights shall be equivalent to an 8%
common stock ownership interest in the Company as of the date of this Agreement
at a strike price equal to that in effect as of the closing of the purchase and
sale to be vested in 3 equal annual increments (one-third on the Effective Date,
the second one-third on the first anniversary of the Effective Date and the last
one-third on the second anniversary of the Effective Date). Upon termination,
Executive shall have the same rights to cause the Company to repurchase his SARs
as he has with respect to the Company's Common Stock pursuant to Sections 5(c)
and 5(e) above. Upon termination, the Company shall have the same rights to
cause Executive to sell his SARs as it has with respect to Common Stock held by
Executive pursuant to Section 5(c).

7. PERMANENT DISABILITY.

Executive will receive full compensation pursuant to Section 4 for any
period of his illness or physical or mental incapacity during the term of this
Agreement until such time as he is deemed "permanently disabled." The Executive
will be deemed permanently disabled ninety (90) days after written notice from
the Company of an illness or incapacity that has disabled or will disable, as
reasonably determined by an independent physician reasonably acceptable to the
Company, the Executive from rendering any services to the Company for a period
of more than six (6) consecutive months in any consecutive twelve (12) month
period; provided, however, that if the Executive resumes work on a regular basis
prior to the notice period elapsing, the Executive will not be deemed
permanently disabled.

8. REIMBURSEMENT.

The Company will reimburse Executive for all reasonable expenses incurred
by Executive in pursuance and furtherance of the Company's business and good
will in accordance with any reasonable reimbursement policy or approved budget
of the Company, including air travel costs to and from Executive's home and
Cutler, California; provided, however, that the Company will not be responsible
for any club membership dues incurred by Executive.

Executive shall also be entitled to a general expense allowance of $15,000
annually. The Company acknowledges that during his tenure as President and
Chief Executive Officer of the Company, Executive will incur personal expenses
which are not tax deductible but which directly or indirectly benefit the
Company by increasing the Company's prominence and visibility in the wine
industry. The Company's Board of Directors may from time to time inquire as to
Executive use of the allowance.

7
<PAGE>

9. CONFIDENTIALITY.

During and for a period of two years after the termination of this
Agreement, Executive will not disclose any confidential or proprietary
information of the Company except: (i) as necessary in furtherance of the
business of the Company; (ii) as required by law or judicial order; or (iii) to
the extent such information otherwise is available to the public. This covenant
shall not be construed as prohibiting Executive from utilizing information that
is not specific to the Company about the wine industry, including the names of
suppliers and customers of the Company derived from Executive's years of
experience with the Company and the industry.

10. NON-COMPETITION.

Reference hereafter in this Section 10 to "Executive" means Executive
individually and any entity in which Executive serves as an officer, director,
shareholder holding 3% or more of the shares, partner, employee, consultant or
advisor, where such entity is engaged in the Bulk Wine Business (the
"Business"), which term means an entity which processes grapes into wine for
sale in bulk to customers or which custom bottles wine for customers within the
State of California.

Except for the current Business interests of Executive as described in
Section 3 hereto:

(a) For a two year period following termination of Executive's
employment by Company with cause or by Executive without cause, Executive will
not engage in the Business. Further, for two years following any such
termination, Executive will not directly or indirectly compete with Company for
any business opportunity which Company was actively pursuing or contemplating on
the date of termination of Executive's employment, and Executive will not,
during such period, solicit, induce, cause or authorize to be solicited or
induced the resignation by any employee of Company, and Executive will not
employ any former employee who was employed on the date of Executive's
termination of employment until a period of 6 months have elapsed since the
resignation from Company of such former employee.

(b) If Executive is terminated by Company without cause, or Executive
terminates with cause, he will be bound by the restrictions of Section 10(a)
above or, as of the date Executive fails to comply with such restrictions or by
written notice renounces such restrictions, he will be obligated to repay to
Company, as Company's sole and exclusive remedy under this Agreement, a "pro
rata" portion of any severance payments theretofore made by Company, and Company
shall be thereupon relieved of any future severance payments as well as its
obligations with respect to the continuation of insurance benefits as set forth
in Section 5. The "pro rata" portion of any severance payments made by Company
shall be calculated by amortizing in equal monthly installments over a two-year
period all severance benefits paid or payable to Executive. For example only,
if Executive's employment terminates on December 31, 1998, and Executive is paid
$600,000 as provided in Section 5(e) of this Agreement, and on December 31,
1999, Executive either violates the covenants set forth in Section 10(a) above
or

8
<PAGE>

renounces the restrictions so imposed, Executive shall pay Company $300,000 plus
interest at the Prime Rate as defined in Section 5(c) for the period from the
date such severance payment was made to Executive until the date of repayment to
Company, and Company shall be thereupon relieved of any future payment
obligations to Executive under the provisions of Section 5 of this Agreement
other than payments relating to the repurchase of Executive's stock.

11. AUTOMOBILE.

The Company will furnish Executive with the use of an automobile during the
term of this Agreement; provided, that the monthly cost of such automobile shall
not exceed $800 (with such amount shall be subject to a CPI adjustment pursuant
to the terms of Section 4). The Company will pay for all reasonable gasoline,
insurance, maintenance and other expenses incurred by Executive in connection
with his use of such automobile, including any and all expenses relating to
private use.

12. EXECUTIVE BENEFITS.

Company will provide comprehensive medical and dental insurance to
Executive and members of his immediate family during the term of this Agreement.
In addition, during the period of this Agreement, Executive will have the right
to participate in all stock option, group life, health or accident insurance,
retirement, pension and other employee benefit plans of the Company if such
plans are available at any time during the period of employment hereunder to any
of the Company's employees; provided, however, that Executive acknowledges that
he will not participate in any profit-sharing or incentive plan that the Company
may institute since he participates in the incentive compensation program
outlined in Section 4. With respect to any such plans in which Executive is
currently participating, the Company shall maintain such plans during the term
of this Agreement in substantially the same form as they currently exist.

13. WAIVER.

The Waiver by the Company of a breach of any provision of this Agreement by
employee will not operate or be construed as a waiver of any subsequent breach
by Executive. This Agreement supersedes all prior agreements and understanding.

14. DISABILITY COVERAGE.

The Company shall increase Executive's disability coverage to a level
sufficient to cause benefits to be paid out under the policy in an amount not
less than $25,000 per month (if available, in such amounts). The premiums for
such coverage shall be paid by the Company and shall be deemed to be additional
compensation to Executive for tax purposes.

9
<PAGE>

15. MODIFICATION.

This instrument may not be changed orally but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.

16. SEVERABILITY.

If any provision of this Agreement or its application to any person or
circumstance is invalid or unenforceable, then a suitable and equitable
provision will be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of the invalid or unenforceable
provision.

17. BENEFIT.

This Agreement will not be assignable by Executive and will be assignable
by the Company to any entity which acquires substantially all of the assets of
the Company and which agrees to be bound by the company's obligations hereunder.

18. GOVERNING LAW.

This Agreement will be construed and governed by the laws of the State of
California.

19. ENFORCEMENT.

In the event of any action to enforce the terms of this Agreement, the
prevailing party will be entitled to its reasonable costs and expenses
(including, without limitation, attorneys' fees) in maintain such an action.
Executive acknowledges that in the event he breaches this contract, damages to
the Company will be impossible to ascertain. Accordingly, Executive
acknowledges that injunctive relief would be appropriate in the event of his
breach of this Agreement.

20. ENTIRE AGREEMENT.

This is the entire agreement between the parties relating to Executive's
employment by the Company, and it supersedes all prior agreements and
understandings between the parties related thereto, including, without
limitation, the Employment Agreement dated as of January 1, 1991 between
Executive and Golden State Vintners, the Company's wholy-owned subsidiary.

10
<PAGE>

IN WITNESS WHEREOF, the parties have duly executed this Agreement to be
effective as of the Effective Date.

Company: GOLDEN STATE ACQUISITION CORP.

/s/ MARK D. MCDONNELL
------------------------------
Chairman of the Board

Executive: /s/ JEFFREY B. O'NEILL
------------------------------
JEFFREY B. O'NEILL

<PAGE>
EXHIBIT 10.6

EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

GOLDEN STATE VINTNERS

$35,000,000 IN AGGREGATE PRINCIPAL AMOUNT
OF
FIRST MORTGAGE NOTES DUE APRIL 1, 2005

AND

GOLDEN STATE ACQUISITION CORP.

100,000 SHARES
OF
12% SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK
EXCHANGEABLE INTO
$10,000,000 IN AGGREGATE PRINCIPAL AMOUNT OF
13.2% SUBORDINATED EXCHANGE NOTES DUE JUNE 30, 2007

414,079 SHARES OF CLASS E COMMON STOCK

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

SECURITIES PURCHASE AGREEMENT

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

Dated as of April 21, 1995

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

<PAGE>

TABLE OF CONTENTSHeader A Text: < < PAGE > >

PAGE

PART I. ISSUANCE AND SALE OF SECURITIES

SECTION 1. ISSUANCE OF SECURITIES
Section 1.1 Authorization of Securities. . . . . . . . . . . . . . . 1
Section 1.2 Purchase and Sale of Securities. . . . . . . . . . . . . 3
Section 1.3 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . 4
Section 1.4 Definitions, etc.. . . . . . . . . . . . . . . . . . . . 4

SECTION 2. GENERAL REPRESENTATIONS AND WARRANTIES
Section 2.1 Capital Stock; Subsidiaries. . . . . . . . . . . . . . . 4
Section 2.2 Organization and Authority . . . . . . . . . . . . . . . 5
Section 2.3 Corporate Proceedings. . . . . . . . . . . . . . . . . . 6
Section 2.4 Validity of Agreements and Securities. . . . . . . . . . 6
Section 2.5 No Event of Default. . . . . . . . . . . . . . . . . . . 7
Section 2.6 Consent, etc.. . . . . . . . . . . . . . . . . . . . . . 7
Section 2.7 Business . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.8 Financial Statements . . . . . . . . . . . . . . . . . . 8
Section 2.9 No Material Adverse Change . . . . . . . . . . . . . . . 8
Section 2.10 Licenses, Registrations, etc.. . . . . . . . . . . . . . 8
Section 2.11 Title to Properties; Leases. . . . . . . . . . . . . . . 9
Section 2.12 Compliance with Other Instruments, etc.. . . . . . . . . 9
Section 2.13 No Conflict, etc.. . . . . . . . . . . . . . . . . . . . 9
Section 2.14 No Materially Adverse Contracts, etc.. . . . . . . . . . 10
Section 2.15 Compliance with Law, etc.. . . . . . . . . . . . . . . . 10
Section 2.16 Compliance with ERISA; Multiemployer Plans . . . . . . . 10
Section 2.17 Pending Litigation, etc. . . . . . . . . . . . . . . . . 11
Section 2.18 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.19 Holding Company Act; Investment Company Act. . . . . . . 12
Section 2.20 No Margin Regulation Violation . . . . . . . . . . . . . 12
Section 2.21 Compliance with Environmental Laws . . . . . . . . . . . 13
Section 2.22 Labor Relations. . . . . . . . . . . . . . . . . . . . . 13
Section 2.23 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.24 Offerees . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.25 Representations and Warranties in Stock
Purchase Agreement and Related Documents. . . . . . 14
Section 2.26 Other Names. . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.27 Investments. . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.28 Flood Hazard Area. . . . . . . . . . . . . . . . . . . . 14
Section 2.29 Broker's or Finder's Commissions . . . . . . . . . . . . 14
Section 2.30 Solvency . . . . . . . . . . . . . . . . . . . . . . . . 14

i
<PAGE>

Section 2.31 Full Disclosure. . . . . . . . . . . . . . . . . . . . . 15

ii
<PAGE>

SECTION 3. REPRESENTATIONS OF THE PURCHASER
Section 3.1 Investment Intent, etc.. . . . . . . . . . . . . . . . . 15
Section 3.2 ERISA Representations. . . . . . . . . . . . . . . . . . 15

SECTION 4. CONDITIONS OF OBLIGATION TO PURCHASE SECURITIES
Section 4.1 Opinion of Special Counsel . . . . . . . . . . . . . . . 16
Section 4.2 Opinions of Special Counsel for the Company
and the Parent. . . . . . . . . . . . . . . . . . . 16
Section 4.3 Performance of Obligations . . . . . . . . . . . . . . . 17
Section 4.4 Representations True; No Event of Default. . . . . . . . 17
Section 4.5 Certificate of Company and the Parent. . . . . . . . . . 17
Section 4.6 Private Placement Number . . . . . . . . . . . . . . . . 18
Section 4.7 Fees and Disbursements of Your Special Counsel . . . . . 18
Section 4.8 Legality . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.9 Certificate of Designations. . . . . . . . . . . . . . . 18
Section 4.10 Parent Guaranty. . . . . . . . . . . . . . . . . . . . . 18
Section 4.11 Stockholder Agreement. . . . . . . . . . . . . . . . . . 18
Section 4.12 Deeds of Trust . . . . . . . . . . . . . . . . . . . . . 18
Section 4.13 Environmental Indemnity Agreement. . . . . . . . . . . . 18
Section 4.14 Security Agreement . . . . . . . . . . . . . . . . . . . 18
Section 4.15 Registration Rights Agreement. . . . . . . . . . . . . . 18
Section 4.16 Consents and Approvals . . . . . . . . . . . . . . . . . 18
Section 4.17 No Material Adverse Change . . . . . . . . . . . . . . . 19
Section 4.18 Securities . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.19 Indebtedness . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.20 Security Filings . . . . . . . . . . . . . . . . . . . . 19
Section 4.21 No Liens on Mortgaged Property . . . . . . . . . . . . . 19
Section 4.22 Title Insurance. . . . . . . . . . . . . . . . . . . . . 19
Section 4.23 Surveys. . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.24 Compliance with Laws . . . . . . . . . . . . . . . . . . 20
Section 4.25 Environmental Audit Report . . . . . . . . . . . . . . . 21
Section 4.26 Taxes and Assessments. . . . . . . . . . . . . . . . . . 21
Section 4.27 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.28 Intercreditor Agreement. . . . . . . . . . . . . . . . . 21
Section 4.29 Inter-Company Note . . . . . . . . . . . . . . . . . . . 21
Section 4.30 GSV Napa Merger. . . . . . . . . . . . . . . . . . . . . 21
Section 4.31 Proceedings, Instruments, etc. . . . . . . . . . . . . . 21

PART II. PROVISIONS RELATING SOLELY TO MORTGAGE NOTES

SECTION 5. MORTGAGE NOTE PAYMENTS
Section 5.1 Required Amortizing Payments . . . . . . . . . . . . . . 22
Section 5.2 Optional Prepayments with Premium. . . . . . . . . . . . 22
Section 5.3 Mandatory Offer to Prepay in a Put Event . . . . . . . . 23
Section 5.4 Restrictions on Prepayment . . . . . . . . . . . . . . . 24
Section 5.5 Security for the Mortgage Notes. . . . . . . . . . . . . 24

iii
<PAGE>

PART III. PROVISIONS RELATING SOLELY TO EXCHANGE NOTES

SECTION 6. EXCHANGE NOTE PAYMENTS
Section 6.1 Required Amortizing Payments . . . . . . . . . . . . . . 25
Section 6.2 Optional Prepayments with Premium. . . . . . . . . . . . 25
Section 6.3 Mandatory Offer to Prepay in a Put Event . . . . . . . . 26
Section 6.4 Restrictions on Prepayment . . . . . . . . . . . . . . . 27

PART IV. PROVISIONS RELATING SOLELY TO NOTES

SECTION 7. OTHER PAYMENT PROVISIONS FOR NOTES
Section 7.1 Application of Payments. . . . . . . . . . . . . . . . . 27
Section 7.2 Method of Payment. . . . . . . . . . . . . . . . . . . . 28
Section 7.3 No Set-off or Counterclaim . . . . . . . . . . . . . . . 28
Section 7.4 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.5 Acquisition of Notes . . . . . . . . . . . . . . . . . . 29

SECTION 8. REGISTRATION, EXCHANGE AND REPLACEMENT OF NOTES
Section 8.1 Registration . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.2 Exchange . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.3 Replacement. . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.4 Effect of Transfer or Exchange . . . . . . . . . . . . . 30
Section 8.5 No Transfers to Competitors. . . . . . . . . . . . . . . 31

SECTION 9. DEFAULTS AND REMEDIES
Section 9.1 Events of Default; Acceleration of Mortgage Notes. . . . 31
Section 9.2 Remedies of Mortgage Noteholders Upon an Event
of Default. . . . . . . . . . . . . . . . . . . . . 34
Section 9.3 Rights and Remedies of Exchange Noteholders
Upon an Event of Default. . . . . . . . . . . . . . 35
Section 9.4 Waiver of Appraisement, Valuation, etc.. . . . . . . . . 38
Section 9.5 Waiver of Marshalling and Other Defenses . . . . . . . . 39
Section 9.6 Rescission of Acceleration . . . . . . . . . . . . . . . 39
Section 9.7 Remedies Cumulative. . . . . . . . . . . . . . . . . . . 39
Section 9.8 Discontinuance of Proceedings. . . . . . . . . . . . . . 40
Section 9.9 Costs and Expenses, Attorneys Fees, etc.
of the Mortgage Noteholders.. . . . . . . . . . . . 40
Section 9.10 No Waiver, etc . . . . . . . . . . . . . . . . . . . . . 40
Section 9.11 Compromise of Actions, etc . . . . . . . . . . . . . . . 41
Section 9.12 Right of the Mortgage Noteholders to
Perform the Company's Covenants, etc. . . . . . . . 41

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PART V. PROVISIONS RELATING SOLELY TO PREFERRED STOCK

SECTION 10. REDEMPTION AND EXCHANGE
Section 10.1 Mandatory Redemption . . . . . . . . . . . . . . . . . . 41
Section 10.2 Optional Redemption. . . . . . . . . . . . . . . . . . . 42
Section 10.3 Mandatory Offer to Redeem in a Put Event . . . . . . . . 43
Section 10.4 Exchange of Preferred Stock for Exchange Notes . . . . . 44
Section 10.5 Acquisition, etc. of Preferred Stock . . . . . . . . . . 45
Section 10.6 Home Office Payment. . . . . . . . . . . . . . . . . . . 45
Section 10.7 Remedies . . . . . . . . . . . . . . . . . . . . . . . . 45

PART VI. PROVISIONS RELATING SOLELY TO CLASS E COMMON STOCK

SECTION 11. MANDATORY REDEMPTION; REGISTRATION RIGHTS
Section 11.1 Restrictions on Transfer of and Rights with
Respect to the Class E Common Stock . . . . . . . . 46
Section 11.2 Mandatory Offer to Redeem in a Put Event . . . . . . . . 46
Section 11.3 Registration Rights. . . . . . . . . . . . . . . . . . . 48
Section 11.4 Remedies . . . . . . . . . . . . . . . . . . . . . . . . 48

PART VII. PROVISIONS RELATING TO ALL SECURITIES

SECTION 12. CERTAIN COVENANTS OF THE PARENT AND THE COMPANY
Section 12.1 Maintenance of Office. . . . . . . . . . . . . . . . . . 49
Section 12.2 Corporate Existence. . . . . . . . . . . . . . . . . . . 49
Section 12.3 General Maintenance of Properties and Business, etc. . . 50
Section 12.4 Inspection . . . . . . . . . . . . . . . . . . . . . . . 51
Section 12.5 Compliance with Law, etc.. . . . . . . . . . . . . . . . 52
Section 12.6 Payment of Taxes and Claims. . . . . . . . . . . . . . . 52
Section 12.7 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.8 Transactions with Affiliates . . . . . . . . . . . . . . 53
Section 12.9 Merger or Consolidation. . . . . . . . . . . . . . . . . 53
Section 12.10 Indemnification. . . . . . . . . . . . . . . . . . . . . 53
Section 12.11 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 12.12 Subsidiary Dividends . . . . . . . . . . . . . . . . . . 55
Section 12.13 Dividends. . . . . . . . . . . . . . . . . . . . . . . . 56
Section 12.14 Tax Consolidation. . . . . . . . . . . . . . . . . . . . 56
Section 12.15 Environmental Law Compliance . . . . . . . . . . . . . . 56
Section 12.16 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 57
Section 12.17 Funded Debt. . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.18 Consolidated Funded Debt Ratio . . . . . . . . . . . . . 59

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Section 12.19 Consolidated Net Worth . . . . . . . . . . . . . . . . . 60
Section 12.20 Working Capital. . . . . . . . . . . . . . . . . . . . . 60
Section 12.21 Consolidated Fixed Charge Coverage . . . . . . . . . . . 60
Section 12.22 Limitation on Repayment of Affiliate Loans . . . . . . . 60
Section 12.23 Mandatory Capital Expenditures . . . . . . . . . . . . . 60
Section 12.24 Sale or Substitution of Mortgaged Property . . . . . . . 60
Section 12.25 Additional Equity; Dilution. . . . . . . . . . . . . . . 61
Section 12.26 Transfer and Sale of Assets. . . . . . . . . . . . . . . 61
Section 12.27 Replacement of Personal Property Collateral. . . . . . . 61
Section 12.28 Ownership. . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.29 Residential Facilities . . . . . . . . . . . . . . . . . 61

SECTION 13. EXPENSES

SECTION 14. CERTAIN SPECIAL RIGHTS
Section 14.1 Home Office Payment. . . . . . . . . . . . . . . . . . . 63
Section 14.2 Delivery Expenses. . . . . . . . . . . . . . . . . . . . 63
Section 14.3 Issuance Taxes . . . . . . . . . . . . . . . . . . . . . 63

SECTION 15. INFORMATION TO BE FURNISHED TO HOLDERS OF SECURITIES
Section 15.1 Financial Statements of the Company. . . . . . . . . . . 64
Section 15.2 Officer's Certificates . . . . . . . . . . . . . . . . . 65
Section 15.3 Accountants' Certificates. . . . . . . . . . . . . . . . 65
Section 15.4 Notice of Certain Events and Conditions. . . . . . . . . 66
Section 15.5 Other Information. . . . . . . . . . . . . . . . . . . . 67

SECTION 16. INTERPRETATION OF AGREEMENT AND SECURITIES
Section 16.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 68
Section 16.2 Directly or Indirectly . . . . . . . . . . . . . . . . . 83
Section 16.3 Accounting Terms . . . . . . . . . . . . . . . . . . . . 83
Section 16.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . 83
Section 16.5 Independence of Covenants. . . . . . . . . . . . . . . . 83
Section 16.6 Saturdays, Sundays, Holidays, etc. . . . . . . . . . . . 84

SECTION 17. MISCELLANEOUS
Section 17.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 17.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 17.3 Successors and Assigns; Transfer of Securities . . . . . 85
Section 17.4 Amendment and Waiver . . . . . . . . . . . . . . . . . . 85
Section 17.5 Confidentiality. . . . . . . . . . . . . . . . . . . . . 86
Section 17.6 Indemnity for Funds Availability at Closing. . . . . . . 87
Section 17.7 Additional Security. . . . . . . . . . . . . . . . . . . 87
Section 17.8 Integration. . . . . . . . . . . . . . . . . . . . . . . 87

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Section 17.9 No Partnership, etc. . . . . . . . . . . . . . . . . . . 87
Section 17.10 Consent to Jurisdiction and Venue. . . . . . . . . . . . 87
Section 17.11 Waiver of Jury Trial.. . . . . . . . . . . . . . . . . . 88
Section 17.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . 88
Section 17.13 Reproduction of Documents. . . . . . . . . . . . . . . . 88

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SCHEDULE I Purchaser of the Securities
SCHEDULE II Information to be Furnished to the Purchaser
SCHEDULE III-A Opinion of Anderson Kill Olick & Oshinsky, P.C.
SCHEDULE III-B Opinion of Steinhart & Falconer
SCHEDULE III-C Opinion of Buchman & O'Brien
SCHEDULE III-D Opinion of Farella, Braun & Martel
SCHEDULE III-E Opinion of Stults & Balber
SCHEDULE III-F Opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin

EXHIBIT A Form of Mortgage Note
EXHIBIT B Form of Certificate of Senior Redeemable Exchangeable
Preferred Stock
EXHIBIT C Form of Subordinated Exchange Note
EXHIBIT D Form of Certificate of Class E Common Stock
EXHIBIT E Form of Certificate of Designations
EXHIBIT F Form of Certificate of Incorporation
EXHIBIT G Form of Deed of Trust
EXHIBIT H Form of Security Agreement
EXHIBIT I Form of Registration Rights Agreement
EXHIBIT J Form of Environmental Indemnity
EXHIBIT K Form of Stockholder Agreement
EXHIBIT L Form of Parent Guaranty
EXHIBIT M Form of Intercreditor Agreement

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GOLDEN STATE GOLDEN STATE
VINTNERS ACQUISITION CORP.
38558 Road 128 Smith McDonnell Stone & Co., Inc.
P.O. Box 39 450 Park Avenue, Suite 2102
Cutler, California 93615 New York, New York 10022
Facsimile: (209) 528-2627 Facsimile: (212) 754-3362

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

SECURITIES PURCHASE AGREEMENT

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

Dated as of April 21, 1995

To the Purchaser of the
Securities (as defined herein)
Named in SCHEDULE I hereto

Ladies and Gentlemen:

Each of the undersigned, Golden State Vintners, a California corporation
(the "COMPANY"), and Golden State Acquisition Corp., a Delaware corporation (the
"PARENT"), hereby agrees with you as follows:

PART I. ISSUANCE AND SALE OF SECURITIES

SECTION 1. ISSUANCE OF SECURITIES.

SECTION 1.1 AUTHORIZATION OF SECURITIES.

(a) SENIOR SECURED NOTES. The Company has duly authorized the
issuance and sale of up to $35,000,000 in aggregate principal amount of its
First Mortgage Notes due 2005, substantially in the form annexed hereto as
EXHIBIT A (the "MORTGAGE NOTES"), to be issued to the Purchaser specified in
SCHEDULE I hereof. Each Mortgage Note shall bear interest from the date thereof
until such Mortgage Note shall become due and payable in accordance with the
terms thereof and hereof (whether at maturity, by acceleration or otherwise) as
follows: (i) from and after the date hereof until April 21, 2000, at the rate
of nine and sixty-nine one hundredths percent (9.69%) per annum, and (ii) on and
after April 21, 2000, at the rate of two and seventy five one hundredths percent
(2.75%) plus the rate of interest then payable on United States Treasury Notes
maturing in five years, as published in THE WALL STREET JOURNAL (or any
successor publication) on such date or the next preceding Business Day.
Interest shall be payable commencing on October 1, 1995 and on the first day of
each month thereafter (each a "MORTGAGE NOTE PAYMENT DATE"). Principal shall be
payable on each

<PAGE>

Mortgage Note Payment Date in accordance with the terms of the Mortgage Note.
Interest on the Mortgage Notes shall be computed on the basis of a 360-day year
of 30-day months. If the Company shall fail to pay any principal, premium or
interest due on a Mortgage Note Payment Date in accordance with Section 9.1, a
late charge of two percent (2%) of any such payment of principal, premium or
interest shall be due and payable. If the Company shall fail to pay any such
payment for more than thirty (30) days after the Mortgage Note Payment Date when
such payment was due, effective as of such Mortgage Note Payment Date the
interest rate payable on the entire outstanding principal balance of the
Mortgage Notes and all other amounts due thereunder shall increase by two
percent (2%) per annum until such time as all amounts past due with respect to
the Mortgage Notes have been paid in full. If the Company shall have paid or
agreed to pay any interest or premium on any Mortgage Note in excess of that
permitted by law, then it is the express intent of the Company and the holder
thereof that all excess amounts previously paid or to be paid by the Company be
applied to reduce the principal balance of such Mortgage Note, and the
provisions thereof immediately be deemed reformed and the amounts thereafter
collectable thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the then applicable law, but so as to permit
the recovery of the fullest amount otherwise called for thereunder.

(b) SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK. The Parent
has duly authorized the issuance and sale of up to 100,000 shares of its 12%
Senior Redeemable Exchangeable Preferred Stock (such shares being purchased by
the Purchaser specified in SCHEDULE I hereto on the Closing Date collectively
being referred to herein as the "SENIOR PREFERRED STOCK"), which when issued
will have the rights, preferences and restrictions set forth herein and in the
Certificate of Designations referred to in Section 4.9 hereof. Such issuance
and sale shall be made pursuant to the terms and conditions of this Securities
Purchase Agreement, and a certificate or certificates representing such shares
of Senior Preferred Stock shall be delivered on the Closing Date and shall be
substantially in the form annexed hereto as EXHIBIT B.

(c) EXCHANGE NOTES. The Parent has duly authorized the issuance
of up to $10,000,000 in aggregate principal amount of its 13.2% Subordinated
Exchange Notes due 2007, substantially in the form annexed hereto as EXHIBIT C
(the "EXCHANGE NOTES"), in exchange for shares of Senior Preferred Stock upon
the terms specified herein and in the Certificate of Designations referred to in
Section 4.9 hereof. Each Exchange Note shall bear interest from the date
thereof until such Exchange Note shall become due and payable in accordance with
the terms thereof and hereof (whether at maturity, by acceleration or otherwise)
at the rate of 13.2% per annum, payable commencing on the first April or October
following the date of such Exchange Note, and on each April and October
thereafter (each a "EXCHANGE NOTE PAYMENT DATE") or as otherwise specified in
Section 9.3(a) hereof. Principal shall be payable on each Exchange Note Payment
Date in accordance with the terms of the Exchange Note. Interest on the
Exchange Notes shall be computed on the basis of a 360-day year of 30-day
months. If the Parent shall have paid or agreed to pay any interest or premium
on any Exchange Note in excess of that permitted by law, then it is the express
intent of the Parent and the holder thereof that all excess amounts previously
paid or to be paid by the Parent be applied to reduce the principal balance of
such Exchange Note, and the provisions thereof immediately be deemed reformed
and the amounts thereafter collectable thereunder reduced,

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<PAGE>

without the necessity of the execution of any new document, so as to comply with
the then applicable law, but so as to permit the recovery of the fullest amount
otherwise called for thereunder.

(d) SHARES OF CLASS E COMMON STOCK. The Parent has duly
authorized the issuance and sale of up to 414,079 shares of its Class E Common
Stock, par value $.01 per share (such shares being purchased by the Purchaser
specified in SCHEDULE I hereto on the Closing Date collectively being referred
to herein, including any shares of capital stock into which such shares are
converted, as the "CLASS E COMMON STOCK"), which when issued will have the
rights, preferences and restrictions set forth herein and in the Certificate of
Incorporation referred to in Section 4.9 hereof. Such issuance and sale shall
be made pursuant to the terms and conditions of this Securities Purchase
Agreement, and a certificate or certificates representing such shares of Class E
Common Stock shall be delivered on the Closing Date and shall be substantially
in the form annexed hereto as EXHIBIT D.

SECTION 1.2 PURCHASE AND SALE OF SECURITIES.

(a) The Company agrees to sell to you, and upon and subject to the
terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein, you agree to purchase from the
Company, Mortgage Notes in the aggregate principal amount, if any, specified
opposite your name in SCHEDULE I hereto, at a purchase price equal to the
principal amount thereof (such aggregate purchase price being referred to herein
as the "NOTE PURCHASE PRICE"). The Parent agrees to sell to you, and upon and
subject to the terms and conditions hereof and in reliance upon the
representations and warranties of the Parent contained herein, you agree to
purchase from the Parent (i) the number of shares of Senior Preferred Stock, if
any, specified opposite your name in SCHEDULE I hereto, at a purchase price
equal to $100.00 per share of Senior Preferred Stock, for an aggregate purchase
price equal to $7,929,605 (such aggregate purchase price being referred to
herein as the "SENIOR PREFERRED STOCK PURCHASE PRICE")); and (ii) shares of
Class E Common Stock specified opposite your name in SCHEDULE I hereto, for an
aggregate purchase price equal to $2,070,395 (such aggregate purchase price
being referred to herein as the "COMMON STOCK PURCHASE PRICE"; and, together
with the Note Purchase Price and the Senior Preferred Stock Purchase Price, the
"PURCHASE PRICE"). The Mortgage Notes, Senior Preferred Stock and Class E
Common Stock (collectively, the "SECURITIES") are to be sold and delivered
together at a closing to be held on April 27, 1995 at 10:00 A.M., Eastern time,
or such other date and time as shall be agreed upon by you, the Company and the
Parent, and in any event not later than 10:00 A.M. Eastern time (such date and
time being hereinafter called the "CLOSING DATE"), at the offices of Anderson
Kill Olick & Oshinsky, P.C., 1251 Avenue of the Americas, New York, New York
10020.

(b) On the Closing Date, the Company will deliver to the
Purchaser one or more duly executed Mortgage Notes dated the Closing Date,
registered in its name or the name of its nominee and in the principal amount
or amounts specified opposite its name in SCHEDULE I hereto. On the Closing
Date, the Parent will deliver (i) to the Purchaser one or more duly executed
certificates for Senior Preferred Stock dated the Closing Date, registered in
its name or the name of its nominee, representing the number of shares of
Senior Preferred

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<PAGE>

Stock specified opposite its name in SCHEDULE I hereto with appropriate stock
transfer legends thereon; and (ii) to the Purchaser a duly executed stock
certificate dated the Closing Date, registered in its name or the name of its
nominee and representing the number of shares of Class E Common Stock
specified opposite its name in SCHEDULE I hereto with appropriate stock
transfer legends thereon. The delivery of such Securities to you shall be
made against payment by wire transfer by you of immediately available funds
to the account of the Company in an amount equal to the Note Purchase Price
to be paid in respect of the Mortgage Notes and to the account of the Parent
in an amount equal to the Senior Preferred Stock Purchase Price and Common
Stock Purchase Price to be paid in respect of the shares of Senior Preferred
Stock and Class E Common Stock to be purchased by you on the Closing Date.

(c) If at the closing the Company or the Parent shall fail to
tender any of the Securities to you as provided above in this Section 1.2, or
any of the conditions specified in Section 4 hereof shall not have been
fulfilled to your satisfaction, at your election you shall be relieved of all
obligations under this Securities Purchase Agreement, without thereby waiving
any other rights you may have by reason of such failure or such nonfulfillment.

SECTION 1.3 USE OF PROCEEDS. The net proceeds of the sale of the
Mortgage Notes on the Closing Date shall be used by the Company (i) to repay
Indebtedness aggregating approximately $31,012,310 payable to Sanwa Bank
California, Bank of America Illinois (formerly known as Continental Bank,
N.A.), and Napa Valley Bank, and (ii) to the extent of any balance thereof,
for general corporate purposes. The net proceeds of the sale of the Senior
Preferred Stock and the Class E Common Stock on the Closing Date shall be
used by the Parent to (i) to purchase outstanding capital stock of the
Company and (ii) to the extent of any balance thereof, for general corporate
purposes.

SECTION 1.4 DEFINITIONS, ETC. Certain terms used in this Securities
Purchase Agreement are defined in Section 16.1 hereof; references to a
"SCHEDULE" or "EXHIBIT" are, unless otherwise specified, to the Schedules and
Exhibits attached to this Securities Purchase Agreement; and "HEREOF",
"HEREIN", "HEREUNDER" and other words of similar import shall be construed to
refer to this Securities Purchase Agreement as a whole and not to any
particular Section or other subdivision. All of the Schedules and Exhibits
attached to this Securities Purchase Agreement are hereby incorporated by
reference herein in their entirety.

SECTION 2. GENERAL REPRESENTATIONS AND WARRANTIES.

Each of the Parent and the Company hereby represents and warrants to you,
as of the Closing Date, as follows:

SECTION 2.1 CAPITAL STOCK; SUBSIDIARIES.

(a) After giving effect to the filing of the Certificate of
Incorporation and Certificate of Designations on or prior to the Closing Date,
and the issuance of the Securities on the Closing Date, the authorized and
outstanding capital stock of the Parent consists of: 1,000,000 shares of
Class A Common Stock, which is vested with 100% of the voting rights

4
<PAGE>

in the Parent, of which 650,000 shares are issued and outstanding; 2,000,000
shares of nonvoting Class B Common Stock, of which 1,300,000 shares are issued
and outstanding; 3,500,000 shares of Class D Common Stock, of which no shares
are issued and outstanding; 1,000,000 shares of nonvoting Class E Common Stock,
of which 414,079 shares are issued and outstanding; 200,000 shares of Senior
Preferred Stock, of which 100,000 shares are issued and outstanding; and 750,000
shares of Junior Preferred Stock (the "JUNIOR PREFERRED STOCK"), of which
523,980 shares are issued and outstanding. All such outstanding shares have
been duly authorized, validly issued and are fully paid, nonassessable and,
except as specified in the Stockholder Agreement, free of preemptive rights. No
shares of stock are held in the treasury of the Company. Listed on Item 2.1 of
SCHEDULE II hereto are all of the Subsidiaries of the Company.

(b) The authorized capital stock of the Company consists of:
500,000,000 shares of Common Stock, which is vested with all the voting rights
in the Company, of which 228,686,534 shares are issued and outstanding and owned
by the Parent and 28,889 shares are issued and outstanding and owned by the
Persons specified in Item 2.1(b) of Schedule II; and 300,000,000 shares of
preferred stock, of which no shares are outstanding. All such outstanding
shares of Common Stock have been duly authorized, validly issued and are fully
paid, nonassessable and free of preemptive rights. No shares of Common Stock
are held in the treasury of the Parent.

(c) All issued and outstanding securities (as defined in the
Securities Act) of each of the Company and the Parent have been offered, issued,
sold and delivered in compliance with, or pursuant to exemptions from, all
applicable federal and state laws, and the rules and regulations of federal and
state regulatory bodies governing the offering, issuance, sale and delivery of
securities. Neither the Company nor the Parent is required to file on the date
hereof nor has it filed prior to the date hereof, pursuant to Section 12 of the
Exchange Act, a registration statement relating to any class of debt or equity
securities.

(d) Except as set forth in the Agreements, there are no
subscriptions, options, warrants or calls relating to the issuance by the
Company or the Parent of any shares of its capital stock, including any right of
conversion or exchange under any outstanding security or other instrument.
There are no voting trusts or other agreements or understandings with respect to
the voting of the capital stock of the Company or the Parent. Except as
contemplated herein and in the Agreements, neither the Company nor the Parent is
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any security convertible
into or exchangeable for any of its capital stock.

SECTION 2.2 ORGANIZATION AND AUTHORITY. Each of the Company, the
Parent and the Subsidiaries:

(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;

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<PAGE>

(b) has all requisite power and authority (corporate and other)
(i) to own and operate its properties, (ii) to conduct its business as currently
conducted and as currently proposed to be conducted, (iii) in the case of the
Company, to offer, issue, sell and deliver the Mortgage Notes, (iv) in the case
of the Parent, to offer, issue, sell and deliver the Senior Preferred Stock, the
Exchange Notes, and the Class E Common Stock, (v) to enter into, as applicable,
this Securities Purchase Agreement, the Deeds of Trust, the Security Agreement,
the Environmental Indemnity Agreement, the Parent Guaranty, the Intercreditor
Agreement, the Stockholder Agreement and the Registration Rights Agreement
(collectively, the AGREEMENTS") and (vi) to perform its respective obligations
under such Agreements, the Mortgage Notes and the Certificate of Incorporation;
and

(c) has made all filings and holds all franchises, licenses,
permits and registrations which are required under the laws of each jurisdiction
in which the properties owned (or held under lease) by it or the nature of its
activities makes such filings, franchises, licenses, permits or registrations
necessary, except for filings, franchises, licenses, permits or registrations
which individually or in the aggregate are not material to the Company or the
Parent or as specified in Item 2.2 of Schedule II.

SECTION 2.3 CORPORATE PROCEEDINGS. Each of the Company and the Parent has
taken all corporate action necessary to be taken by it to authorize the
execution and delivery of the Agreements, the offer, issuance, sale and delivery
of the Securities and the performance of all obligations to be performed by it
hereunder and thereunder.

SECTION 2.4 VALIDITY OF AGREEMENTS AND SECURITIES. This Securities
Purchase Agreement has been duly executed and delivered by each of the Company
and the Parent and constitutes the legal, valid and binding obligation of each
of the Company and the Parent, enforceable against each of the Company and the
Parent in accordance with its terms, except as limited by applicable bankruptcy,
insolvency, fraudulent conveyance and similar laws regarding debtor/creditor
relationships and the effect of general principles of equity. The other
Agreements, when executed and delivered by the Company and/or the Parent, as
applicable, will each constitute the legal, valid and binding obligation of the
Company and/or the Parent, as applicable, enforceable against the Company and/or
the Parent, as applicable, in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, fraudulent conveyance and similar laws
regarding debtor/creditor relationships and the effect of general principles of
equity. Upon receipt by the Company of payment for the Mortgage Notes, the
Mortgage Notes will have been duly issued by the Company, will be entitled to
the benefits and security of the Security Agreement and the Deeds of Trust and
will each constitute the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as limited
by applicable bankruptcy, insolvency, fraudulent conveyance and similar laws
regarding debtor/creditor relationships and the effect of general principles of
equity. Upon receipt by the Parent of payment for the Senior Preferred Stock
and issuance of the Senior Preferred Stock as herein provided, the Senior
Preferred Stock will be duly issued, fully paid and nonassessable and free from
preemptive rights in favor of the holders of other shares of capital stock of
the Parent. Upon receipt by the Parent of payment for the Class E Common Stock
and issuance of the Class E Common Stock as herein provided, the Class E Common
Stock will be duly issued, fully paid and nonassessable and free from preemptive

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<PAGE>

rights in favor of the holders of other shares of capital stock of the Parent,
except as specified in the Stockholder Agreement. Upon receipt by the Parent of
the Senior Preferred Stock in exchange for the Exchange Notes pursuant to
Section 10.4 hereof and upon the issuance and delivery of such Exchange Notes,
such Exchange Notes will be duly issued by the Parent and will constitute legal,
valid and binding obligations of the Parent, enforceable against the Parent in
accordance with their terms, except as limited by applicable bankruptcy,
insolvency, fraudulent conveyance and similar laws regarding debtor/creditor
relationships and the effect of general principles of equity.

SECTION 2.5 NO EVENT OF DEFAULT. No event has occurred and is continuing,
and no condition exists, that, if the Mortgage Notes, Senior Preferred Stock or
Class E Common Stock had been issued and were outstanding on the date hereof,
would constitute a Default or an Event of Default.

SECTION 2.6 CONSENT, ETC. Except as specified in Item 2.6 of SCHEDULE II,
no prior consent, approval or authorization of, registration, qualification,
designation, declaration or filing with, or notice to any federal, state or
local governmental or public authority or agency including, without limitation,
any filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, is or was required for (a) the valid execution, delivery or performance
of the Agreements by the Company or the Parent, (b) the perfection or
maintenance of the Liens intended to be created by the Security Documents
(including the first priority nature thereof), (c) the valid offer, execution,
issuance, sale or delivery of the Securities or the performance of the
Securities by the Company or the Parent or (d) the consummation of the
Acquisition. Except as specified in Item 2.6 of SCHEDULE II, each of the
Company and the Parent has obtained all consents, approvals or authorizations
of, made all declarations or filings with, and given all notices to, all
applicable federal, state or local governmental or public authorities or
agencies which are necessary for the continued conduct by each of the Company
and the Parent of its businesses as now conducted or as proposed to be conducted
and which the failure to so obtain, make or give could have a Material Adverse
Effect.

SECTION 2.7 BUSINESS.

(a) Neither the Company, the Parent nor any of the Subsidiaries
presently contemplates conducting a business other than the business presently
conducted by it.

(b) The address of the principal place of business and chief
executive office of each of the Company and the Parent is the same as the
address for notices to the Company and the Parent provided in Section 17.1
hereof.

(c) The Confidential Private Placement Memorandum dated December,
1994 (the "OFFERING MEMORANDUM"), furnished by Smith McDonnell Stone & Co., Inc.
contains materially accurate descriptions of the general nature of the business
of the Company as presently conducted and proposed to be conducted. Except as
set forth in Item 2.7(c) of SCHEDULE II, neither the Parent nor the Company is
presently engaged in any line of business not so disclosed and does not own or
lease any significant properties not so disclosed.

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SECTION 2.8 FINANCIAL STATEMENTS.

(a) The Company has heretofore furnished to you complete and
accurate copies of: (i) audited consolidated financial statements of the
Company for the Fiscal Years ended June 30, 1990, June 30, 1991, June 30, 1992,
June 30, 1993 and June 30, 1994, including audited consolidated balance sheets
of the Company as of the end of each such Fiscal Year and statements of income,
changes in stockholders' equity and cash flows of the Company for each such
Fiscal Year, together with the opinion thereon of (A) Deloitte & Touche,
independent certified public accountants, as to the fiscal years ended June 30,
1994, and (B) Arthur Andersen & Co., independent certified public accountants as
to the fiscal years ended June 30, 1992 and June 30, 1993; and (ii) unaudited
financial statements of the Company for the six-month period ended December 31,
1994, including unaudited balance sheets as of the end of such period and a
statement of income and retained earnings for such period (the financial
statements referred to in clauses (i) and (ii) of this Section 2.8 being
collectively referred to as the "FINANCIAL STATEMENTS"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the respective periods, except
as therein noted. The Financial Statements are complete and present fairly the
financial position of the Company as of such dates and the results of their
operations and changes in their financial position or cash flows, as the case
may be, for such periods in all material respects. The Company does not have
any material obligation or liability, individually or in the aggregate, of the
nature required to be disclosed on a balance sheet prepared in accordance with
generally accepted accounting principles that is not disclosed by the Financial
Statements referred to above.

(b) The Company and its Subsidiaries have furnished to you
copies of certain forward-looking financial information for the Company
contained in the Offering Memorandum, consisting of information under the
Caption "VI. Financial Projections" (collectively, the "PROJECTIONS"). The
Projections have been prepared on the basis of reasonable assumptions made in
good faith by the Company, and as of the date on which such assumptions were
made, no relevant facts known to the Company existed that were not taken into
account in the making of such assumptions and that reasonably could be expected
to have a material effect thereon. There are no facts known to the Company
which are inconsistent with the Projections or such assumptions in any material
respect.

SECTION 2.9 NO MATERIAL ADVERSE CHANGE. Since June 30, 1994, there has
been no material adverse change in the business, earnings, properties or
condition (financial or other) of the Company or the Parent, except for
conditions generally known to the public, general economic and environmental
conditions and local floods, storms and earthquakes.

SECTION 2.10 LICENSES, REGISTRATIONS, ETC. Each of the Parent and the
Company owns or possesses, and holds free from burdensome restrictions or known
conflicts with the rights of others, all licenses, registrations, permits,
copyrights, trademarks, service marks, trade names and patents, and all rights
with respect to the foregoing, necessary for the conduct of its business as now
conducted and as proposed to be conducted, and is in full compliance with the
terms and conditions, if any, of all such licenses, registrations, franchises,
permits, copyrights, trademarks, serviced marks, trade names, patents and all
rights with respect to the

8
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foregoing and the terms and conditions of any agreements relating thereto,
except for such restrictions, conflicts or noncompliance which, either
individually or in the aggregate, do not have, and in the future will not have,
a Material Adverse Effect. The Parent does not conduct any business other than
owning the capital stock of the Company.

SECTION 2.11 TITLE TO PROPERTIES; LEASES.

(a) The Company has good and valid fee title to the Real Property
Collateral described in Item 2.11(a) of SCHEDULE II, and the Company has good
and valid title to the Personal Property Collateral. Except for Permitted
Liens, there are no Liens on any of the Mortgaged Property.

(b) Item 2.11(b) of SCHEDULE II hereto accurately lists (i) each
financing statement other security agreement or instrument which has been filed,
recorded or registered pursuant to any United States or federal, state or local
law or regulation that names the Company or the Parent as debtor or lessee or as
the grantor or the transferor of the interest created thereby currently in
force, and (ii) as to each such financing statement agreement or other
instrument, the names of the debtor, lessee, grantor or transferor and the
secured party, lessor, grantee or transferee and the name of the jurisdiction in
which such financing statement, agreement or other instrument has been filed,
recorded or registered. Except as specified in Item 2.11(b) of SCHEDULE II, the
financing statements listed thereon do not cover any part of the Mortgaged
Property.

SECTION 2.12 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Each of the
Company, the Parent and the Subsidiaries is not: (a) in violation of any term
of its charter or by-laws; or (b) in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in, and
is not otherwise in default under, (i) any evidence of Indebtedness for Money
Borrowed, or any other evidence of Indebtedness or any instrument or agreement
under or pursuant to which any evidence of Indebtedness for Money Borrowed or
other evidence of Indebtedness has been issued; or (ii) any other instrument or
agreement to which it is a party or by which it is bound or any of its
properties is affected any which default would have a Material Adverse Effect.

SECTION 2.13 NO CONFLICT, ETC. Neither the execution, delivery or
performance of the Agreements by the Company and the Parent nor the offer,
issuance, sale or delivery of the Securities by the Company and the Parent or
the performance of the Securities by the Company or the Parent does or will:
(a) conflict with or violate the charter or by-laws of the Company or the
Parent; (b) conflict with or result in a breach of any of the terms, conditions
or provisions of, or constitute a default under, or result in the creation of
any Lien on any of the properties or assets of the Company or the Parent
pursuant to the terms of, any evidence of Indebtedness, or any instrument or
agreement under or pursuant to which any evidence of Indebtedness has been
issued, or any other instrument or agreement to which the Company or the Parent
is a party or by which it is bound in each case resulting in a Material Adverse
Effect; or (c) require the consent of, or other action by, any stockholder,
trustee or any creditor of, any lessor to or any investor in, the Company, the
Parent or any other non-governmental Person, except as specified in Item 2.13 of
SCHEDULE II.

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SECTION 2.14 NO MATERIALLY ADVERSE CONTRACTS, ETC.

(a) Each of the Company and the Parent is not a party to or bound
by (nor are any of its properties affected by) any contract or agreement, or
subject to any order, writ, injunction or decree or other action of any court or
any governmental department, commission, bureau, board or other administrative
agency or official, or any charter or other corporate or contractual
restriction, which has a Material Adverse Effect.

(b) Neither the Company nor the Parent is a party to any contract
or agreement with any Affiliate the terms of which are not commercially
reasonable or are less favorable to it than it would obtain in a comparable
arm's length transaction with a person other than an Affiliate.

SECTION 2.15 COMPLIANCE WITH LAW, ETC. Each of the Company and the
Parent is in full compliance in all material respects with all laws and
ordinances and all governmental rules and regulations to which it is subject.
Neither the execution, delivery or performance of this Securities Purchase
Agreement by the Company and the Parent, the offer, issuance, sale or delivery
of the Securities by the Company and the Parent nor the performance of the
Securities, does or will cause the Company or the Parent to be in violation of
any statute, law or ordinance or any judgment, decree, writ, injunction, order,
award or other action of any court or governmental authority or arbitrator or
any order, rule or regulation, of any federal, state, county, municipal or other
governmental or public authority or agency. The Company uses and operates the
Mortgaged Property for lawful purposes in full compliance in all material
respects with all laws and ordinances and all governmental rules and regulations
to which it is subject.

SECTION 2.16 COMPLIANCE WITH ERISA; MULTIEMPLOYER PLANS.

(a) Neither (i) the execution and delivery of this Securities
Purchase Agreement by the Company and the Parent, (ii) the offer, issuance, sale
and delivery of the Securities by the Company and the Parent, (iii) the
acquisition of the Securities by you, (iv) the application by the Company and
the Parent of the proceeds of the sale of the Securities nor (v) the
consummation of any of the other transactions contemplated by this Securities
Purchase Agreement constitutes or will constitute a "prohibited transaction"
(within the meaning of Section 4975 of the Code or Section 406 of ERISA). The
representation by the Company and the Parent in the preceding sentence is made
in reliance upon and subject to the accuracy of the representations made by you
in Section 3.2 hereof. The Company has delivered to you a complete and correct
list of all "employee benefit plans" (within the meaning of Section 3(3) of
ERISA) with respect to which the Company or any ERISA Affiliate of the Company
is a "party in interest" (within the meaning of Section 3(14) of ERISA) or with
respect to which its securities are "employer securities" (within the meaning of
Section 407(d)(1) of ERISA).

(b) Each Plan is in compliance in all respects with applicable
provisions of ERISA, the Code and applicable foreign law. The Company and each
ERISA Affiliate has made all contributions to the Plans required to be made by
it.

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(c) Except for liabilities to make contributions and to pay PBGC
premiums and administrative costs, neither the Company nor any ERISA Affiliate
of the Company has incurred any material liability to or on account of any Plan
or Pension Plan under applicable provisions of ERISA, the Code or applicable
foreign law, and no condition exists which presents a material risk to the
Company or any ERISA Affiliate of the Company of incurring any such liability.
No Pension Plan has an "accumulated funding deficiency" (within the meaning of
Section 412 of the Code), whether or not waived. None of the Company, any ERISA
Affiliate of the Company, the PBGC or any other Person has instituted any
proceedings or taken any other action to terminate any Pension Plan.

(d) The actuarial present value of all accrued benefit liabilities
under each Pension Plan (based on the assumptions used in the funding of such
Pension Plan, which assumptions are reasonable, and determined as of the last
day of the most recent plan year of such Pension Plan for which an annual report
has been filed with the Internal Revenue Service did not exceed the current fair
market value of the assets of such Pension Plan as of such last day.

(e) Except as specified in Item 2.16(e) of SCHEDULE II, (i) none
of the Plans is a Multiemployer Plan, and neither the Company nor any ERISA
Affiliate of the Company has contributed or been obligated to contribute to any
Multiemployer Plan at any time within the preceding six years and (ii) neither
the Company nor any ERISA Affiliate of the Company maintains or has any
obligation to maintain any plan, program or other arrangement for the provision
of post-employment group health or other welfare benefits for its retired or
former employees except to the extent required under Section 601 ET SEQ. of
ERISA or Section 4980B of the Code.

SECTION 2.17 PENDING LITIGATION, ETC. There is no action at law, suit in
equity or other proceeding or investigation (whether or not purportedly on
behalf of the Company or the Parent) in any court or by or before any other
governmental or public authority or agency, or any arbitrator or arbitration
panel pending or, to the best knowledge of the Company and the Parent,
threatened against or affecting the Company, the Parent, or any of their
properties that, either individually or in the aggregate, (a) could reasonably
be expected to have a Material Adverse Effect or (b) could reasonably be
expected to question the validity or enforceability of this Securities Purchase
Agreement, the other Agreements or the Securities. Neither the Company nor the
Parent is in default with respect to any order, writ, injunction, judgment or
decree of any court or other governmental or public authority or agency or
arbitrator or arbitration panel.

SECTION 2.18 TAXES. All federal, state and other tax returns of the
Company required by law to be filed have been duly filed or a valid extension
for such filing has been obtained, and all federal, state and other taxes,
assessments, fees and other governmental charges upon the Company or upon any of
its properties, income or assets that are due and payable have been paid, except
where they are being protested or contested in good faith by appropriate
proceedings except for eight months of withholding and other employment-related
taxes for Mark Rasmussen, which taxes will be paid by May 1, 1995. No
extensions of the time for the assessment of deficiencies have been granted by
the Company. The Company does not know

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of any proposed, asserted or assessed tax deficiency against the Company except
for an investigation by Fresno and Madera Counties regarding the allocation of
the Company's ad valorem taxes between the two counties. The Company is not a
party to or bound by or obligated under any tax sharing or similar agreement.
There are no Liens on any properties or assets of the Company imposed or arising
as a result of the delinquent payment or the non-payment of any tax, assessment,
fee or other governmental charge other than Permitted Liens. Federal and state
income tax returns for the Company have been audited by the Internal Revenue
Service or the appropriate state authorities, respectively, or the applicable
statutes of limitation with respect to such obligations have expired through the
Fiscal Year ended June 30, 1991 and all prior Fiscal Years. Except as specified
in Item 2.18 of SCHEDULE II, the Company (a) has not assumed and is not liable
for any federal, state or other income tax liability of any other Person,
including any predecessor corporation, as a result of any purchase of assets or
other business acquisition transaction and (b) has not indemnified any other
Person or otherwise agreed to pay on behalf of any other Person tax liability
growing out of or which may be asserted on the basis of any tax treatment
adopted with respect to all or any aspect of such a business acquisition
transaction. The charges, accruals and reserves, if any, on the books of the
Company in respect of federal, state and local corporate franchise and income
taxes for all fiscal periods to date are adequate in accordance with generally
accepted accounting principles, and the Company does not know of any additional
unpaid assessments for such periods or of any basis therefor. There are no
applicable taxes, fees or other governmental charges payable by the Parent or
the Company in connection with the execution and delivery of this Securities
Purchase Agreement or the offer, issuance, sale and delivery of the Securities.

SECTION 2.19 HOLDING COMPANY ACT; INVESTMENT COMPANY ACT.

(a) Neither the Company nor the Parent is, and the ownership of
its properties by each of the Company and the Parent does not cause it to be,
(i) a "public utility company" or a "holding company", or a "subsidiary company"
of a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended or (ii) a "public
utility" within the meaning of the Federal Power Act, as amended.

(b) Neither the Company nor the Parent is an "investment company"
or an "affiliated person" of an "investment company" or a company "controlled"
by an "investment company," as such terms are defined in the Investment Company
Act of 1940, as amended, that is subject to registration and regulation under
such act. Neither the Company nor the Parent is an "investment adviser" or an
"affiliated person" of an "investment adviser" as such terms are defined in the
Investment Advisers Act of 1940, as amended.

SECTION 2.20 NO MARGIN REGULATION VIOLATION. None of the transactions
contemplated by this Securities Purchase Agreement (including, without
limitation, the direct or indirect use of the proceeds from the sale of the
Securities) will violate or result in a violation of Section 7 of the Exchange
Act or any regulations issued pursuant thereto, including, without limitation,
Regulation G (12 C.F.R., Part 207), as amended, Regulation T (12 C.F.R., Part
220), as amended, Regulation U (12 C.F.R., Part 221), as amended and Regulation
X (12 C.F.R., Part

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<PAGE>
224), as amended, of the Board of Governors of the Federal Reserve System, or
will require you to obtain a statement in conformity with the requirements of
Federal Reserve Form FR G-3 or to register on Federal Reserve Form FR G-1 under
such regulations. The proceeds from the sale of the Securities by the Company
and the Parent will not be used to purchase or carry any "margin securities"
within the meaning of such Regulation G.

SECTION 2.21 COMPLIANCE WITH ENVIRONMENTAL LAWS. Each of the Company and
the Parent is, and will continue to be in full compliance in all material
respects with all applicable Environmental Laws, regulations and ordinances
governing its business, products, properties or assets with respect to all
Hazardous Materials, as more fully set forth in the Deeds of Trust. In
addition, the Company shall indemnify you against environmental costs and claims
pursuant to an Environmental Indemnity Agreement substantially in the form
annexed hereto as EXHIBIT J (the "ENVIRONMENTAL INDEMNITY AGREEMENT").

SECTION 2.22 LABOR RELATIONS. Neither the Parent nor the Company is
engaged in any unfair labor practice which could have a Material Adverse Effect.
There is (a) no unfair labor practice complaint pending or, to the best
knowledge of the Company and the Parent, threatened against the Company or the
Parent before the National Labor Relations Board or any court or labor board,
and no grievance or arbitration proceedings arising out of or under collective
bargaining agreements is so pending or, to the best knowledge of the Company and
the Parent, threatened, except as specified in Item 22 of SCHEDULE II; (b) no
strike, labor dispute, slowdown or stoppage pending or, to the best knowledge of
the Company and the Parent, threatened against the Company or the Parent; and
(c) to the best of the Company's and the Parent's knowledge, no union
representation question existing with respect to the employees of the Company
and no union organizing activities are taking place with respect to any thereof.
Except as specified in Item 2.22 of SCHEDULE II, the Company is not a party to
any collective bargaining agreement.

SECTION 2.23 INSURANCE. Each of the Company and the Parent has obtained
insurance, with respect to its properties and businesses, with financially sound
insurers of nationally recognized stature and responsibility, of such a nature,
with such terms and in such amounts as a reasonably prudent person would
maintain with respect to similar properties and a similar business and which
otherwise satisfies the requirements of Section 12.16 hereof.

SECTION 2.24 OFFEREES. Neither the Company, the Parent nor any other
Person authorized by the Company or the Parent to act as an agent, broker,
dealer or otherwise in connection with the offering or sale of the Securities
has, either directly or through any agent, offered any of the Securities or any
similar securities for sale to, or solicited any offers to buy any thereof from,
or otherwise approached or negotiated in respect thereof with, any Person or
Persons other than you and not more than 24 other Institutional Investors. Each
of the Company and the Parent agrees that neither it, nor any agent on behalf of
it, will sell or offer any of the Securities or any similar securities to, or
solicit offers to buy any thereof from, or otherwise approach or negotiate in
respect thereof with, any other Person or Persons whomsoever, or take any other
action, so as to bring the issuance and sale of any of the Securities within the
provisions of Section 5 of the Securities Act or the provisions of any state
securities law

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requiring registration of securities, notification of the issuance and sale
thereof or confirmation of the availability of any exemption from registration
thereof.

SECTION 2.25 REPRESENTATIONS AND WARRANTIES IN STOCK PURCHASE AGREEMENT
AND RELATED DOCUMENTS. The representations with respect to the Company and the
Parent contained in the Agreements, the Stock Purchase Agreement dated as of
April 27, 1995, by and among the Parent, the Company, the shareholders at that
time of the Company (the "STOCK PURCHASE AGREEMENT") and in any document,
certificate or instrument delivered pursuant thereto, are true and correct in
all material respects and you shall be entitled to rely on such representations
as if they were made to you in this Securities Purchase Agreement as of the
Closing Date.

SECTION 2.26 OTHER NAMES. Except as set forth in Item 2.26 of
SCHEDULE II hereto, the businesses conducted by the Company or the Parent prior
to the date hereof have not been conducted under any corporate, trade or
fictitious name.

SECTION 2.27 INVESTMENTS. Except as set forth in Item 2.27 of
SCHEDULE II hereto, each of the Company and the Parent has no Investment in any
Person and is not engaged in any joint venture or partnership with any other
Person.

SECTION 2.28 FLOOD HAZARD AREA. Except as specified in Item 2.28 of
SCHEDULE II no portion of the Mortgaged Property lies within a designated flood
plain or flood hazard area.

SECTION 2.29 BROKER'S OR FINDER'S COMMISSIONS. Except for the fees
specified in Item 2.29 of SCHEDULE II, no broker's or finder's placement fee or
commission will be payable by the Company or the Parent with respect to the
issuance, sale and delivery of the Securities or any of the transactions
contemplated hereby. The Agent acted solely as agent for the Company and not as
agent for you and the Company has not engaged any other person in connection
with the issuance, sale or delivery of the Securities other than as described in
Item 2.29 of SCHEDULE II.

SECTION 2.30 SOLVENCY. Each of the Parent, Company and the Subsidiaries
is and, immediately after giving effect to the issue and sale of the Securities
and the consummation of the other transactions contemplated by this Securities
Purchase Agreement, will be, Solvent.

For purposes of this Section 2.30, the term "SOLVENT" shall mean, with
respect to any Person, that:

(a) the assets of such Person, at a fair valuation, exceed the
total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person;

(b) based on current projections, which are based on underlying
assumptions which provide a reasonable basis for the projections and which
reflect such Person's judgment based on present circumstances of the most likely
set of conditions and such Person's most likely course of action for the period
projected, such Person believes it will have sufficient cash flow to enable it
to pay its debts as they mature; and

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<PAGE>

For purposes of this Section 2.30, the "FAIR VALUATION" of the assets
of any Person shall be determined on the basis of the amount which may be
realized within a reasonable time, either through collection or sale of such
assets at the regular market value, conceiving the latter as the amount which
could be obtained for the property in question within such period by a capable
and diligent businessman from an interested buyer who is willing to purchase
under ordinary selling conditions.

SECTION 2.31 FULL DISCLOSURE. Neither this Securities Purchase
Agreement, the Stock Purchase Agreement, the Offering Memorandum (as updated by
this Securities Purchase Agreement, including all Exhibits and Schedules hereto
and any other agreements or documents delivered to you by or on behalf of the
Company or the Parent on the Closing Date) or any report or financial statement
referred to in Section 2.8 hereof, nor any certificate, report or other written
statement delivered to you by or on behalf of the Company, the Parent or any of
the Subsidiaries in connection with the negotiation of this Securities Purchase
Agreement or the transactions contemplated hereby or the sale of the Securities,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which such statements were made. There is
no fact known to the Company or the Parent (other than general economic,
environmental, horticultural and weather conditions known to the public
generally) that has not been disclosed to you in writing that (a) could
reasonably be expected to have a Material Adverse Effect or (b) adversely
affects in any material respect or could reasonably be expected to adversely
affect in any material respect the ability of the Company or the Parent to
perform its obligations under this Securities Purchase Agreement, the other
Agreements, the Mortgage Notes, the Senior Preferred Stock, the Class E Common
Stock and, when issued, the Exchange Notes.

SECTION 3. REPRESENTATIONS OF THE PURCHASER.

SECTION 3.1 INVESTMENT INTENT, ETC. This Securities Purchase
Agreement is made with you in reliance upon your representation to the
Company and the Parent, which by your acceptance hereof you confirm, that you
are purchasing the Securities for your own account for investment and not
with a view to or for sale in connection with any distribution thereof;
PROVIDED that the disposition of your property shall be at all times within
your own control, and that your right to sell or otherwise dispose of all or
any part of the Securities and the Exchange Notes purchased or acquired by
you pursuant to an effective registration statement under the Securities Act
or under an exemption from such registration available under the Securities
Act (including but not limited to the exemption provided by Rule 144A of the
SEC thereunder) and in accordance with any applicable state securities law
shall not be prejudiced.

SECTION 3.2 ERISA REPRESENTATIONS. You represent and warrant that,
with respect to each source of funds to be used by it to purchase the Securities
(respectively, the "Source"), at least one of the following statements is
accurate as of the Closing Date:

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(a) The Source consists of assets of an "insurance company general
account" (within the meaning of the proposed prohibited transaction class
exemption published by the Department of Labor in the Federal Register on August
22, 1994 (59 FR 43134, August 22, 1994)); and you have identified in writing to
the Company each "plan" or group of related "plans" with respect to which the
reserves held for all contracts held by or on behalf of such "plans" exceed 10%
of the total liabilities of such account;

(b) The Source is a "governmental plan" (within the meaning of
Section 3(32) of ERISA);

(c) The Source is either (i) an "insurance company pooled separate
account" (within the meaning of Prohibited Transaction Class Exemption ("PTCE")
90-1 (issued January 20, 1990)) or (ii) a "bank collective investment fund"
(within the meaning of PTCE 91-38 (issued July 12, 1991)); and you have
identified in writing to the Company each "plan" or group of related "plans"
that comprises 10% of the assets of such account or fund;

(d) The Source is an "investment fund" managed by a "qualified
professional asset manager" or "QPAM" (as defined in Part V of PTCE 84-14) and
no other party to the transactions described in this Securities Purchase
Agreement and no "affiliate" of such other party (as defined in Section V(c) of
PTCE 84-14) has at this time, and has not exercised at any time during the
immediately preceding year, the authority to appoint or terminate said QPAM as
manager of the assets of any "plan" identified in writing pursuant to this
paragraph (d) or to negotiate the terms of said QPAM's management agreement on
behalf of any such identified "plans"; or

(e) The Source is one or more "plans," or a separate account or
trust fund comprised of one or more "plans," each of which has been identified
in writing pursuant to this paragraph (e).

As used in this Section 3.2, "plan" or "plans" shall mean one or more
"employee benefit plans" (within the meaning of Section 3(3) of ERISA).

SECTION 4. CONDITIONS OF OBLIGATION TO PURCHASE SECURITIES.

Your obligation to purchase and pay for the Securities to be purchased
by you hereunder on the Closing Date shall be subject to the satisfaction, prior
to or concurrently with such purchase and payment, of the following conditions:

SECTION 4.1 OPINION OF SPECIAL COUNSEL. You shall have received from
Orrick, Herrington & Sutcliffe, your special counsel, such assurances as you may
reasonably request with respect to the Securities to be purchased by you
hereunder and the transactions contemplated hereby.

SECTION 4.2 OPINIONS OF SPECIAL COUNSEL FOR THE COMPANY AND THE PARENT.
You shall have received (a) from Anderson Kill Olick & Oshinsky, P.C., special
counsel for the Company and the Parent, an opinion, dated the Closing Date, in
form and substance

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<PAGE>

reasonably satisfactory to you and your special counsel, to the effect set forth
in SCHEDULE III-A hereto, (b) from Steinhart & Falconer, special California
counsel to the Company and the Parent, an opinion, dated the Closing Date, in
form and substance reasonably satisfactory to you and your special counsel, to
the effect set forth in SCHEDULE III-B hereto, (c) from Buchman & O'Brien, an
opinion, dated the Closing Date, in form and substance reasonably satisfactory
to you and your special counsel, to the effect set forth in SCHEDULE III-C
hereto, (d) from Farella, Braun & Martel, an opinion, dated the Closing Date, in
form and substance reasonably satisfactory to you and your special counsel, to
the effect set forth in SCHEDULE III-D hereto, (e) from Stults & Balber, an
opinion, dated the Closing Date, in form and substance reasonably satisfactory
to you and your special counsel, to the effect set forth in SCHEDULE III-E
hereto, and (f) from Howard, Rice, Nemerovski, Canady, Falk & Rabkin, an
opinion, dated the Closing Date, in form and substance reasonably satisfactory
to you and your special counsel, to the effect set forth in SCHEDULE III-F
hereto. Each of the Company and the Parent hereby instructs such counsel to
prepare and deliver such opinion to you pursuant to this Section 4.2 its opinion
referred to above.

SECTION 4.3 PERFORMANCE OF OBLIGATIONS. Each of the Company and the
Parent shall have performed all of its obligations to be performed hereunder
prior to or on the Closing Date, and you shall have received an Officer's
Certificate of the Company and the Parent, dated the Closing Date, to such
effect.

SECTION 4.4 REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. The
representations and warranties of the Company and the Parent contained herein
shall be true on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date,
except for changes contemplated by the terms hereof occurring in the ordinary
course of business between the date hereof and the Closing Date. There shall
exist on the Closing Date no Event of Default or Default, assuming for this
purpose that the Securities had been outstanding at all times from and after the
date hereof. You shall have received an Officer's Certificate of the Company
and the Parent, dated the Closing Date, to the effect of each of the foregoing
sentences.

SECTION 4.5 CERTIFICATE OF COMPANY AND THE PARENT.

(a) You shall have received a certificate from the Company, dated
the Closing Date and in form and substance satisfactory to you, certifying
(i) that attached thereto are true, correct and complete copies of (A) its
Articles of Incorporation, by-laws and any amendments thereto and (B) the
resolutions of its Board authorizing the execution and delivery of the
Agreements and the Mortgage Notes, and (ii) the incumbency, specimen signatures
and corporate authority of those officers executing such agreements and
instruments and other instruments contemplated therein.

(b) You shall have received a certificate of the Parent, dated the
Closing Date and in form and substance satisfactory to you, certifying (i) that
attached thereto are true, correct and complete copies of (A) its Certificate of
Incorporation, by-laws and any amendments thereto and (B) the resolutions of its
Board authorizing the execution and delivery of the Agreements, the Senior
Preferred Stock and the Class E Common Stock and (ii) the

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incumbency, specimen signatures and corporate authority of those officers
executing such agreements and instruments and other instruments contemplated
therein.

SECTION 4.6 PRIVATE PLACEMENT NUMBER. The CUSIP Service Bureau of
Standard & Poor's Ratings Group shall have assigned private placement numbers to
the Senior Preferred Stock, the Class E Common Stock and the Exchange Notes and
evidence thereof shall have been delivered to you and your special counsel.

SECTION 4.7 FEES AND DISBURSEMENTS OF YOUR SPECIAL COUNSEL. Your
special counsel shall have received payment of any invoice rendered for its
reasonable fees and disbursements posted through the date of such invoice (with
the understanding that a supplemental statement for fees and disbursements
subsequently posted is to be rendered at a later date) in connection with its
representation of you.

SECTION 4.8 LEGALITY. The Mortgage Notes, the Senior Preferred Stock
and the Class E Common Stock shall qualify as a legal investment for you under
all applicable laws (without resort to any so-called "basket clause" of any such
law) and your purchase thereof shall not cause you to be subject to any onerous
or burdensome legal requirement or penalty.

SECTION 4.9 CERTIFICATE OF DESIGNATIONS. A Certificate of Designations
in the form set forth in EXHIBIT E annexed hereto (the "CERTIFICATE OF
DESIGNATIONS") and a Certificate of Incorporation in the form set forth in
Exhibit F (the "CERTIFICATE OF INCORPORATION") shall have been filed with the
appropriate officials of the State of Delaware and shall have become effective
and be in full force and effect without further amendment or modification
thereto. You shall have received evidence reasonably satisfactory to you and
your special counsel of such filing and effectiveness.

SECTION 4.10 PARENT GUARANTY. The Parent shall have duly authorized,
executed and delivered to you the Parent Guaranty in the form annexed hereto as
EXHIBIT L.

SECTION 4.11 STOCKHOLDER AGREEMENT. All parties thereto shall have
executed and delivered the Stockholder Agreement in the form annexed hereto as
EXHIBIT K.

SECTION 4.12 DEEDS OF TRUST. Each Deed of the Trust relating to the
Mortgaged Property shall have been shall have duly authorized, executed and
delivered to you or a title company for recording in the form annexed hereto as
EXHIBIT G.

SECTION 4.13 ENVIRONMENTAL INDEMNITY AGREEMENT. The Company shall have
duly authorized, executed and delivered to you the Environmental Indemnity
Agreement in the form annexed hereto as EXHIBIT J.

SECTION 4.14 SECURITY AGREEMENT. The Company shall have duly authorized,
executed and delivered to you the Security Agreement in the form annexed hereto
as EXHIBIT H.

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SECTION 4.15 REGISTRATION RIGHTS AGREEMENT. The Parent shall have duly
authorized, executed and delivered to you the Registration Rights Agreement in
the form annexed hereto as EXHIBIT I.

SECTION 4.16 CONSENTS AND APPROVALS. Each of the Company and the Parent
shall have delivered to the Purchaser an Officer's Certificate, dated the
Closing Date, certifying that any necessary consents, waivers, approvals,
authorizations, registrations, filings and notifications of the character
referred to in Section 2.13 hereof have been obtained or made and are in full
force and effect.

SECTION 4.17 NO MATERIAL ADVERSE CHANGE. There shall have been no
material adverse change in the financial condition, business, earnings,
properties, or operations of the Company or in the condition of the Mortgaged
Property since June 30, 1994, and you shall have received an Officer's
Certificate of the Company and the Parent, dated the Closing Date and in form
and substance satisfactory to you, to such effect.

SECTION 4.18 SECURITIES. The Company shall have executed and delivered
the Mortgage Notes in the authorized denomination or denominations and
registered in the name of you or such nominee as shall be indicated on
SCHEDULE I hereto. The Parent shall have executed and delivered stock
certificates representing the shares of Senior Preferred Stock and Class E
Common Stock and registered in the name of you or such nominee as shall be
indicated on SCHEDULE I hereto.

SECTION 4.19 INDEBTEDNESS. Except as otherwise disclosed on Item 4.19 of
SCHEDULE II hereto, (a) all Indebtedness for Money Borrowed of the Company
listed on Item 4.19 of SCHEDULE II hereto shall be extinguished, (b) the holders
thereof shall have agreed to effect the release of all Liens on the assets of
the Company securing such Indebtedness for Money Borrowed, and (c) you shall
have received on the evidence reasonably satisfactory to you and your special
counsel that all such Indebtedness for Money Borrowed has been so extinguished
and that the release of all such Liens has been agreed to.

SECTION 4.20 SECURITY FILINGS. You shall have received evidence, in form
and substance satisfactory to you and your special counsel, that the Financing
Statements shall have been duly filed in respect of the security interests
intended to be created by the Security Documents in all places listed in Item
4.20 of SCHEDULE II hereto and all other places specified by your special
counsel as being necessary or advisable to perfect and protect such security
interests, and all filing fees in respect thereof shall have been paid. As of
the Closing Date, the Purchaser shall hold a valid perfected first priority
security interest in that portion of the Mortgaged Property constituting
personal property and fixtures, and valid first priority mortgage liens on all
other Mortgaged Property, subject only to Permitted Liens.

SECTION 4.21 NO LIENS ON MORTGAGED PROPERTY. You shall have received
copies of lien waivers, releases, termination statements, reconveyances and
other evidence satisfactory to you that all contractors, subcontractors,
suppliers and materialmen involved in the construction of the Mortgaged Property
have been paid, no Person has any right, interest or claim against the Mortgaged
Property or any revenues or proceeds generated by the Mortgaged Property.

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<PAGE>

SECTION 4.22 TITLE INSURANCE. With respect to each Deed of Trust, you
shall have received a lender's Form 1970 A.L.T.A. extended coverage policy of
title insurance with Form 1 coverage, together with CLTA Endorsement Forms 100.2
(ALTA Form 9), 103.7, 111.5, 116.1 (with respect to the Real Property Collateral
at the processing facilities at Cutler, Fresno and Napa, California), 116 (with
respect to all of the other Real Property Collateral), 116.7 and 123.2 (or 123.1
on vacant land) and such other endorsements as you and your special counsel may
require (each such policy and endorsements being hereinafter referred to as
"TITLE POLICY" and collectively, the "TITLE POLICIES"), in an aggregate amount
not less than the amount of the proceeds of the sale of the Notes hereunder, and
issued by Chicago Title Insurance Company in form and substance reasonably
satisfactory to you and your special counsel, insuring that the Company is the
owner of the portion of the Real Property Collateral covered by such Deed of
Trust in fee simple, and that the Deed of Trust is a valid first lien on the
portion of the Real Property Collateral covered by such Deed of Trust in favor
of the Purchaser, free and clear of all liens, encumbrances and exceptions to
title whatsoever, other than Permitted Encumbrances. With respect to each Deed
of Trust, the applicable Title Policy shall effect full coverage against losses
arising out of encroachments on boundary or setback lines, against losses from
existing mechanics' or materialmen's liens and subsequent mechanics' and
materialmen's liens which may gain priority over such Deed of Trust and such
other losses with respect to which you and your special counsel may request
coverage, and shall be issued without any creditors' rights exception, general
survey exception, or general exception as to rights of parties in possession.
In connection with the Title Policies, you shall have received written
commitments by reinsurers acceptable to you to enter with you into an American
Land Title Association Facultative Reinsurance Agreement Form -- 1990, under
which the Title Company shall retain primary loss risk and secondary loss risk
in amounts acceptable to you, and the reinsurers shall retain secondary risk in
amounts acceptable to you.

SECTION 4.23 SURVEYS. With respect to the Real Property Collateral at
the processing facilities at Cutler, Fresno and Napa California, you shall have
received a land survey prepared in accordance with the "Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys", jointly established and adopted
by ALTA and ACSM in 1992 and including items 1, 2, 3, 4, 6, 7A, 7B, 8, 9, 10, 11
and 13 of Table A thereof (collectively, the "SURVEYS"). The Surveys shall be
dated as of a recent date and the certificate thereon shall be addressed to you
and otherwise be in a form acceptable to you. The Surveys shall not disclose
any encumbrances, liens, encroachments or other matters other than Permitted
Liens.

Section 4.24 COMPLIANCE WITH LAWS. The Mortgaged Property and its use
shall be in full compliance in all material respects with all applicable zoning,
building, environmental, subdivision and other laws, all applicable ordinances,
governmental rules and regulations, all applicable directions, rules and
regulations of the fire marshal, health officer, building inspector and other
officers or any government or agency having jurisdiction, and all private
restrictive covenants affecting the Mortgaged Property. All consents, permits
and licenses which may be necessary for the making, use or occupancy of the
Mortgaged Property shall have been obtained, the Mortgaged Property shall be
ready for use and occupancy, and all necessary certificates of approval and
occupancy shall have been issued and furnished by all authorities having
jurisdiction over the construction, use or occupancy of the Improvements, the
failure of which to be issued, obtained or furnished would have a Material
Adverse Effect.

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Each of the Parent and the Company shall have delivered to you a Certificate of
the Company and the Parent which Certificate shall be reasonably satisfactory in
substance to you and your special counsel and shall certify that the conditions
contained in this Section 4.24 have been fully satisfied.

SECTION 4.25 ENVIRONMENTAL AUDIT REPORT. You shall have received an
Officer's Certificate of the Company attaching a copy of the Environmental Audit
Reports listed on Item 4.25 of Schedule II and certifying that (a) such copy is
a true, correct and complete copy thereof, (b) such Environmental Audit Reports
are the only such reports that has been conducted regarding the Company's
operations within the twelve (12) months preceding the Closing Date, and (c)
such reports have not been amended, modified or retracted in any respect prior
to or on the Closing Date. Such reports shall be in form and substance
reasonably satisfactory to you and show that the Mortgaged Property is free from
any material amounts of Hazardous Materials, except for such uses which are in
compliance in all material respects with applicable federal, state and local
environmental laws, regulations and ordinances governing the Mortgaged Property.

SECTION 4.26 TAXES AND ASSESSMENTS. Each of the Company and the Parent
shall have provided you with evidence reasonably satisfactory to you that any
and all taxes or assessments associated with the Mortgaged Property, whether
federal, state or local, which are due as of the Closing Date, have been paid in
full.

SECTION 4.27 INSURANCE. Each of the Company and the Parent shall have
furnished to you (a) a certificate of an insurance broker, dated the Closing
Date, which certificate shall be reasonably satisfactory in substance to you and
your special counsel, and shall certify that the Company is in compliance with
the requirements of Section 12.16 hereto, and (b) copies of all applicable
policies, endorsements and riders.

SECTION 4.28 INTERCREDITOR AGREEMENT. The Company and Sanwa Bank
California shall have duly authorized, executed and delivered to you the
Intercreditor Agreement in the form annexed hereto as EXHIBIT M.

SECTION 4.29 INTER-COMPANY NOTE. The Company shall have delivered to
Sanwa Bank California, as agent for itself and the Purchaser, a promissory note
for $1,300,000 executed by the Parent and payable to the Company.

SECTION 4.30 GSV NAPA MERGER. GSV Napa shall have merged with and into
the Company, and you shall have received evidence reasonably satisfactory to you
and your special counsel of the effectiveness of such merger.

SECTION 4.31 PROCEEDINGS, INSTRUMENTS, ETC. All proceedings and actions
taken on or prior to the Closing Date in connection with the transactions
contemplated by this Securities Purchase Agreement and all instruments incident
thereto shall be in form and substance reasonably satisfactory to you and your
special counsel, and you and your special counsel shall have received copies of
all documents that you or they may reasonably request in connection with such
proceedings, actions and transactions (including, without limitation, copies of
court

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documents, certifications and evidence of the correctness of the representations
and warranties contained herein and certifications and evidence of the
compliance with the terms and the fulfillment of the conditions of this
Securities Purchase Agreement, in form and substance reasonably satisfactory to
you and your special counsel).

PART II. PROVISIONS RELATING SOLELY TO MORTGAGE NOTES

SECTION 5. MORTGAGE NOTE PAYMENTS.

SECTION 5.1 REQUIRED AMORTIZING PAYMENTS. The Company shall on each
Mortgage Note Payment Date make the payments of principal and interest on the
Mortgage Notes as set forth in the Mortgage Notes.

SECTION 5.2 OPTIONAL PREPAYMENTS WITH PREMIUM.

(a) Upon the terms and subject to the conditions hereinafter set
forth and in the Mortgage Notes, the Company, at its option, upon notice as
provided in Section 5.2(c) hereof, may prepay the outstanding principal amount
of the Mortgage Notes on any Mortgage Note Payment Date occurring on or after
April 1, 1998, either in whole or from time to time in any part (but, if in
part, then in partial payments of not less than $100,000), at a prepayment price
equal to the sum of (i) the aggregate principal amount of the Mortgage Notes so
to be prepaid, together with interest accrued on such principal amount to the
date fixed for prepayment, and (ii) the Mortgage Note Make-Whole Amount for such
principal amount (as defined below) (the "OPTIONAL MORTGAGE NOTE PREPAYMENT
PRICE").

(b) The Mortgage Note Make-Whole Amount for any principal amount
shall equal the net present value (if positive) of the payment stream equal to
the difference between (i) each payment of principal and interest the Purchaser
would have received on account of such principal amount at the interest rate set
forth in the Mortgage Notes and (ii) each corresponding payment of principal and
interest the Purchaser would have received on account of such principal amount
at a rate equal to the sum of (A) the rate then being paid on United States
Treasury Notes with maturities equal to the Weighted Average Life to Maturity to
April 21, 2000 or, if such determination is made on any date after April 21,
2000, the maturity of the remaining aggregate principal amount of Mortgage Notes
at the time of prepayment plus (B) 0.75% (the "MORTGAGE NOTE TREASURY RATE")
discounted at the Mortgage Note Treasury Rate.

(c) Notice of any prepayment of Mortgage Notes pursuant to this
Section 5.2 shall be given to each holder of the Mortgage Notes not less than
thirty (30) nor more than sixty (60) days before the date fixed for prepayment
(the "OPTIONAL MORTGAGE NOTE PREPAYMENT DATE") and shall be accompanied by an
Officer's Certificate of the Company certifying as to: (i) the Optional
Mortgage Note Prepayment Date, (ii) the aggregate principal amount of the
Mortgage Notes to be prepaid on such Optional Mortgage Note Prepayment Date,
(iii) the principal amount of each Mortgage Note held by such holder to be
prepaid on such Optional Mortgage Note Prepayment Date, (iv) the Optional
Mortgage Note Prepayment

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Price to be paid in respect of each Mortgage Note held by such holder on such
Optional Mortgage Note Prepayment Date and (v) the amount of accrued interest to
be paid to such holder on such Optional Mortgage Note Prepayment Date. Any
notice of prepayment pursuant to this Section 5.2 having been so given, the
aggregate Optional Mortgage Note Prepayment Price payable in respect of the
aggregate principal amount of Mortgage Notes specified in such notice shall
become due and payable on such Optional Mortgage Note Prepayment Date.

(d) The aggregate principal amount of any partial prepayment of
Mortgage Notes pursuant to this Section 5.2 shall be allocated among the holders
of the Mortgage Notes to be prepaid in proportion, as nearly as practicable, to
the respective unpaid principal amounts of Mortgage Notes then held thereby,
with adjustments, to the extent practicable, to compensate for any prior
prepayments not made in exactly such proportion.

SECTION 5.3 MANDATORY OFFER TO PREPAY IN A PUT EVENT.

(a) If any Put Event shall occur, the Company shall (i) deliver to
each holder of a Mortgage Note a Mortgage Note Notice and Offer to Prepay
pursuant to Section 5.3(b) hereof and (ii) if such holder accepts prepayment as
to one or more Mortgage Notes it holds by delivering a Section 5.3 Response
pursuant to Section 5.3(d) hereof, prepay such Mortgage Notes as hereinafter
provided. Any prepayment of Mortgage Notes pursuant to this Section 5.3 shall
be made at a prepayment price equal to the Optional Mortgage Note Prepayment
Price.

(b) Not later than thirty (30) days prior to the effective date of
a Put Event, the Company shall give written notice to each Mortgage Noteholder
of the pendency thereof and the right of the Mortgage Noteholders to elect to be
prepaid hereunder arising as a result thereof (a "MORTGAGE NOTE NOTICE AND OFFER
TO PREPAY"). Such Mortgage Note Notice and Offer to Prepay shall state:
(i) that such notice is delivered and such offer to prepay is made pursuant to
this Section 5.3; (ii) the date of and a description of the circumstances
surrounding such Put Event; (iii) the date by which a Mortgage Noteholder must
deliver a Section 5.3 Response pursuant to Section 5.3(d) hereof; and (iv) the
date on which the Company will prepay the Mortgage Notes if the Mortgage
Noteholder delivers a Section 5.3 Response pursuant to Section 5.3(d) hereof and
the Put Event giving rise to the Mortgage Note Notice and Offer to Prepay is
consummated, which prepayment date shall be a Business Day prior to the date the
Put Event occurs (the "SPECIAL MORTGAGE NOTE PREPAYMENT DATE").

(c) If the Company fails to deliver to each Mortgage Noteholder
the notice of a pending Put Event as required by this Section 5.3, any Mortgage
Noteholder may, upon obtaining knowledge of a pending or completed Put Event,
notify the Company of such Put Event in writing (the "MORTGAGE NOTEHOLDER
NOTICE"), whereupon the Company shall, and any Mortgage Noteholder may, promptly
notify each other Mortgage Noteholder of such pending or completed Put Event,
the nature thereof and the date upon which it is scheduled to occur or did
occur. In such event, prepayment under this Section 5.3 shall occur not later
than thirty (30) days after the date of such Mortgage Noteholder Notice, unless
the Company and such Mortgage Noteholder agree to a different date or unless
such prepayment is not accepted as provided in Section 5.3(d) below or unless
the transactions underlying the Put Event are not consummated.

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(d) To accept an offer of prepayment of one or more of the
Mortgage Notes pursuant to this Section 5.3, a Mortgage Noteholder shall deliver
to the Company, on or before the tenth (10th) day following the date of receipt
of the Mortgage Note Notice and Offer to Prepay, such holder's notice that it
accepts prepayment pursuant to this Section 5.3 with respect to the Mortgage
Notes designated therein (a "Section 5.3 RESPONSE"). The Section 5.3 Response
shall set forth the name of such holder and the statement that it accepts
prepayment pursuant to this Section 5.3 with respect to the Mortgage Notes
designated therein. Promptly and in any event within two (2) Business Days
after receipt of a Mortgage Noteholder's Section 5.3 Response, the Company
shall, by written notice to such Mortgage Noteholder, acknowledge receipt
thereof.

(e) The provisions of this Section 5.3 are applicable to
successive Put Events and no failure on the part of any holder to exercise any
right under this Section 5.3 arising on account of any Put Event shall affect or
impair any other right of such holder under this Securities Purchase Agreement
or the Mortgage Notes upon the occurrence of any other or any subsequent Put
Event.

SECTION 5.4 RESTRICTIONS ON PREPAYMENT. Except as otherwise provided in
this Section 5, there shall be no prepayment, in whole or in part, of the
principal of all or any of the Mortgage Notes. The Company waives any right to
prepay the Mortgage Notes except under the terms and conditions as set forth in
this Section 5 and agrees that if the Mortgage Notes are prepaid, the Company
shall pay the Mortgage Note Make-Whole Amount (to the extent required by the
terms hereof). The Company hereby acknowledges that (a) the inclusion of this
waiver of prepayment rights and agreement to pay the Mortgage Note Make-Whole
Amount upon prepayment of the Mortgage Notes was separately negotiated with the
Purchaser, (b) the economic value of the various elements of this waiver and
agreement was discussed between the Company and the Purchaser, (c) the
consideration given by the Purchaser for the Mortgage Notes was adjusted to
reflect the specific waiver and agreement negotiated between the Company and the
Purchaser and contained herein and (d) this waiver is intended to comply with
California Civil Code Section 2954.10.

The Company's Initials
----------

SECTION 5.5 SECURITY FOR THE MORTGAGE NOTES. The Mortgage Notes shall
be unconditionally secured by the following: (a) a Lien on the personal
property portion of the Mortgaged Property pursuant to a Security Agreement
substantially in the form annexed hereto as EXHIBIT H (the "SECURITY
AGREEMENT"), (b) Liens on the real property portion of the Mortgaged Property
pursuant to Deeds of Trust and Assignments of Rents and Fixture Filings
substantially in the form annexed hereto as EXHIBIT G (collectively, the "DEEDS
OF TRUST"), and which shall contain an absolute assignment of the rents and
profits from the Mortgaged Property, subject, however, to the other terms of the
Deeds of Trust. The Security Agreement and the Deeds of Trust are collectively
referred to herein as the "SECURITY DOCUMENTS." All Mortgage Notes at any time
outstanding shall be equally and ratably secured by the Security Documents,
without preference, priority or distinction on account of the date or dates or
the actual time or times of the issue or maturity of such Mortgage Notes.

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<PAGE>

PART III. PROVISIONS RELATING SOLELY TO EXCHANGE NOTES

SECTION 6. EXCHANGE NOTE PAYMENTS.

SECTION 6.1 REQUIRED AMORTIZING PAYMENTS. The Parent shall on each
Exchange Note Payment Date make the payments of principal and interest on the
Exchange Notes as set forth in the Exchange Notes.

SECTION 6.2 OPTIONAL PREPAYMENTS WITH PREMIUM.

(a) Upon the terms and subject to the conditions hereinafter set
forth and in the Exchange Notes, the Parent, at its option, upon notice as
provided in Section 6.2(c) hereof, may prepay the outstanding principal amount
of the Exchange Notes on any Exchange Note Payment Date occurring on or after
April 1, 2000, either in whole or from time to time in any part (but, if in
part, then in partial payments of not less than $100,000), at a prepayment price
equal to the sum of (i) the aggregate principal amount of the Exchange Notes so
to be prepaid, together with interest accrued on such principal amount to the
date fixed for prepayment, and (ii) the Exchange Note Make-Whole Amount for such
principal amount (as defined below) (the "OPTIONAL EXCHANGE NOTE PREPAYMENT
PRICE").

(b) The Exchange Note Make-Whole Amount for any principal amount
shall equal the net present value (if positive) of the payment stream equal to
the difference between (i) each payment of principal and interest the Purchaser
would have received on account of such principal amount at the interest rate set
forth in the Exchange Notes and (ii) each corresponding payment of principal and
interest the Purchaser would have received on account of such principal amount
at a rate equal to the sum of (A) the rate then being paid on United States
Treasury Notes with maturities equal to the Weighted Average Life to Maturity of
the remaining aggregate principal amount of Exchange Notes at the time of
prepayment plus (B) 3.95% (the "EXCHANGE NOTE TREASURY RATE") discounted at the
Exchange Note Treasury Rate; PROVIDED that if the Parent is prepaying at the
same time all of the Exchange Notes and has previously redeemed or is redeeming,
simultaneously with the prepayment of the Exchange Notes, shares of the Senior
Preferred Stock and the Class E Common Stock pursuant to the terms hereof and
the Certificate of Designations, then the Exchange Note Make-Whole Amount shall
be reduced by the amount of the excess, if any, of (1) the sum of the aggregate
Optional Redemption Price paid by the Parent and the aggregate Common Stock
Redemption Price paid by the Parent over (2) that amount which, if paid at the
time of redemption, would have resulted in the Purchaser receiving a yield of
25% on their aggregate investments in the Senior Preferred Stock and the Class E
Common Stock, taking into account all dividends and other distributions made on
the Senior Preferred Stock and the Class E Common Stock prior to the time of
redemption; and PROVIDED FURTHER, that in no event shall the Exchange Note
Make-Whole Amount be less than zero.

(c) Notice of any prepayment of Exchange Notes pursuant to this
Section 6.2 shall be given to each holder of the Exchange Notes not less than
thirty (30) nor more than sixty (60) days before the date fixed for prepayment
(the "OPTIONAL EXCHANGE NOTE PREPAYMENT DATE") and shall be accompanied by an
Officer's Certificate of the Parent

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<PAGE>

certifying as to: (i) the Optional Exchange Note Prepayment Date, (ii) the
aggregate principal amount of the Exchange Notes to be prepaid on such Optional
Exchange Note Prepayment Date, (iii) the principal amount of each Exchange Note
held by such holder to be prepaid on such Optional Exchange Note Prepayment
Date, (iv) the Optional Exchange Note Prepayment Price to be paid in respect of
each Exchange Note held by such holder on such Optional Exchange Note Prepayment
Date and (v) the amount of accrued interest to be paid to such holder on such
Optional Exchange Note Prepayment Date. Any notice of prepayment pursuant to
this Section 6.2 having been so given, the aggregate Optional Exchange Note
Prepayment Price payable in respect of the aggregate principal amount of
Exchange Notes specified in such notice shall become due and payable on such
Optional Exchange Note Prepayment Date.

(d) The aggregate principal amount of any partial prepayment of
Exchange Notes pursuant to this Section 6.2 shall be allocated among the holders
of the Exchange Notes to be prepaid in proportion, as nearly as practicable, to
the respective unpaid principal amounts of Exchange Notes then held thereby,
with adjustments, to the extent practicable, to compensate for any prior
prepayments not made in exactly such proportion.

SECTION 6.3 MANDATORY OFFER TO PREPAY IN A PUT EVENT.

(a) If any Put Event shall occur, the Parent shall (i) deliver to
each holder of an Exchange Note an Exchange Note Notice and Offer to Prepay
pursuant to Section 6.3(b) hereof and (ii) if such holder accepts prepayment as
to one or more Exchange Notes it holds by delivering a Section 6.3 Response
pursuant to Section 6.3(d) hereof, prepay such Exchange Notes as hereinafter
provided. Any prepayment of Exchange Notes pursuant to this Section 6.3 shall
be made at a prepayment price equal to the Optional Note Prepayment Price.

(b) Not later than thirty (30) days prior to the effective date of
a Put Event, the Parent shall give written notice to each Exchange Noteholder of
the pendency thereof and the right of the Exchange Noteholders to elect to be
prepaid hereunder arising as a result thereof (a "EXCHANGE NOTE NOTICE AND OFFER
TO PREPAY"). Such Exchange Note Notice and Offer to Prepay shall state:
(i) that such notice is delivered and such offer to prepay is made pursuant to
this Section 6.3; (ii) the date of and a description of the circumstances
surrounding such Put Event; (iii) the date by which a Exchange Noteholder must
deliver a Section 6.3 Response pursuant to Section 6.3(d) hereof; and (iv) the
date on which the Parent will prepay the Exchange Notes if the Exchange
Noteholder delivers a Section 6.3 Response pursuant to Section 6.3(d) hereof and
the Put Event giving rise to the Exchange Note Notice and Offer to Prepay is
consummated, which prepayment date shall be a Business Day prior to the date the
Put Event occurs (the "SPECIAL EXCHANGE NOTE PREPAYMENT DATE").

(c) If the Parent fails to deliver to any Exchange Noteholder the
notice of a pending Put Event as required by this Section 6.3, any Exchange
Noteholder may, upon obtaining knowledge of a pending or completed Put Event,
notify the Parent of such Put Event in writing (the "EXCHANGE NOTEHOLDER
NOTICE"), whereupon the Parent shall, and any Mortgage Noteholder may, promptly
notify each other Mortgage Noteholder of such pending or completed Put Event,
the nature thereof and the date upon which it is scheduled to occur or did
occur. In such event, prepayment under this Section 6.3 shall occur not later
than thirty (30)

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days after the date of such Mortgage Noteholder Notice, unless the Parent and
such Mortgage Noteholder agree to a different date or unless such prepayment is
not accepted as provided in Section 6.3(d) below or unless the transactions
underlying the Put Event are not consummated.

(d) To accept an offer of prepayment of one or more of the
Exchange Notes pursuant to this Section 6.3, an Exchange Noteholder shall
deliver to the Parent, on or before the tenth (10th) day following the date of
receipt of the Exchange Note Notice and Offer to Prepay, such holder's notice
that it accepts prepayment pursuant to this Section 6.3 with respect to the
Exchange Notes designated therein (a "SECTION 6.3 RESPONSE"). The Section 6.3
Response shall set forth the name of such holder and the statement that it
accepts prepayment pursuant to this Section 6.3 with respect to the Exchange
Notes designated therein. Promptly and in any event within two (2) Business
Days after receipt of a Exchange Noteholder's Section 6.3 Response, the Parent
shall, by written notice to such Exchange Noteholder, acknowledge receipt
thereof.

(e) The provisions of this Section 6.3 are applicable to
successive Put Events and no failure on the part of any holder to exercise any
right under this Section 6.3 arising on account of any Put Event shall affect or
impair any other right of such holder under this Securities Purchase Agreement
or the Exchange Notes upon the occurrence of any other or any subsequent Put
Event.

SECTION 6.4 RESTRICTIONS ON PREPAYMENT. Except as otherwise provided in
this Section 6, there shall be no prepayment, in whole or in part, of the
principal of all or any of the Exchange Notes. The Parent waives any right to
prepay the Exchange Notes except under the terms and conditions as set forth in
this Section 6 and agrees that if the Exchange Notes are prepaid, the Parent
shall pay the Exchange Note Make-Whole Amount (to the extent required by the
terms hereof). The Parent hereby acknowledges that (a) the inclusion of this
waiver of prepayment rights and agreement to pay the Exchange Note Make-Whole
Amount upon prepayment of the Exchange Notes was separately negotiated with the
Purchaser, (b) the economic value of the various elements of this waiver and
agreement was discussed between the Parent and the Purchaser, (c) the
consideration given by the Purchaser for the Exchange Notes was adjusted to
reflect the specific waiver and agreement negotiated between the Parent and the
Purchaser and contained herein and (d) this waiver is intended to comply with
California Civil Code Section 2954.10.

The Parent's Initials
----------

PART IV. PROVISIONS RELATING SOLELY TO NOTES

SECTION 7. OTHER PAYMENT PROVISIONS FOR NOTES.

SECTION 7.1 APPLICATION OF PAYMENTS. Each payment on a Note shall be
applied, FIRST, to the payment of accrued interest on such Note to the date of
such payment, SECOND, to the payment of any principal of and premium, if any, on
such Note then due thereunder, and THIRD, to the payment of the installments of
principal of and premium, if any, on such Note remaining unpaid in the inverse
order of the maturity thereof.

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<PAGE>

SECTION 7.2 METHOD OF PAYMENT.

(a) The principal of, premium, if any, and interest on each Note
shall be payable to each Noteholder either (i) by wire transfer of such amount
in immediately available funds to the banking institution with bank wire
transfer facilities designated in such notice for the account of such
Noteholder, with telephonic and/or written confirmation of such transfer, to the
extent specified by such Noteholder, or (ii) by direct debit from a bank account
designated by the Company or the Parent, as applicable, of such amount; PROVIDED
that the Company or the Parent, as applicable, shall be entitled to require the
surrender of any Note following payment in full of the principal of, premium, if
any, and interest on such Note. Notwithstanding the foregoing, all amounts
payable with respect to any Notes held by a Purchaser or its nominee (without
the necessity for any presentation or surrender thereof or any notation of such
payment thereon) shall be paid in immediately available funds by 12:00 Noon
Eastern time on the date payment is due in the manner and at the address for
such purpose specified below the Purchaser's name in SCHEDULE I to this
Securities Purchase Agreement, or at any other address as the Purchaser may from
time to time direct in writing, unless it shall have specified some other manner
of payment by notice in accordance with this Securities Purchase Agreement.

(b) Each Noteholder shall, prior to any sale, assignment or
transfer of a Note by it, make a proper notation thereon of the amount of
principal paid thereon as of the date of such sale, assignment or transfer.

SECTION 7.3 NO SET-OFF OR COUNTERCLAIM. Each Noteholder shall be
entitled to the principal of and premium, if any, and interest on such Note free
from all equities or rights of set-off or counterclaims of the Company, the
Parent or any prior Noteholder and all Persons may act accordingly. The receipt
by such Noteholder of any payment of principal, premium or interest shall be a
good discharge to the Company or the Parent, as applicable, for the same, and
the Company and the Parent shall not be bound to inquire into the title of any
such Noteholder.

SECTION 7.4 TAXES.

(a) Each of the Company and the Parent shall make any and all
payments hereunder or under the Notes free and clear of, and without deduction
or withholding for or on account of, any present or future taxes, levies,
imposts, duties, fees, deductions, charges or withholdings, and all liabilities
with respect thereto, excluding, in the case of any Noteholder, net income and
franchise taxes imposed on it by any jurisdiction, unless the only connection
between such Noteholder and such jurisdiction results from the transactions
contemplated by this Securities Purchase Agreement or the Deeds of Trust (all
such non-excluded taxes, levies, imposts, duties, fees, deductions, charges,
withholdings and liabilities being hereinafter referred to as "TAXES"). Each of
the Company and the Parent understands that the transactions contemplated by
this Securities Purchase Agreement and the Deeds of Trust are not the
Purchaser's only connections with the State of California. If the Company or
the Parent shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder or under any Note to any Noteholder, (i) the sum
payable shall be increased to the extent necessary so that after making all
required deductions (including deductions applicable

28
<PAGE>

to additional sums payable under this Section 7.4) such Noteholder receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Company or the Parent shall make such deductions and (iii) the Company
or the Parent shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.

(b) In addition, each of the Company and the Parent agrees to pay
any present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
under the Securities or from the execution or delivery or otherwise with respect
to this Securities Purchase Agreement or the Securities (hereinafter referred to
as "OTHER TAXES").

(c) Each of the Company and the Parent shall indemnify each
Noteholder for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 7.4) paid by any Noteholder, as the case may be, or
any liability (including penalties, additions to tax, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. This indemnification shall be made
within thirty (30) days from the date such Noteholder makes written demand
therefor.

(d) Within thirty (30) days after the date of any payment of Taxes
by the Company or the Parent, the Company or the Parent shall furnish to the
Noteholders the original or a certified copy of a receipt evidencing payment
thereof. Each of the Company and the Parent shall compensate each Noteholder
for all reasonable losses and expenses sustained by such Noteholder as a result
of any failure by the Company or the Parent so to furnish such copy of such
receipt.

(e) The agreements and obligations of the Company and the Parent
contained in this Section 7.4 shall survive the payment or prepayment of the
Notes, the redemption of the Senior Preferred Stock and the Class E Common
Stock, the termination of this Securities Purchase Agreement and the
reconveyance of the Deeds of Trust.

(f) Notwithstanding the foregoing, neither the Company nor the
Parent shall be required to pay any taxes incurred by the Purchaser as a result
of a deemed distribution pursuant to Section 305(c) of the Code.

SECTION 7.5 ACQUISITION OF NOTES. Neither the Company nor the Parent
shall, and each shall not permit any Subsidiary or Affiliate to, purchase,
prepay, redeem or otherwise acquire any Note except (a) as expressly permitted
by the terms hereof and of such Note or (b) pursuant to an offer that is offered
to all holders of Mortgage Notes or Exchange Notes, as applicable, on a pro rata
basis.

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<PAGE>

SECTION 8. REGISTRATION, EXCHANGE AND REPLACEMENT OF NOTES.

SECTION 8.1 REGISTRATION. The Mortgage Notes issued on the Closing Date
and the Exchange Notes issued in exchange for the Senior Preferred Stock shall
be registered notes. Each of the Company and the Parent shall keep, at its
respective office required to be maintained pursuant to Section 12.1 hereof,
books for the registration and registration of transfer of Mortgage Notes and
the Exchange Notes, as applicable. Prior to presentation of any Note for
registration of transfer, the Company and the Parent shall treat the Person in
whose name such Note is registered as the owner and holder of such Note for all
purposes whatsoever, whether or not such Note shall be overdue, and the Company
and the Parent shall not be affected by notice to the contrary.

SECTION 8.2 EXCHANGE. Any Noteholder, at its option, may in person or
by duly authorized attorney surrender the same for exchange at the office
maintained pursuant to Section 12.1 hereof, and promptly thereafter and at the
expense of the Company or the Parent, as applicable, except as provided below,
receive in exchange therefor one or more new Notes, each in the denomination
requested by such holder, dated the date to which interest shall have been paid
on the Note so surrendered or, if no interest shall have yet been so paid, dated
the date of the Note so surrendered and registered in the name of such Person or
Persons as shall have been designated in writing by such holder or its attorney
for the same principal amount as the then unpaid principal amount of the Note
so surrendered. Subject to Section 12.1 hereof, the Company or the Parent may
require payment of a sum sufficient to cover any stamp or other tax or
governmental charge imposed in respect of any transfer involved in such
exchange.

SECTION 8.3 REPLACEMENT. Upon receipt by the Company or the Parent of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note and (a) in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to it; PROVIDED that if the
holder of such Note is the original Purchaser listed on SCHEDULE I hereto of the
Notes or any Affiliate or nominee thereof or any Institutional Investor or any
nominee thereof, its own unsecured agreement of indemnity shall be deemed to be
satisfactory; or (b) in the case of mutilation, upon surrender thereof, the
Company or the Parent, at its expense, shall execute and deliver in lieu thereof
a new Note executed in the same manner as the Note being replaced, in the same
principal amount as the unpaid principal amount of such Note and dated the date
to which interest shall have been paid on such Note or, if no interest shall
have yet been so paid, dated the date of such Note.

SECTION 8.4 EFFECT OF TRANSFER OR EXCHANGE. All Notes issued upon any
registration of transfer or exchange of Notes shall be the valid obligations of
the Company or the Parent, as applicable, evidencing the same respective
obligations, and, in the case of Mortgage Notes, entitled to the same security
and benefits under the Security Documents as the Mortgage Notes surrendered upon
such registration of transfer or exchange. The Company and the Parent shall not
be required to register the transfer of or exchange any surrendered Note as
above provided during the ten-day period preceding the due date of any payment
of principal of or interest on such Note.

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<PAGE>

SECTION 8.5 NO TRANSFERS TO COMPETITORS. No Note shall be sold or
otherwise transferred to any entity that could reasonably be deemed to be a
competitor of the Company. For this purpose, the Company agrees that no
insurance company or financial institution shall be deemed to be a competitor.

SECTION 9. DEFAULTS AND REMEDIES.

SECTION 9.1 EVENTS OF DEFAULT; ACCELERATION OF MORTGAGE NOTES. If any
of the following conditions or events ("EVENTS OF DEFAULT") shall occur and be
continuing:

(a) the Company shall fail to make any payment or prepayment of
principal of or premium or interest on any Mortgage Note or the Parent shall
fail to make any payment or prepayment of principal of or premium or interest on
any Exchange Note, in each case within three (3) Business Days after the date
when the same becomes due and payable, whether at maturity, at a date fixed for
prepayment, upon acceleration or otherwise; or

(b) any representation or warranty of the Company or the Parent
contained in this Securities Purchase Agreement or in any agreement, instrument,
certificate, statement or other writing furnished in connection herewith or
pursuant hereto shall prove to have been false or inaccurate in any material
respect on the date as of which such representation or warranty was made and the
Company or the Parent, as applicable, shall fail to cure such falsity or
inaccuracy within fifteen (15) Business Days of the earlier of (i) the date the
Company or the Parent, as applicable, shall have knowledge of such falsity or
inaccuracy or (ii) the date any holder of a Mortgage Note shall have notified
the Company or the Parent of such falsity or inaccuracy; or

(c) except as specifically permitted by this Securities Purchase
Agreement, there shall be any sale, transfer, hypothecation, assignment or
encumbrance, whether voluntary, involuntary or by operation of law, of all or
any part of the Mortgaged Property; or

(d) the Company or the Parent shall default in the due and
punctual performance of or compliance with any covenant, condition or agreement
to be performed or observed by it under Sections 5.3, 6.3, 10.3, 11.2, 12.2,
12.9, 12.11, 12.12, 12.13, 12.17 through 12.22, 12.24, 12.25 or 12.26 hereof; or

(e) any of the insurance policies required pursuant to Section
12.16 shall lapse or expire without being replaced by other insurance policies
that comply with Section 12.16 prior to such lapse or expiration; or

(f) the Company or the Parent shall default in the due and
punctual performance of or compliance with (i) any covenant, condition or
agreement (other than any referred to in subsection (a), (b), (c), (d) or (e) of
this Section 9.1) to be performed or observed by it under any provision hereof
or (ii) any material covenant, condition or agreement to be performed or
observed by it under any other Agreement and, in each case, any such failure
shall continue unremedied for thirty (30) days following the earlier of written
notice from any

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<PAGE>

Noteholder or any responsible officer of the Company or the Parent obtaining
knowledge of such failure; or

(g) a final judgment or judgments entered by a court of competent
jurisdiction for the payment of money in excess of $500,000 in the aggregate
shall be rendered against the Company or the Parent and shall remain in force
undischarged and unstayed for a period of more than thirty (30) days; or

(h) the Company or the Parent shall (i) commence a voluntary case
under any chapter of the Federal Bankruptcy Code (11 U.S.C. Section 101, ET
SEQ., as amended) as now or hereafter in effect, or shall consent to (or fail to
controvert in a timely manner) the commencement of an involuntary case against
the Company or the Parent under said Code; (ii) institute proceedings for
liquidation, rehabilitation, readjustment or composition (or for any related or
similar purpose) under any law (other than the Federal Bankruptcy Code as now or
hereafter in effect) relating to financially distressed debtors, their creditors
or property, or shall consent to (or fail to controvert in a timely manner) the
institution of any such proceedings against the Company or the Parent;(iii) make
an assignment for the benefit of creditors or enter into any arrangement for the
adjustment or composition of debts or claims; (iv) apply for or consent to the
appointment of, or the taking possession by, a receiver, liquidator, assignee,
trustee, custodian or sequestrator (or other similar official) of itself or any
of its property; or (v) take corporate action for the purpose or with the effect
of authorizing, acknowledging or confirming the taking or existence of any
action or condition specified in clause (i), (ii), (iii) or (iv) above; or

(i) the Company or the Parent shall be insolvent (within the
meaning of any applicable law), or shall be unable, or shall admit in writing
its inability, to pay its debts as they become due, or take corporate action for
the purpose or with the effect of authorizing or confirming the taking or
existence of any action or condition specified in this Section 9.1(i); or

(j) a court or other governmental authority or agency having
jurisdiction in the premises shall enter a decree or order (i) for the
appointment of a receiver, liquidator, assignee, trustee, custodian or
sequestrator (or other similar official) of the Company or the Parent of any
part of its property, or for the winding-up or liquidation of its affairs, and
such decree or order shall remain in force undischarged and unstayed for a
period of more than sixty (60) days or (ii) for the sequestration or attachment
of any material part of the property of the Company or the Parent without its
unconditional return to the possession of the Company or the Parent or its
unconditional release from such sequestration or attachment within sixty (60)
days thereafter; or

(k) a court having jurisdiction in the premises shall enter an
order for relief in any involuntary case commenced against the Company or the
Parent under the Federal Bankruptcy Code as now or hereafter in effect, and such
order shall remain in force undischarged and unstayed for a period of more than
sixty (60) days; or

(l) a court or other governmental authority or agency having
jurisdiction in the premises shall enter a decree or order approving or
acknowledging as properly filed or

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<PAGE>

commenced against the Company or the Parent a petition or proceedings for
liquidation, rehabilitation, readjustment or composition (or for any related or
similar purpose) under any law (other than the Federal Bankruptcy Code as now or
hereafter in effect) relating to financially distressed debtors, their creditors
or property, and such petition or proceedings shall not be dismissed within
sixty (60) days of the date of filing or commencement; or

(m) the Federal Trade Commission or any other federal or state
governmental authority shall impose sanctions or other penalties on the Company
or the Parent for fraud or any other unlawful business practice;

(n) (i) any Pension Plan (other than a Multiemployer Plan) shall
incur an "accumulated funding deficiency" (within the meaning of Section 412 of
the Code) with respect to any plan year; or (ii) any waiver shall be sought or
granted under Section 412(d) of the Code; or (iii) any Pension Plan shall be,
have been or be likely to be terminated or the subject of termination
proceedings under ERISA unless terminated in accordance with law without
incurring an obligation to contribute funds to make the pension plan's assets
sufficient to cover its benefit liabilities upon its termination; or (iv) the
Company or any ERISA Affiliate shall incur or be likely to incur a liability to
or on account of a Pension Plan under Section 4062, 4063, 4064 or 4201 of ERISA
or any comparable provision of applicable foreign law, and there shall result
from one or more of the events set forth in the foregoing clauses (i) through
(iv) either a liability or a material risk of incurring a liability to the PBGC,
any foreign governmental entity or a Pension Plan, which, in the opinion of the
holders of 51% of the aggregate outstanding principal amount of the Mortgage
Notes and the holders of 51% of the aggregate outstanding principal amount of
the Exchange Notes, could have a Material Adverse Effect;

(o) (i) the Company or the Parent shall fail to perform or comply
with any term or condition of any agreement or contract to which the Company or
the Parent is a party relating to any Indebtedness for Money Borrowed in excess
of $250,000 in the aggregate within the applicable grace period, or (ii) any
other event shall occur, the effect of which is to accelerate such Indebtedness
or permit the holder of such Indebtedness or any other Person to accelerate the
date for payment of such Indebtedness; or

then

(A) upon the occurrence and continuance of any of the Events of
Default set forth in subsections (h) through (l), inclusive, of this
Section 9.1, the Notes shall automatically mature and become due and
payable, together with interest accrued thereon, plus any premium, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived; or

(B) upon the occurrence and continuance of any of the Events of
Default set forth in subsection (a) of this Section 9.1 with respect to a
Mortgage Note, any Mortgage Noteholder may, at its option, by written
notice or notices to the Company or the Parent, declare all of the Mortgage
Notes to be due and payable, whereupon the same shall mature and become due
and payable, together with interest accrued thereon, plus

33
<PAGE>

any premium, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived; or

(C) upon the occurrence and continuance of any of the Events of
Default set forth in subsections (b) through (g), inclusive, or
subsections (m) and (o) of this Section 9.1, the holders of 51% of the
aggregate outstanding principal amount of the Mortgage Notes may, at their
option, by written notice or notices to the Company or the Parent, declare
all of the Mortgage Notes to be due and payable, whereupon the same shall
mature and become due and payable, together with interest accrued thereon,
plus any premium, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived.

If the maturity of the Mortgage Notes shall be accelerated under this Section
9.1 by reason of the occurrence of an Event of Default, there shall become due
and payable (and the Company shall pay), as compensation to the holders of the
Mortgage Notes for the loss of their investment opportunity and not as a
penalty, an additional amount equal to the Mortgage Note Make-Whole Amount. A
final determination of the Mortgage Note Make-Whole Amount payable on a
prepayment pursuant to any acceleration of the Mortgage Notes pursuant to this
Section 9.1 shall be made by the Mortgage Noteholders as of the Prepayment Date.
The Company hereby acknowledges that (1) its agreement to pay the Mortgage Note
Make-Whole Amount if the Mortgage Notes are accelerated under this Section 9.1
was separately negotiated with the Purchaser, (D) the economic value of the
various elements of this waiver and agreement was discussed between the Company
and the Purchaser, (E) the consideration given by the Purchaser for the Mortgage
Notes was adjusted to reflect the specific waiver and agreement negotiated
between the Company and the Purchaser and contained herein and (F) this waiver
is intended to comply with California Civil Code Section 2954.10.

The Company's Initials _____

SECTION 9.2 REMEDIES OF MORTGAGE NOTEHOLDERS UPON AN EVENT OF DEFAULT.
Upon the occurrence of an Event of Default hereunder and the acceleration of the
Mortgage Notes pursuant to Section 9.1 hereof, any Mortgage Noteholder may, at
its option, and in addition to all other rights and remedies available to the
Mortgage Noteholders, without further notice to the Company, do any one or more
of the following:

(a) Proceed to protect and enforce the rights, privileges and
remedies granted to it by this Securities Purchase Agreement, the Deeds of Trust
and the Security Agreement by such judicial proceedings as the Mortgage
Noteholders shall deem necessary or appropriate, either at law, in equity, in
bankruptcy or otherwise, whether for specific enforcement of any covenant or
agreement contained in the Mortgage Notes, this Securities Purchase Agreement,
the Security Agreement, the Deeds of Trust or any other Security Document, or in
aid of the exercise of any right, power, privilege or remedy therein or herein
granted;

(b) Foreclose or otherwise enforce the Mortgage Noteholders'
security interest in any manner permitted by law, or provided for in this
Securities Purchase

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<PAGE>

Agreement, and exercise at any time all rights and remedies of a secured party
under the Uniform Commercial Code in effect in the State of California, or for
any foreclosure of the Mortgaged Property provided under the Security Documents
and sale under any judgment or decree in any judicial proceeding, or to enforce
any other legal or equitable right or remedy granted or otherwise available to
the Mortgage Noteholders hereunder or under the other Agreements;

(c) Enter onto property where any Personal Property Collateral is
located and take possession thereof with or without judicial action;

(d) Prior to the disposition of the Personal Property Collateral,
store, process, repair or recondition it or otherwise prepare it for disposition
in any manner and to the extent the Mortgage Noteholders deem appropriate and in
connection with such preparation and disposition, without charge, use any
copyright, patent, technical process permit, approval, license, consent or
governmental approval used or held by the Company;

(e) Demand, sue for, collect or receive any money or property at
any time payable to or receivable by the Company on account of or in exchange
for any part of the Personal Property Collateral;

(f) Secure the appointment of a receiver without notice to the
Company;

(g) Sell, lease, or otherwise dispose of any Personal Property
Collateral at one or more public or private sales, whether or not such Personal
Property Collateral is present at the place of sale, without assumption of any
credit risk, for cash or credit or future delivery, on such terms and in such
manner as the Mortgage Noteholders may determine in their sole and complete
discretion and in light of their own best interests with or without any previous
demand on or notice to the Company or advertisement of any such sale or other
disposal (the Obligations being the equivalent of cash for the purposes of such
sale); and for the aforesaid purposes, all notice of sale, advertisement and
demand and any right or equity of redemption otherwise required by, or available
to the Company under the law are hereby waived by the Company to the fullest
extent permitted by law; the power of sale hereunder shall not be exhausted by
one or more sales, and the Mortgage Noteholders may from time to time adjourn
any sale to be made hereunder; the Mortgage Noteholders or any other Person may
be the purchaser of any or all of the Personal Property Collateral so sold and
thereafter hold the same absolutely free from any claim or right of whatsoever
kind, including any equity of redemption, of the Company; to the extent
permitted by law, the Company waives all claims, damages and demands against the
Mortgage Noteholders arising out of the repossession, retention or sale of the
Personal Property Collateral, except for claims based on the gross negligence or
wilful misconduct of the Mortgage Noteholders; and

(h) Take any other action and seek any other remedy available to a
secured party under applicable law.

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<PAGE>

SECTION 9.3 RIGHTS AND REMEDIES OF EXCHANGE NOTEHOLDERS UPON AN EVENT OF
DEFAULT.

(a) If the Parent shall fail to make any payment of interest or
principal on the Exchange Notes when due (a "Missed Payment"), the following
shall occur:

(i) For one Missed Payment, the interest rate payable on
the outstanding principal balance of and accrued interest on the Exchange
Notes shall be increased to 13.70%, effective on the date when such Missed
Payment was due, until the earlier of the occurrence of two Missed Payments
or such time as such Missed Payment and interest thereon is paid in full.

(ii) For two or more consecutive Missed Payments, the
interest rate payable on the outstanding principal balance of and accrued
interest on the Exchange Notes shall be increased to 14.20%, effective on
the date when the second Missed Payment was due, until such time as (A) all
Missed Payments and interest thereon are paid in full or (B) only one
Missed Payment is outstanding, in which case the interest rate shall be
13.70%.

(iii) For three consecutive Missed Payments, the number of
members of the Board of Directors shall increase by one and holders of at
least 51% in outstanding principal amount of the Exchange Notes shall have
the exclusive right to elect one member of the Board of Directors of the
Parent and the Company. Such director or any successor appointed by
holders of at least 51% in outstanding principal amount of the Exchange
Notes shall have the right to serve on the Board of Directors of the Parent
and the Company for at least one year from the date of his or her election,
irrespective of whether such Missed Payments are cured. The right of the
holders of the Exchange Notes to elect such additional director shall
continue until the later of (A) one year from the date of election of such
director and (B) the date when two or fewer Missed Payments are
outstanding.

(iv) For four consecutive Missed Payments, the number of
members of the Board of Directors shall increase by two and holders of at
least 51% in outstanding principal amount of the Exchange Notes shall have
the exclusive right to elect two additional members of the Board of
Directors of the Parent and the Company, in addition to the member elected
pursuant to Section 9.3(a)(iii). Such directors or any successors
appointed by holders of at least 51% in outstanding principal amount of the
Exchange Notes shall have the right to serve on the Board of Directors of
the Parent and the Company for at least one year from the date of their
election, irrespective of whether such Missed Payments are cured. The
right of the holders of the Exchange Notes to elect such additional
directors shall continue until the later of (A) one year from the date of
election of such directors and (B) the date when three or fewer Missed
Payments are outstanding.

The foregoing right of the holders of the Exchange Notes with respect to the
election of additional directors may be exercised at any annual meeting of
stockholders or at any special meeting of stockholders held for such purpose.
If the right to elect directors shall have

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<PAGE>

accrued to the holders of the Exchange Notes more than thirty (30) days
preceding the date established for the next annual meeting of stockholders, the
appropriate officer of the Parent shall, within five (5) days after the delivery
to the Parent at its principal office of a written request, addressed to the
President of the Parent, for a special meeting signed by the holders of at least
10% of the Exchange Notes then outstanding, call a special meeting of the
holders of the Exchange Notes to be held within ten (10) days after the delivery
of such request of the purpose of electing such additional director.
Notwithstanding the foregoing, any action to be taken by holders of Exchange
Notes with respect to the election of such director may be taken without a
meeting, without prior notice and without a vote, if taken by the written
consent of the holders of a majority of the Exchange Notes. The holders of the
Exchange Notes, voting as a class, shall have the right to remove, with or
without cause, at any time and from time to time and to replace any director
such holders shall have elected pursuant to this Section 9.2(a) by electing a
new director pursuant to this Section 9.2(a).

(b) Upon the occurrence of a fifth consecutive Missed Payment or
an Event of Default described in Sections 9.1(b), 9.1(d), 9.1(f) or 9.1(g)
through 9.1(o) (an "EXCHANGE NOTE EVENT OF DEFAULT"), holders of at least
66 2/3% of the outstanding principal balance of the Exchange Note may, at their
option and subject to the subordination provisions of the Exchange Notes and
this Securities Purchase Agreement, by written notice or notices to the
Parent, declare all of the Exchange Notes to be due and payable, whereupon
the same shall mature and become due and payable, together with interest
accrued thereon, plus any premium, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. If the
maturity of the Exchange Notes shall be accelerated under this Section 9.3,
there shall become due and payable (and the Parent shall pay), as
compensation to the holders of the Exchange Notes for the loss of their
investment opportunity and not as a penalty, an additional amount equal to
the Exchange Note Make-Whole Amount. A final determination of the Exchange
Note Make-Whole Amount payable on a prepayment pursuant to any acceleration
of the Exchange Notes pursuant to this Section 9.3 shall be made by the
Exchange Noteholders as of the Prepayment Date. The Parent hereby
acknowledges that (1) its agreement to pay the Exchange Note Make-Whole
Amount if the Exchange Notes are accelerated under this Section 9.3 was
separately negotiated with the Purchaser, (2) the economic value of the
various elements of this waiver and agreement was discussed between the
Parent and the Purchaser, (3) the consideration given by the Purchaser for
the Exchange Notes was adjusted to reflect the specific waiver and agreement
negotiated between the Parent and the Purchaser and contained herein and (4)
this waiver is intended to comply with California Civil Code Section 2954.10.

The Parent's Initials
----------

(c) The holder of any Exchange Note then outstanding may, subject
to the subordination provisions of this Securities Purchase Agreement and the
Exchange Notes, exercise any right, power or remedy permitted to it by law,
either by suit in equity or by action at law, or both, whether for specific
performance of any covenant or agreement contained in this Securities Purchase
Agreement or in such Exchange Note, or for an injunction against a violation of
any of the terms of this Securities Purchase Agreement or in such Exchange Note,
or may proceed to enforce payment of such Exchange Note or to enforce

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any other legal or equitable right of the holder of such Exchange Note. No
remedy herein conferred upon any holder of an Exchange Note is intended to be
exclusive of any other remedy and each and every remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law, in equity, by statute or otherwise. No course of dealing on
the part of any holder of any Exchange Note, or any delay or failure on the part
of any holder of any Exchange Note to exercise any right or power, shall operate
as a waiver of such right or power or otherwise prejudice the rights, powers and
remedies of such holder or of any other holder. No failure to insist upon
strict compliance with any covenant, term, condition or other provision of this
Securities Purchase Agreement or the Exchange Notes shall constitute a waiver by
any holder of any of the Exchange Notes of any such covenant, term, condition or
other provision or of any Default or Exchange Note Event of Default in
connection therewith. To the extent effective under applicable law, the Company
hereby agrees to waive, and does hereby absolutely and irrevocably waive and
relinquish, the benefit and advantage of any valuation, stay, appraisement,
extension or redemption laws now existing or that may hereafter exist that, but
for this provision, might be applicable to any sale made under any judgment,
order or decree of any court, or otherwise, based on the Exchange Notes or on
any claim for interest on the Exchange Notes. If an Exchange Note Event of
Default shall occur, the Parent will pay to the holders of the Exchange Notes,
subject to the subordination provisions of the Exchange Notes, to the extent not
prohibited by applicable law, such further amount as shall be sufficient to
cover the reasonable costs and expenses of collection, including, without
limitation, reasonable attorneys' fees and expenses.

(d) The Indebtedness of the Parent under the Exchange Notes (the
"SUBORDINATED INDEBTEDNESS") shall be subordinated and junior in right of
payment, to the extent and in the manner set forth in the Exchange Notes, to all
Senior Debt of the Company. The term "SENIOR DEBT" shall mean the principal of,
premium, if any, and interest on (i) the Mortgage Notes, together with any
amendments, refinancings, refundings, deferrals, renewals, modifications or
extensions thereof, (ii) Indebtedness of the Company not to exceed $8,000,000 in
principal amount under the Working Capital Facility (iii) Indebtedness of the
Company not to exceed $1,800,000 in principal amount payable pursuant to the
proposed Business Loan Agreements to be entered into by the Company and The
Grape Group, Inc., with Bank of America NTSA, as guaranteed by E.&J. Gallo
Winery, (iv) Indebtedness of the Company not to exceed $2,724,156 in principal
amount payable pursuant to the installment note secured by deed of trust dated
September 30, 1986, as amended, executed by The Grape Group, Inc. in favor of
The Prudential Insurance Company of America, (v) Indebtedness of the Company not
to exceed $452,791.17 in principal amount payable pursuant to the demand note
dated September 30, 1986 executed by The Grape Group, Inc. in favor of
Cottonwood Vineyard, (vi) Indebtedness of the Company not to exceed $1,696,209
in principal amount payable pursuant to the proposed Purchase Agreement between
the Company and The Grape Group, Inc. and (vii) Indebtedness of the Company in a
principal amount not to exceed the lesser of $4,500,000 and 75% of the appraised
value of the brandy and dessert wine production and storage facility located in
Reedley, California payable to Sanwa Bank California solely in connection with
the Company's acquisition of such facility.

SECTION 9.4 WAIVER OF APPRAISEMENT, VALUATION, ETC. To the full extent
it may lawfully do so, the Company, for itself and for any other Person who may
claim through or under it,

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hereby (a) agrees that neither it nor any such Person shall set up, plead, claim
or in any manner whatsoever take advantage of, any appraisal, valuation, stay,
moratorium, extension or redemption laws, now or hereafter in force, or any
rights of marshalling in the event of any sale of the Mortgaged Property or any
part thereof or any interest therein, (b) waives all benefit or advantage of any
such laws and waives and releases any and all such rights and covenants not to
hinder, delay or impede the exercise of any right or remedy permitted herein, in
the Security Agreement or in the Deeds of Trust but to suffer and permit every
such right or remedy as though no such laws were in effect, (c) consents and
agrees that the Real Property and the Personal Property Collateral may be sold
by the Mortgage Noteholders as an entirety or in parts and (d) agrees that it
shall neither claim, demand or otherwise be entitled to any credit against or
deduction from the principal of or premium, if any, or interest on the Mortgage
Notes or any other sums which may become payable under the terms of this
Securities Purchase Agreement, the Security Agreement or the Deeds of Trust by
reason of the payment of any tax, assessment or other municipal or governmental
charge or imposition on or relating to the Property or the Personal Property
Collateral or any part thereof, nor claim or otherwise be entitled to any
deduction from the taxable or assessed value of the Real Property or the
Personal Property Collateral or any part thereof by reason of this Securities
Purchase Agreement, the Security Agreement, the Deeds of Trust or the Mortgage
Notes.

SECTION 9.5 WAIVER OF MARSHALLING AND OTHER DEFENSES. The Company
hereby (a) waives any and all rights of marshalling and specifically agrees that
in the event of foreclosure, whether by action or advertisement, all of the
Mortgaged Property and all interests in the Mortgaged Property may, at the
option of the Mortgage Noteholders, be sold together, in a single sale, and
(b) agrees that the Lien of the Security Documents as to the interests of the
Company shall not be released, impaired or subordinated by any amendment to or
termination of any of the Agreements, any extension of time or waiver of right
or remedy under any of the Agreements, or any other act, inaction or thing
which, but for this provision, would so release, impair or subordinate.

SECTION 9.6 RESCISSION OF ACCELERATION. If (a) the outstanding
principal amount of the Mortgage Notes shall have become immediately due and
payable, (b) no judgment or decree for any amounts so becoming due and payable
shall have been entered, (c) all amounts of principal, premium, if any, and
interest which shall have become due and payable in respect of all of the
Mortgage Notes otherwise than pursuant to any acceleration shall have been paid
in full, including interest on all overdue principal, premium, if any, and (to
the extent permitted by applicable law) interest at the applicable rate or rates
provided for in the Mortgage Notes, (d) the Mortgage Noteholders shall have been
paid an amount sufficient to cover all costs and expenses of collection incurred
by or on behalf of the Mortgage Noteholders (including, without limitation,
reasonable counsel fees and expenses), (e) all other Obligations then due and
owing shall have been paid in full, and (f) every other Event of Default shall
have been remedied or waived to the satisfaction of the Mortgage Noteholders,
then the Mortgage Noteholders may, with the written consent of the holders of
66 2/3% of the aggregate outstanding principal amount of the Mortgage Notes, by
written notice or notices to the Company, rescind and annul any acceleration of
the Mortgage Notes and its consequences, but no such rescission and annulment
shall extend to or affect any subsequent Default or Event of

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Default or impair any right consequent thereon, or shall require any Mortgage
Noteholder to repay any interest, principal or premium actually paid as a result
of such acceleration.

SECTION 9.7 REMEDIES CUMULATIVE. Each and every right, power and remedy
herein or in the other Security Documents specifically given to the Mortgage
Noteholders or otherwise in this Securities Purchase Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein or in the other Security Documents specifically given or now or hereafter
existing at law, in equity or by statute or otherwise, and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and as often and in such order as may be deemed
expedient by the Mortgage Noteholders, and the exercise or the beginning of the
exercise of any right, power or remedy shall not be construed to be a waiver of
the right to exercise at the same time or thereafter any other right, power or
remedy. No delay or omission by the Mortgage Noteholders in the exercise of any
right, power or remedy or in the pursuance of any remedy shall impair any such
right, power or remedy or be construed to be a waiver of any default on the part
of the Company or to be an acquiescence therein.

SECTION 9.8 DISCONTINUANCE OF PROCEEDINGS. If the Mortgage Noteholders
shall have proceeded to enforce any right, power or remedy under one or more of
the Deeds of Trust or the other Security Documents by foreclosure, entry or
otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely to the Mortgage Noteholders,
then, and in every such case, the Company and the Mortgage Noteholders shall be
restored to their former positions and rights hereunder and under the other
Security Documents with respect to the Real Property and the Personal Property
Collateral, and all rights, powers and remedies of the Mortgage Noteholders
shall continue as if no such proceedings had been taken.

SECTION 9.9 COSTS AND EXPENSES, ATTORNEYS FEES, ETC. OF THE MORTGAGE
NOTEHOLDERS. The Company shall pay all reasonable costs, fees and expenses of
the Mortgage Noteholders, their agents and counsel in connection with the
enforcement of their rights hereunder and under the other Agreements, including,
without limitation, the reasonable cost of any trustee's sale guaranty or other
title insurance coverage ordered in connection with any foreclosure proceedings
hereunder, but excluding any costs attributable to in-house counsel or any
overhead costs, and shall pay all taxes (except federal and state income taxes)
or other governmental charges or impositions imposed on the Mortgage Noteholders
by reason of their interest in the Mortgage Notes, this Securities Purchase
Agreement, the other Security Documents, the Real Property or the Personal
Property Collateral. The Company shall pay to the Mortgage Noteholders on
demand any reasonable costs and expenses, including reasonable attorneys fees
and expenses, but excluding any costs attributable to in-house counsel or any
overhead costs, paid or incurred by the Mortgage Noteholders in connection with
the collection of any amount payable by the Company to the Mortgage Noteholders
hereunder, whether or not any legal proceeding is commenced hereunder and
whether or not any Default or Event of Default shall have occurred and is
continuing, together with interest thereon at the Overdue Rate from the date of
payment or incurring by the Mortgage Noteholders until paid by the Company.

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SECTION 9.10 NO WAIVER, ETC. No failure by any Mortgage Noteholder to
insist upon the strict performance of any term hereof or under the other
Security Documents or any other Agreement, or to exercise any right, power or
remedy consequent upon a breach hereof or thereof, shall constitute a waiver of
any such term or of any such breach. No waiver of any breach shall affect or
alter this Securities Purchase Agreement or the Security Documents which shall
continue in full force and effect with respect to any other then existing or
subsequent breach. No waiver by any Mortgage Noteholder of any Default or Event
of Default shall be deemed to be a waiver of any other or similar, previous or
subsequent Default or Event of Default. By accepting payment of any amount
secured by the Security Documents after its due date, the Mortgage Noteholders
shall not be deemed to waive their right either to require prompt payment when
due of all other amounts payable hereunder or under the other Security Documents
or any other Agreement or to declare a default for failure to effect such prompt
payment.

SECTION 9.11 COMPROMISE OF ACTIONS, ETC. Any action, suit or proceeding
brought by the Mortgage Noteholders pursuant to any of the terms of this
Securities Purchase Agreement, the Security Documents or otherwise, and any
claim made by the Mortgage Noteholders hereunder or thereunder, may be
compromised, withdrawn or otherwise dealt with by the Mortgage Noteholders upon
notice to, but without approval of, the Company.

SECTION 9.12 RIGHT OF THE MORTGAGE NOTEHOLDERS TO PERFORM THE COMPANY'S
COVENANTS, ETC. If (a) the Company shall fail to make any payment or perform
any act required to be made or performed by the Company hereunder or under the
Mortgage Notes, the Security Documents or the Agreements which failure would
constitute an Default or Event of Default, or (b) any action or proceeding is
commenced that materially and adversely affects the Mortgage Noteholders'
interest in all or a portion of the Real Property or the Personal Property
Collateral or any part thereof, any Mortgage Noteholder with notice to, but
without demand upon, the Company, and without waiving or releasing any
Obligation, Default or Event of Default, may at any time thereafter make such
appearances or such payment or perform such act for the account and at the
expense of the Company, and may enter upon the Mortgaged Property for such
purpose, and take all such action thereon as, in the Mortgage Noteholder's
opinion, may be necessary or appropriate therefor, including, without
limitation, payment, purchase, contest or compromise of any Lien that in the
judgment of the Mortgage Noteholder appears to be prior or superior to the Lien
of the Security Documents. No such entry and no such action shall be deemed an
eviction of any lessee of the Real Property, the Personal Property Collateral or
any part thereof. All sums so paid by any Mortgage Noteholder and all
reasonable costs and expenses, (including, without limitation, reasonable
attorneys fees and expenses) so incurred, together with interest thereon at the
Overdue Rate from the date of payment or incurring, shall constitute additional
Obligations secured by the Security Documents and shall be paid by the Company
to any Mortgage Noteholders on demand.

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PART V. PROVISIONS RELATING SOLELY TO PREFERRED STOCK

SECTION 10. REDEMPTION AND EXCHANGE.

SECTION 10.1 MANDATORY REDEMPTION. The Senior Preferred Stock shall be
issued subject to the mandatory redemption provisions set forth in the
Certificate of Designations.

SECTION 10.2 OPTIONAL REDEMPTION.

(a) Upon the terms and subject to the conditions hereinafter set
forth, the Parent, at its option, upon notice as provided in Section 10.2(c)
hereof, may redeem the Senior Preferred Stock, at any time after April 21, 2000,
either in whole or from time to time in any part (but, if in part, then with
respect to at least 1,000 shares at any one time) at a redemption price equal to
the sum of $100 per share (the "LIQUIDATION VALUE") and the "Optional Redemption
Premium" (as defined below) for such Liquidation Value, together with accrued
and unpaid dividends with respect to the shares of Senior Preferred Stock so to
be redeemed to the date fixed for redemption (collectively, the "OPTIONAL
REDEMPTION PRICE").

(b) The Optional Redemption Premium for any Liquidation Value
shall equal the net present value (if positive) of the payment stream equal to
the difference between (i) each payment of dividends and mandatory redemption
price the Purchaser would have received on account of such Liquidation Value at
a 12% per annum dividend rate and (ii) each corresponding payment of dividends
and mandatory redemption price the Purchaser would have received on account of
such Liquidation Value at dividend rate equal to the sum of (A) the rate then
being paid on United States Treasury Notes with maturities equal to the Weighted
Average Life to Maturity of the remaining aggregate Liquidation Value of Senior
Preferred Stock at the time of prepayment plus (B) 2.75% (the "PREFERRED
TREASURY RATE") discounted at the Preferred Treasury Rate; PROVIDED that if the
Parent is redeeming at the same time all of the outstanding Senior Preferred
Stock and has previously redeemed or is redeeming, simultaneously with the
redemption of the Senior Preferred Stock, all of the outstanding Class E Common
Stock pursuant to the terms hereof and the Certificate of Designations, then the
Optional Redemption Premium shall be reduced by the amount of the excess, if
any, of (a) the sum of the aggregate Optional Redemption Price paid by the
Parent and the aggregate Common Stock Redemption Price paid by the Parent over
(b) that amount which, if paid at the time of redemption, would have resulted in
the Purchaser receiving a yield of 25% on their aggregate investments in the
Senior Preferred Stock and the Class E Common Stock, taking into account all
dividends and other distributions made on the Senior Preferred Stock and the
Class E Common Stock prior to the time of redemption; and PROVIDED FURTHER, that
in no event shall the Optional Redemption Premium be less than zero.

(c) Notice of any redemption of Senior Preferred Stock pursuant to
this Section 10.2 shall be given to each holder of the Senior Preferred Stock
not less than thirty (30) nor more than sixty (60) days before the date fixed
for redemption (the "OPTIONAL REDEMPTION DATE") and shall be accompanied by an
Officer's Certificate of the Parent certifying as to: (i) the Optional
Redemption Date, (ii) the aggregate Liquidation Value of all of the shares of
Senior Preferred Stock to be so redeemed on such Optional Redemption Date,
(iii) the number

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of shares of Senior Preferred Stock held by such holder to be redeemed on such
Optional Redemption Date, (iv) the Optional Redemption Price to be paid in
respect of each share certificate of Senior Preferred Stock held by such holder
on such Optional Redemption Date and a calculation of such Optional Redemption
Premium and (v) the amount of accrued and unpaid dividends to be paid to such
holder on such Optional Redemption Date. Any notice of redemption pursuant to
this Section 10.2 having been so given, the aggregate Optional Redemption Price
payable in respect of the shares of Senior Preferred Stock specified in such
notice shall become due and redeemable on such Optional Redemption Date.

(d) Notwithstanding the foregoing provisions of this Section 10.2,
an optional redemption of Senior Preferred Stock pursuant to this Section 10.2
may only be made if, on the Optional Redemption Date, such optional redemption
is permitted by the provisions of this Securities Purchase Agreement based on
the financial statements for the most recently completed Fiscal Quarter (or, if
the most recently completed Fiscal Quarter was the fourth Fiscal Quarter of a
Fiscal Year, based on financial statements for such Fiscal Year, which for this
purpose may be unaudited) delivered pursuant to Section 15.1 hereof, and by
applicable law.

SECTION 10.3 MANDATORY OFFER TO REDEEM IN A PUT EVENT.

(a) In the event that the Parent anticipates that a Put Event will
occur, the Parent shall (i) deliver to each holder of Senior Preferred Stock a
Notice and Offer to Redeem Preferred Stock pursuant to Section 10.3(b) hereof
and (ii) if such holder accepts redemption as to the Senior Preferred Stock it
holds by delivering a Section 10.3 Response pursuant to Section 10.3(d) hereof,
redeem such Senior Preferred Stock as hereinafter provided. Any redemption of
Senior Preferred Stock pursuant to this Section 10.3 shall be made at a
redemption price equal to the Optional Redemption Price of the shares of Senior
Preferred Stock to be redeemed.

(b) Not later than thirty (30) days prior to the effective date of
a Put Event, the Parent shall give written notice to each holder of Senior
Preferred Stock of the pendency thereof and the right of such holders to elect
to have their shares of Senior Preferred Stock redeemed hereunder arising as a
result thereof (a "NOTICE AND OFFER TO REDEEM PREFERRED STOCK"). Such Notice
and Offer to Redeem Preferred Stock shall state: (i) that such notice is
delivered and such offer to redeem is made pursuant to this Section 10.3(b);
(ii) the date of and a description of the circumstances surrounding such Put
Event; (iii) the date by which a holder of Senior Preferred Stock must deliver a
Section 10.3 Response pursuant to Section 10.3(d) hereof; (iv) the date on which
the Parent shall redeem the Senior Preferred Stock if the holder of Senior
Preferred Stock delivers a Section 10.3 Response pursuant to Section 10.3(d)
hereof and the Put Event giving rise to the Notice and Offer to Redeem is
consummated, which redemption date shall be a Business Day prior to the date the
Put Event occurs (the "SPECIAL REDEMPTION DATE"); and (v) the amount of accrued
and unpaid dividends to be paid with respect to shares of Senior Preferred Stock
held by such holder on such Special Redemption Date if such shares of Senior
Preferred Stock are redeemed pursuant to this Section 10.3; PROVIDED that,
notwithstanding the foregoing provisions of this sentence, the Special
Redemption Date specified in such Notice and Offer to Redeem Preferred Stock may
be postponed, by five (5) Business Days' prior written notice from the Parent to
each holder of Senior Preferred Stock to be redeemed, to the

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earliest subsequent date which allows compliance with the restrictions imposed
by the last sentence of Section 10.3(c).

(c) If the Parent fails to deliver to each holder of the Senior
Preferred Stock the notice of a pending Put Event as required by this Section
10.3, any holder of Senior Preferred Stock may, upon obtaining knowledge of a
pending or completed Put Event, notify the Parent of such Put Event in writing
(the "STOCKHOLDER NOTICE"), whereupon the Parent shall, and any holder of Senior
Preferred Stock may, promptly notify each other holder of Senior Preferred Stock
of such pending or completed Put Event, the nature thereof and the date upon
which it is scheduled to occur or did occur. In such event, redemption under
this Section 10.3 shall occur not later than thirty (30) days after the date of
such Stockholder Notice unless the Parent and such holder agree to a different
date or unless such redemption is not accepted as provided in Section 10.3(d)
below or unless the transactions underlying the Put Event are not consummated.
Notwithstanding any other provision of this Securities Purchase Agreement, a
redemption of Senior Preferred Stock pursuant to this Section 10.3 may only be
made, if, on the Special Redemption Date, such redemption is permitted by the
provisions of this Securities Purchase Agreement based on the financial
statements for the most recently completed Fiscal Quarter (or, if the most
recently completed Fiscal Quarter was the fourth Fiscal Quarter of a Fiscal
Year, based on financial statements for such Fiscal Year, which for this purpose
may be unaudited) delivered pursuant to Section 15.1 hereof, and by applicable
law.

(d) To accept an offer of redemption of Senior Preferred Stock
pursuant to this Section 10.3, a holder thereof shall deliver to the Parent, on
or before the tenth (10th) day following the date of receipt of the Notice and
Offer to Redeem, such holder's notice that it accepts redemption pursuant to
this Section 10.3 with respect to the shares of Senior Preferred Stock
designated therein (a "SECTION 10.3 RESPONSE"). The Section 10.3 Response shall
set forth the name of such holder and the statement that it accepts redemption
pursuant to this Section 10.3 with respect to the shares of Senior Preferred
Stock designated therein. Promptly and in any event within two (2) Business
Days after receipt of such holder's Section 10.3 Response, the Parent shall, by
written notice to such holder, acknowledge receipt thereof.

(e) The provisions of this Section 10.3 are applicable to
successive Put Events and no failure on the part of any holder to exercise any
right under this Section 10.3 arising on account of any Put Event shall affect
or impair any other right of such holder under this Securities Purchase
Agreement upon the occurrence of any other or any subsequent Put Event. In any
such Put Event, the Parent shall make a mandatory offer to redeem shares of
Senior Preferred Stock pursuant to this Section 10.3 concurrently with the
making of a mandatory offer to prepay the Mortgage Notes pursuant to Section 5.3
hereof (and a mandatory offer to redeem the Common Stock pursuant to Section
11.2 hereof).

SECTION 10.4 EXCHANGE OF PREFERRED STOCK FOR EXCHANGE NOTES.

(a) The Parent, at its option, may at any time require the holders
of all of the then outstanding shares of Senior Preferred Stock to exchange the
shares of Senior Preferred Stock held by them for Exchange Notes (a "SECTION
10.4 EXCHANGE") in accordance with this Section 10.4, which Exchange Notes shall
be issued pursuant to, and governed by the terms and

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<PAGE>

conditions of, this Securities Purchase Agreement. The Parent may not elect to
exchange Exchange Notes for less than all outstanding shares of Senior Preferred
Stock. Holders of outstanding shares of Senior Preferred Stock shall be
entitled to receive $100.00 in principal amount of Exchange Notes in exchange
for each share of Senior Preferred Stock to be exchanged by them at the time of
exchange.

(b) The Parent shall mail to each holder of record of the shares
of Senior Preferred Stock written notice (an "EXCHANGE NOTICE") of its intention
to effect an exchange pursuant to this Section 10.4 not less than thirty (30)
nor more than ninety (90) days prior to the Dividend Payment Date fixed for the
exchange (the "EXCHANGE DATE"). Each such Exchange Notice shall state: (i) the
Exchange Date, (ii) the place or places where certificates for such shares of
Senior Preferred Stock are to be surrendered for exchange into Exchange Notes,
(iii) the number of shares of Senior Preferred Stock held by such holder to be
exchanged and (iv) that dividends on the shares of Senior Preferred Stock to be
exchanged shall cease to accrue on such Exchange Date. On or prior to the
Exchange Date, each holder of shares of Senior Preferred Stock shall surrender
to the Parent, at the office maintained by the Parent pursuant to Section 12.1
hereof, certificates evidencing at least the number of shares of Senior
Preferred Stock specified in the Exchange Notice, duly endorsed or assigned
pursuant to a separate instrument, against delivery in exchange therefor on the
Exchange Date of an aggregate principal amount of Exchange Notes equal to the
Liquidation Value of the shares of Senior Preferred Stock being surrendered and
payment in cash of accrued but unpaid dividends through the Exchange Date on the
Senior Preferred Stock being surrendered. The Parent shall issue to each Person
surrendering Senior Preferred Stock one or more Exchange Notes, registered in
the name of such Person or such nominee as may be specified by such Person,
dated the Exchange Date; PROVIDED that the Exchange Date shall not be deemed to
occur and a Section 10.4 Exchange shall not be deemed to be effective with
respect to the Senior Preferred Stock held by a holder until the issuance to
such holder of the Exchange Notes to be received by it in the Section 10.4
Exchange.

(c) Upon issuance of the Exchange Notes to be issued pursuant to
this Section 10.4, dividends on the shares of the Senior Preferred Stock to be
exchanged shall cease to accrue, said shares shall no longer be deemed to be
issued and outstanding, and all rights of the holders thereof as stockholders of
the Parent shall cease and terminate, except the right to receive from the
Parent payment of any accrued and unpaid dividends, including without limitation
the final dividend, on such shares.

SECTION 10.5 ACQUISITION, ETC. OF PREFERRED STOCK. The Parent shall not,
and shall not permit any Subsidiary or Affiliate to, purchase, redeem or
otherwise acquire any shares of Senior Preferred Stock except as expressly
permitted by the terms hereof and of the Certificate of Incorporation and unless
not prohibited by California or Delaware law.

SECTION 10.6 HOME OFFICE PAYMENT. Notwithstanding any provision to the
contrary in this Securities Purchase Agreement, the Certificate of Designations
or the Senior Preferred Stock, the Parent shall punctually pay in immediately
available funds by 12:00 P.M. New York City time on the date payment is due all
amounts payable to you with respect to any Senior Preferred Stock held by you or
your nominee (without the necessity for any presentation or surrender thereof or
any notation of such payment thereon other than upon payment of the

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Liquidation Value thereof) in the manner and at the address for such purpose
specified below your name in SCHEDULE I hereto, or at any other address
within the continental United States as you may from time to time direct in
writing.

SECTION 10.7 REMEDIES. With respect to any material misrepresentation or
breach of warranty or covenant made by the Parent in this Securities Purchase
Agreement, the holder of any shares of Senior Preferred Stock may exercise any
right, power or remedy permitted to it by law, either by suit, in equity or by
action at law or both, whether for specific performance of any covenant or
agreement contained in this Securities Purchase Agreement, or for an injunction
against a violation of any of the terms of this Securities Purchase Agreement,
or in aid of the exercise of any power granted in this Securities Purchase
Agreement, or may proceed to enforce any other legal or equitable right of the
holder of such Senior Preferred Stock. No remedy herein conferred upon any
holder of Senior Preferred Stock is intended to be exclusive of any other remedy
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law, in equity, by
statute or otherwise. No course of dealing on the part of any holder of Senior
Preferred Stock, or any delay or failure on the part of any such holder to
exercise any right or power, shall operate as a waiver of such right or power or
otherwise prejudice the rights, powers and remedies of such holder or of any
other holder. No failure to insist upon strict compliance with any covenant,
term, condition or other provision of this Securities Purchase Agreement shall
constitute a waiver by any holder of Senior Preferred Stock of any such
covenant, term, condition or other provision or of any default in connection
therewith. To the extent effective under applicable law, the Parent hereby
agrees to waive, and does hereby absolutely and irrevocably waive and
relinquish, the benefit and advantage of any valuation, stay, appraisement,
extension or redemption laws now existing or that may hereafter exist that, but
for this provision, might be applicable to any sale made under any judgment,
order or decree of any court, or otherwise.

PART VI. PROVISIONS RELATING SOLELY TO CLASS E COMMON STOCK

SECTION 11. MANDATORY REDEMPTION; REGISTRATION RIGHTS

SECTION 11.1 RESTRICTIONS ON TRANSFER OF AND RIGHTS WITH RESPECT TO THE
CLASS E COMMON STOCK. The Class E Common Stock shall be freely transferable by
the holder thereof, subject only to restrictions on such transfer imposed by
(i) the provisions of the Stockholders Agreement and (ii) the Securities Act and
applicable state law in respect of the transfer of the Class E Common Stock.

SECTION 11.2 MANDATORY OFFER TO REDEEM IN A PUT EVENT.

(a) If any Put Event or Class E Common Stock Put Event shall
occur, the Parent shall (1) deliver to each holder of Class E Common Stock a
Notice and Offer to Redeem Common Stock pursuant to Section 11.2(b) hereof and
(2) if such holder accepts redemption as to the Class E Common Stock it holds by
delivering a Section 11.2 Response pursuant to Section 11.2(d) hereof, redeem
such Class E Common Stock as hereinafter provided.

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(i) In the event of a Put Event, the redemption price for a
share of Class E Common Stock pursuant to this Section 11.2 shall be an
amount equal to (A) the fair market value of the Parent and its
Subsidiaries, as determined by an independent appraiser approved by holders
of at least 51% of the then outstanding shares of Class E Common Stock
purchased by the Purchaser hereunder or, at the option of such holders, if
a third party is to purchase all of the Parent's outstanding capital stock
or assets in an arm's length transaction, the actual price to be paid for
such stock or assets by such third party (which actual price shall be net
of liabilities being paid or assumed in connection with such transaction),
divided by (B) the number of shares of Common Stock then outstanding.

(ii) In the event of a Class E Common Stock Put Event, the
redemption price for a share of Class E Common Stock pursuant to this
Section 11.2 shall be an amount equal to (A) six (6) multiplied by EBITDA
for the twelve calendar months immediately preceding the date of the Notice
and Offer to Redeem Common Stock (defined below) PLUS (B) all cash of the
Parent and its Subsidiaries as of the end of the calendar month immediately
preceding the date of the Notice and Offer to Redeem Common Stock MINUS
(C) the sum of Consolidated Funded Debt as of the end of the calendar month
immediately preceding the date of the Notice and Offer to Redeem Common
Stock, the Liquidation Value of the Senior Preferred Stock on the Special
Redemption Date (defined below) and $2,700,000 minus the redemption price
paid for all of the Junior Preferred Stock on the Special Redemption Date
MINUS (D) 3% of the sum of the amounts in clauses (A), (B) and (C) (the
"COMMON STOCK REDEMPTION PRICE"), divided by (D) the number of shares of
Common Stock then outstanding.

(b) Not later than thirty (30) days prior to the effective date of
a Put Event or Class E Common Stock Put Event, the Parent shall give written
notice to each holder of Class E Common Stock of the pendency thereof and the
right of such holders to elect to have their shares of Class E Common Stock
redeemed hereunder arising as a result thereof (a "NOTICE AND OFFER TO REDEEM
COMMON STOCK"). Such Notice and Offer to Redeem Common Stock shall state:
(i) that such notice is delivered and such offer to redeem is made pursuant to
this Section 11.2; (ii) the date of and a description of the circumstances
surrounding such Put Event or Class E Common Stock Put Event; (iii) the date by
which a holder of Class E Common Stock must deliver a Section 11.2 Response
pursuant to Section 11.2(d) hereof; (iv) the date on which the Parent shall
redeem the Class E Common Stock if the holder of Class E Common Stock delivers
a Section 11.2 Response pursuant to Section 11.2(d) hereof and the Put Event or
Class E Common Stock Put Event giving rise to the Notice and Offer to Redeem
Common Stock is consummated, which redemption date shall be a Business Day prior
to the date the Put Event or Class E Common Stock Put Event occurs (the "SPECIAL
REDEMPTION DATE"); and (v) the amount of accrued and unpaid dividends to be paid
with respect to shares of Class E Common Stock held by such holder on such
Special Redemption Date if such shares of Class E Common Stock are redeemed
pursuant to this Section 11.2; PROVIDED that, notwithstanding the foregoing
provisions of this sentence, the Special Redemption Date specified in such
Notice and Offer to Redeem Common Stock may be postponed, by two (2) Business
Days' prior written notice from the Parent to each holder of Class E Common
Stock to be redeemed, to the

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earliest subsequent date which allows compliance with the restrictions imposed
by the last sentence of Section 11.2(c).

(c) If the Parent fails to deliver to each holder of the Class E
Common Stock the notice of a pending Put Event or Class E Common Stock Put Event
as required by this Section 11.2, any holder of Class E Common Stock may, upon
obtaining knowledge of a pending or completed Put Event or Class E Common Stock
Put Event, notify the Parent of such Put Event or Class E Common Stock Put Event
in writing (the "CLASS E STOCKHOLDER NOTICE"), whereupon the Parent shall, and
any holder of Class E Common Stock may, promptly notify each other holder of
Class E Common Stock of such pending or completed Put Event or Class E Common
Stock Put Event, the nature thereof, and the date upon which it is scheduled to
occur or did occur. In such event, redemption under this Section 11.2 shall
occur not later than thirty (30) days after the date of such Class E Stockholder
Notice, unless the Parent and such holder agree to a different date or unless
such redemption is not accepted as provided in Section 11.2(d) below.
Notwithstanding any other provision of this Securities Purchase Agreement, a
redemption of Class E Common Stock pursuant to this Section 11.2 may only be
made, if, on the Special Redemption Date, such redemption is permitted by the
provisions of this Securities Purchase Agreement based on the financial
statements for the most recently completed Fiscal Quarter (or, if the most
recently completed Fiscal Quarter was the fourth Fiscal Quarter of a Fiscal
Year, based on financial statements for such Fiscal Year, which for this purpose
may be unaudited) delivered pursuant to Section 15.1 hereof and by applicable
law.

(d) To accept an offer of redemption of Class E Common Stock
pursuant to this Section 11.2, a holder thereof shall deliver to the Parent, on
or before the tenth (10th) day following the date of receipt of the Notice and
Offer to Redeem, such holder's notice that it accepts redemption pursuant to
this Section 11.2 with respect to the shares of Class E Common Stock designated
therein (a "SECTION 11.2 RESPONSE"). The Section 11.2 Notice shall set forth
the name of such holder and the statement that it accepts redemption pursuant to
this Section 11.2 with respect to the shares of Class E Common Stock designated
therein. Promptly and in any event within two (2) Business Days after receipt
of such holder's Section 11.2 Response, the Parent shall, by written notice to
such holder, acknowledge receipt thereof.

(e) The provisions of this Section 11.2 are applicable to
successive Put Events or Class E Common Stock Put Events and no failure on the
part of any holder to exercise any right under this Section 11.2 arising on
account of any Put Event or Class E Common Stock Put Event shall affect or
impair any other right of such holder under this Securities Purchase Agreement
upon the occurrence of any other or any subsequent Put Event or Class E Common
Stock Put Event. In any such Put Event or Class E Common Stock Put Event, the
Parent shall make a mandatory offer to redeem shares of Class E Common Stock
pursuant to this Section 11.2 concurrently with the making of an offer to redeem
the Senior Preferred Stock pursuant to Section 10.3 hereof.

SECTION 11.3 REGISTRATION RIGHTS. A holder of Class E Common Stock shall
have the right to have such shares registered under the Securities Act by the
Parent in accordance with the terms of the Registration Rights Agreement
attached as EXHIBIT I hereto.

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SECTION 11.4 REMEDIES. With respect to any material misrepresentation or
breach of warranty or covenant made by the Parent in this Securities Purchase
Agreement, the holder of any shares of Class E Common Stock may exercise any
right, power or remedy permitted to it by law, either by suit, in equity or by
action at law or both, whether for specific performance of any covenant or
agreement contained in this Securities Purchase Agreement, or for an injunction
against a violation of any of the terms of this Securities Purchase Agreement,
or in aid of the exercise of any power granted in this Securities Purchase
Agreement, or may proceed to enforce any other legal or equitable right of the
holder of such Class E Common Stock. No remedy herein conferred upon any holder
of Class E Common Stock is intended to be exclusive of any other remedy and each
and every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law, in equity, by
statute or otherwise. No course of dealing on the part of any holder of Class E
Common Stock, or any delay or failure on the part of any such holder to exercise
any right or power, shall operate as a waiver of such right or power or
otherwise prejudice the rights, powers and remedies of such holder or of any
other holder. No failure to insist upon strict compliance with any covenant,
term, condition or other provision of this Securities Purchase Agreement shall
constitute a waiver by any holder of Class E Common Stock of any such covenant,
term, condition or other provision or of any default in connection therewith.
To the extent effective under applicable law, the Parent hereby agrees to waive,
and does hereby absolutely and irrevocably waive and relinquish, the benefit and
advantage of any valuation, stay, appraisement, extension or redemption laws now
existing or that may hereafter exist that, but for this provision, might be
applicable to any sale made under any judgment, order or decree of any court, or
otherwise.

PART VII. PROVISIONS RELATING TO ALL SECURITIES

SECTION 12. CERTAIN COVENANTS OF THE PARENT AND THE COMPANY.

Each of the Parent and the Company covenants and agrees for the benefit of
each holder of Securities that so long as any of the Securities shall remain
outstanding:

SECTION 12.1 MAINTENANCE OF OFFICE. Each of the Parent and the Company
shall maintain at the office located at the address for notices to the Company
or the Parent provided in Section 17.1 hereof an office where notices,
presentations and demands in respect of this Securities Purchase Agreement and
the Securities may be given to and made upon the Company or the Parent; PROVIDED
that the Company or the Parent, may, upon fifteen (15) Business Days' prior
written notice to the holders of the Securities, move such office to any other
location within the continental boundaries of the United States. Each of the
Parent and the Company hereby agrees that it shall pay, and shall save any
holder of a Security issued by it harmless against liability for, any stamp or
other tax or governmental charge imposed in respect of any transfer of the
Security resulting from such change in office; and said obligation of the Parent
and the Company shall survive the payment or prepayment of the Notes, the
redemption of the Senior Preferred Stock and the Class E Common Stock, the
termination of this Securities Purchase Agreement and the reconveyance of the
Deeds of Trust.

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SECTION 12.2 CORPORATE EXISTENCE. Each of the Parent, the Company and
the Subsidiaries each shall take and fulfill, or cause to be taken and
fulfilled, all actions and conditions necessary to preserve and keep in full
force and effect its existence, rights and privileges as a corporation, shall
not liquidate or dissolve and shall take and fulfill, or cause to be taken
and fulfilled, all actions and conditions necessary to qualify, and to
preserve and keep in full force and effect its qualification to do business
as a foreign corporation in the jurisdictions in which the failure to so
qualify would have a Material Adverse Effect.

SECTION 12.3 GENERAL MAINTENANCE OF PROPERTIES AND BUSINESS, ETC.

(a) Each of the Parent, the Company and the Subsidiaries shall:

(i) maintain its property in good condition, subject to wear
and tear in the ordinary course of business, and make all reasonable and
necessary renewals, replacements, additions, betterments and improvements
thereof and thereto, so that the business carried on in connection
therewith may be conducted properly at all times;

(ii) keep proper books of record and accounts in which entries
shall be made of its business transactions in accordance with and to the
extent required by generally accepted accounting principles; and

(iii) set aside on its books from its earnings for each Fiscal
Year, in amounts deemed adequate in the reasonable opinion of the Parent or
the Company, as the case may be, all proper accruals and reserves that, in
accordance with generally accepted accounting principles, should be set
aside from such earnings in connection with its business, including
reserves for depreciation, obsolescence and/or amortization, third party
insurance payment and claims and accruals for taxes based on or measured by
income or profits and for all other taxes.

(b) With respect specifically to the Mortgaged Property, the
Company covenants:

(i) to keep the Mortgaged Property in good condition and
repair, subject to wear and tear in the ordinary course of business;

(ii) not to demolish the Mortgaged Property or any part
thereof (other than an immaterial portion of the Property in connection
with a minor repair);

(iii) to complete or restore promptly and in good and
workmanlike manner the Mortgaged Property or any part thereof which may be
damaged or destroyed;

(iv) except as are being contested under Section 12.11 below,
to pay when due all claims for work performed and for materials furnished
on or to the Mortgaged Property, and to pay any and all liens or
encumbrances arising out of or resulting from work performed or materials
supplied on or to the Mortgaged Property;

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(v) to comply with and not suffer violations of (A) any and
all laws, ordinances, regulations and standards, (B) any and all covenants,
conditions, restrictions and equitable servitudes, whether public or
private, of every kind and character, and (C) all requirements of insurance
companies and any bureau or agency which establishes standards of
insurability, which laws, covenants or requirements materially affect the
Mortgaged Property and pertain to acts committed or conditions existing
thereon, including, without limitation, such work of alteration,
improvement or demolition as such laws, covenants or requirements mandate;

(vi) not to commit or permit waste of the Mortgaged Property
or any part thereof;

(vii) to do all other acts which from the character or use of
the Mortgaged Property may be reasonably necessary to maintain and preserve
its value;

(viii) to perform all obligations required to be performed in
any leases, conditional sales contracts or like agreements materially
affecting all or any portion of the Mortgaged Property or the operation,
occupation or use thereof; and

(ix) to make no further assignment of rents of the Mortgaged
Property.

(c) The Company shall execute and, where appropriate, acknowledge
and deliver such further instruments as you deem reasonably necessary or
appropriate to preserve, continue, perfect and enjoy the security provided by
the Security Documents, including, without limitation, assignments of the
Company's interest in leases of all or any portion of the Mortgaged Property.

(d) Neither the Company nor any Subsidiary shall engage in any
material line of business other than the lines of business in which the Company
and its Subsidiaries are engaged on the Closing Date as generally described in
the Offering Memorandum or in related extensions of such lines of business.

SECTION 12.4 INSPECTION.

Each of the Parent and the Company shall permit, and shall cause each
of the Subsidiaries to permit, any holder of any Security, by its
representatives, agents or attorneys, (a) to examine all of its books of
account, records, reports and other papers, (b) to make copies and take extracts
from any thereof, (c) to discuss its affairs, finances and accounts with its
officers and independent certified public accountants (and by this provision
each of the Parent and the Company hereby authorizes said accountants to discuss
with any such holder the finances and accounts of the Parent, the Company and
the Subsidiaries) and (d) to visit and inspect, at reasonable times, upon
reasonable prior notice, the properties of each of the Parent and the Company
and the Subsidiaries, in each case to the extent permitted by applicable federal
and state law. Each such inspection shall be at the expense of the Person
making the inspection, unless such inspection shall be made during the
continuance of an Event of Default

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(in which event, the reasonable expense of any such inspection shall be borne by
the Parent or the Company); PROVIDED that in the absence of an Event of Default,
each holder shall be entitled to have its reasonable expenses of one such
inspection during each Fiscal Year paid or reimbursed by the Parent or the
Company and, for such purpose, no visit or inspection by any representative,
agent or designee of such holder attending any meeting of the Board as a member
of the Board at or around the time of such meeting of the Board shall be deemed
to constitute an inspection for the purposes of this Section 12.4.
Notwithstanding the foregoing sentence, it is understood and agreed by each of
the Parent and the Company that all expenses in connection with any such
inspection incurred by the Parent or the Company or any Subsidiary, any officers
and employees thereof and the attorneys and independent certified public
accountants therefor shall be expenses payable by the Parent and the Company and
shall not be expenses of the Person making any inspection.

SECTION 12.5 COMPLIANCE WITH LAW, ETC. Neither the Parent, the
Company nor any Subsidiary shall (a) violate any laws, ordinances or
governmental rules or regulations to which it is or may become subject, the
violation of which is reasonably likely, in the aggregate, to have a Material
Adverse Effect, or (b) fail to obtain or maintain any patents, trademarks,
service marks, trade names, copyrights, design patents, licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its property or to the conduct of its business, except where the failure so to
obtain or maintain the foregoing, either individually or in the aggregate, is
not reasonably likely to have a Material Adverse Effect. The Company shall use
and operate the Mortgaged Property for lawful purposes in full compliance in all
material respects with all laws and ordinances and all governmental rules and
regulations to which it is subject.

SECTION 12.6 PAYMENT OF TAXES AND CLAIMS. Each of the Parent and the
Company shall pay and discharge promptly when due:

(a) prior to delinquency, all taxes, assessments, levies and
charges imposed by any public or quasi-public authority or utility company upon
the Company or the Parent, its income or profits or any of its properties;

(b) after notice and prior to delinquency, all taxes, assessments,
levies and charges imposed by any public authority upon any Mortgage Noteholder
by reason of its interest in the Mortgaged Property created hereby, under the
Deeds of Trust or by reason of any payment, or portion thereof, made hereunder
to any holder of any Security; PROVIDED that the Company shall have no
obligation to pay or discharge any holder's business or franchise taxes, federal
or state income taxes or other taxes and which are measured by and imposed upon
the holder's net or gross income or receipts; and

(c) all lawful claims of materialmen, mechanics, carriers,
warehousemen, landlords and other similar Persons for labor, materials, supplies
and rentals that, if unpaid, might by law become a Lien upon all or a portion of
the Mortgaged Property or any of its other property;

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PROVIDED that none of the foregoing need be paid while the same is being
contested in good faith by appropriate proceedings diligently conducted in
accordance with the conditions of Section 12.11 below. Neither the Parent nor
the Company shall be a party to or bound by or obligated under any tax sharing
or similar agreement.

SECTION 12.7 ERISA.

(a) The Company and the ERISA Affiliates each shall take all actions
and fulfill all conditions necessary to maintain any and all Plans in
substantial compliance with applicable requirements of ERISA, the Code and
applicable foreign law until such Plans are terminated, and the liabilities
thereof discharged, in accordance with applicable law.

(b) No Pension Plan shall have any "accumulated funding
deficiency" (within the meaning of Section 412 of the Code), which deficiency
could have a Material Adverse Effect.

(c) The Company and the ERISA Affiliates each shall take and
fulfill all actions and conditions necessary to maintain, and shall maintain,
substantial compliance of any and all Plans established or maintained, or to
which contributions are made, by the Company and the ERISA Affiliates with the
requirements of ERISA and the rules and regulations adopted thereunder, in each
case as in effect at the time.

SECTION 12.8 TRANSACTIONS WITH AFFILIATES. Neither the Company, the
Parent nor any of the Subsidiaries shall enter into any transaction (including,
without limitation, the purchase, sale or exchange of property, the rendering of
any services or the payment of management fees) with any Affiliate except in the
ordinary course of, and pursuant to the reasonable requirements of, its
business, and in good faith and upon terms that are commercially reasonable to
the Company or the Parent, as applicable, directly or indirectly, and that are
no less favorable to the Company or the Parent, directly or indirectly, than it
would obtain in a comparable arm's-length transaction with a Person other than
an Affiliate.

SECTION 12.9 MERGER OR CONSOLIDATION. Neither the Parent nor the
Company shall, and each shall not permit any of its Subsidiaries to, merge into
or consolidate with any other Person or permit any other Person to merge into or
consolidate with it if, after giving effect to such merger or consolidation, a
Default or Event of Default will occur.

SECTION 12.10 INDEMNIFICATION.

(a) Except as provided in subsection (c) below, each of the Parent
and the Company shall defend, protect, indemnify and hold harmless you, your
directors, officers, employees, attorneys and agents and each Person, if any,
who controls you within the meaning of the Securities Act or the Exchange Act
(any and all of whom are referred to as the "Indemnified Party") against, and
shall protect, save and hold harmless each Indemnified Party from and against,
any and all claims, demands, loss, damage, liability (joint or several), expense
or cost (including all legal fees or other expenses reasonably incurred by any
Indemnified Party in connection with the preparation for or defense of any
pending or

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threatened claim, action or proceeding, whether or not resulting in any
liability) imposed on, incurred by or asserted against such Indemnified Party
(whether or not such Indemnified Party is a party thereto) under any applicable
federal or state law or otherwise caused by or arising out of, or allegedly
caused by or arising out of (i) the Mortgaged Property or any part thereof,
(ii) this Securities Purchase Agreement and any amendments, modifications,
consents or supplements hereto or any transaction contemplated hereby, other
than losses, claims, damages or liabilities resulting from any misrepresentation
made by you in Section 2 hereof, subject to subsection (c) below, (iii) the
other Agreements and any amendments, modifications, consents or supplements to
any thereof, or any action or inaction by the Company or the Parent in
connection with any thereof, (iv) the enforcement of any agreement, restriction
or legal requirement affecting the Mortgaged Property or any part thereof,
(v) any Default or Event of Default, or (vi) the design, financing, mortgaging,
construction, purchase, sale, acceptance, rejection, ownership, acquisition,
delivery, non-delivery, shipment, lease, sublease, rental, preparation,
possession, use, non-use, operation, condition, maintenance, repair,
restoration, modification, storage, transportation, transfer of title,
abandonment, return, or any application, disposition or transfer of all or any
part of the Mortgaged Property or the imposition of any Lien (or incurrence of
any liability to refund or pay over any amount as a result of such Lien) on the
Mortgaged Property or any interest therein other than Permitted Liens.

(b) The matters covered by the indemnification provided for in
subsection (a) above shall include, without limitation, any claim or penalty
arising from (i) violations of laws, or in tort (by application of the doctrine
of strict liability or otherwise), (ii) the negligence of any Indemnified Party,
(iii) latent or other defects, whether or not discoverable by such Indemnified
Party, the Company, the Parent or any other Person, (iv) loss of or damage to
any property or the environment, (v) violation of any Environmental Law or the
presence of any Hazardous Material or other waste on all or any portion of the
Mortgaged Property, (vi) death of or injury to any person and (vii) any claim
for patent, trademark or copyright infringement. In addition, each Indemnified
Party shall be entitled to indemnity hereunder whether such indemnity arises
because of an act or omission by such Indemnified Party or otherwise, whether or
not the claims giving rise to indemnity hereunder are also indemnified against
by any other Person under any other document, and whether or not the
transactions contemplated hereby are consummated.

(c) Notwithstanding any of the indemnities set forth above, each
of the Parent and the Company shall not indemnify any Indemnified Party for any
loss, damage, liability, cost or expense (i) arising from the bad faith, willful
misconduct or gross negligence of such Indemnified Party or (ii) resulting from
any untrue statement of a material fact contained in a registration statement,
prospectus, preliminary prospectus or any amendment or supplement thereto or any
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, to the extent that such untrue statement
or omission is contained in any information or affidavit furnished in writing by
an Indemnified Party.

(d) Promptly after receipt by an Indemnified Party of notice of
any claim, action or proceeding with respect to which an Indemnified Party is
entitled to indemnity

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hereunder, such Indemnified Party shall notify the Company or the Parent of such
claim or the commencement of such action or proceeding; PROVIDED that the
failure of an Indemnified Party to give notice as provided herein shall not
relieve the Company or the Parent of its obligations under this Section 12.10
with respect to such Indemnified Party, except to the extent that the Company or
the Parent is actually prejudiced by such failure. The Parent and the Company
shall assume the defense of such claim, action or proceeding and shall employ
counsel satisfactory to the Indemnified Party and shall pay the reasonable fees
and expenses of such counsel. Notwithstanding the preceding sentence, the
Indemnified Party shall be entitled, at the expense of the Company and the
Parent, to employ counsel separate from counsel for the Company and for any
other party in such action if the Indemnified Party reasonably determines that a
conflict of interest or other reasonable basis exists which makes representation
by counsel chosen by the Company not advisable. If an Indemnified Party (or any
of its officers, directors, employees or attorneys) appears as a witness in any
action or proceeding brought against the Company or the Parent in which an
Indemnified Party is not named as a defendant, each of the Parent and the
Company agrees to reimburse such Indemnified Party for all out-of-pocket
expenses incurred by it (including reasonable fees and expenses of counsel) in
connection with its appearing as a witness. The obligations of each of the
Parent and the Company under this Section 12.10 shall survive the payment or
prepayment of the Notes, the redemption of the Senior Preferred Stock and the
Class E Common Stock, the termination of this Securities Purchase Agreement and
the reconveyance of the Deeds of Trust.

SECTION 12.11 LIENS. The Company shall not create, incur or suffer to
exist any Lien on all or any portion of the Mortgaged Property other than
Permitted Liens. The Company shall pay, at or prior to maturity, all
obligations secured by or reducible to Liens which shall now or hereafter
encumber or appear to encumber the Mortgaged Property or any part thereof or
interest therein, including, without limitation, all claims for work or labor
performed, or materials or suppliers furnished, in connection with any work of
demolition, alteration, improvement of or construction upon all or any portion
of the Mortgaged Property. The Company shall have the right to contest in good
faith any such obligation or claim provided such contest shall be prosecuted
diligently and in a manner not prejudicial to the Mortgage Noteholders, and if
(a) a judgment adverse to the Company is obtained, such judgment shall be fully
paid or discharged within thirty (30) days after the entry of such judgment or
shall be appealed prior to the expiration of the period of time in which an
appeal must be filed and (b) a final, non-appealable judgment adverse to the
Company is obtained, such judgment shall be fully paid or discharged within
thirty (30) days after the entry of such judgment. Upon demand by the Mortgage
Noteholders, the Company shall defend, indemnify and hold the Mortgage
Noteholders harmless against any such obligation or claim so contested by the
Company, and upon demand by the Mortgage Noteholders, the Company shall make
suitable provision by payment to the Mortgage Noteholders or by posting a bond
or other security reasonably satisfactory to the Mortgage Noteholders for the
possibility that the contest will be unsuccessful, including, if the Mortgage
Noteholders request, a one-and-one half times bond with respect to mechanics' or
materialmen's Liens, if available. Such provision shall be made within fifteen
(15) days after demand therefor and, if made by payment of funds to the Mortgage
Noteholders, the amount so deposited shall be disbursed in accordance with the
resolution of the contest either to the Company or the adverse claimant. If the
Company fails to post a suitable bond or other acceptable security as provided,
the Mortgage Noteholders

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may remove or pay such Lien at the Company's expense. Notwithstanding anything
in the foregoing to the contrary, if the Lien to be contested is senior to the
Lien of the applicable Deed of Trust, the Company shall, within ten (10) days
after the Mortgage Noteholders' demand, remove or pay such Lien, and, if the
Company shall fail to do so, the Mortgage Noteholders may do so at the Company's
expense, and any amount so advanced by the Mortgage Noteholders shall be secured
by the Deeds of Trust.

SECTION 12.12 SUBSIDIARY DIVIDENDS. Except as expressly permitted
herein, each of the Parent and the Company shall not and shall not permit any
Subsidiary to enter into any agreement, instrument or other document which
prohibits or restricts in any way the payment of dividends or other
distributions on or with respect to the capital stock of any Subsidiary if the
effect thereof is (or could reasonably be expected) to reduce the amount of cash
payments to be made (or permitted to be made), directly or indirectly, to the
Parent by an amount that exceeds (or could reasonably be expected to exceed)
$1,656,000 during any period of twelve consecutive months.

SECTION 12.13 DIVIDENDS. Without the prior written consent of the
holders of 51% of the aggregate outstanding principal amount of the Mortgage
Notes issued and outstanding, each of the Parent and the Company shall not (a)
declare or pay any dividend or other distribution, direct or indirect, in
respect of any shares of the Common Stock of the Parent, the Company or any
Subsidiary or (b) purchase, redeem, retire or otherwise acquire any shares of
Common Stock of the Parent, the Company or any Subsidiary (or of any warrants,
rights or options evidencing a right to purchase or acquire any such shares).
Dividends may be paid on any shares of Senior Preferred Stock or Junior
Preferred Stock if (i) permitted by applicable law, (ii) the ratio calculated
pursuant to Section 12.21 is at least 1.15/1.00 and (iii) no Default or Event of
Default exists.

SECTION 12.14 TAX CONSOLIDATION. Each of the Parent and the Company
shall not and shall not permit any of its Subsidiaries to file or consent to the
filing of any consolidated income tax return with any Person other than a
Subsidiary.

SECTION 12.15 ENVIRONMENTAL LAW COMPLIANCE.

(a) HAZARDOUS SUBSTANCES. Each of the Parent and the Company
shall at all times comply and cause each Subsidiary to comply, in all material
respects, with all Environmental Laws applicable to it, except to the extent
that the failure to comply therewith is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect and indemnify, pay and hold
each holder of Securities harmless from and against any and all losses, costs
(including reasonable attorneys' fees), liabilities and damages whatsoever
incurred by such holder of Securities by reason of (i) any liability of the
Company, the Parent or any of the Subsidiaries under any applicable
Environmental Laws, (ii) any violation of any applicable Environmental Laws for
which the Company, the Parent or any of the Subsidiaries is liable or which is
related to any real estate or other facility owned, leased or operated by the
Company, the Parent or any of the Subsidiaries or (iii) the imposition of any
governmental Lien for the recovery of environmental cleanup or response costs
expended by reason of any such liability or violation.

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(b) CLEANUP ORDERS; FURTHER ASSURANCE. Each of the Parent and the
Company shall provide each holder of Securities promptly with a copy of any
notice received by the Parent, the Company or any Subsidiary from any
governmental agency stating that the Parent, the Company or such Subsidiary has
become liable for the cost of investigating, removing or remediating Hazardous
Materials or subject to a cleanup order or decree, or a fine or penalty issued
or imposed, by an agency having jurisdiction over the Company, the Parent or any
such Subsidiary if the Company or the Parent believes or reasonably should
believe that the matter that is the subject of such notice is, individually or
in the aggregate, reasonably likely to have a Material Adverse Effect.

(c) The Company shall deliver to each holder of Securities
semiannually (i) a report of the Company's Chief Financial Officer regarding
(A) the status of the removal of the underground storage tanks at the Real
Property Collateral located in Fresno, California, and (B) the monitoring of the
groundwater in connection with the Chateau Fresno Landfill, together with
(ii) copies of all engineering reports of Geraghtey and Miller Development
Company that the Company receives with respect to the Chateau Fresno Landfill.
The Company further agrees that, with respect to all of its properties, it will
engage in such other environmental monitoring and, if necessary, remediation, as
is prudent under the circumstances.

SECTION 12.16 INSURANCE. The Company shall maintain, or cause to be
maintained, in full force and effect, with such insurers, amounts, coverages and
forms reasonably satisfactory to and approved by the Mortgage Noteholders,
insurance as follows:

(a) REQUIRED INSURANCE COVERAGES AND LIMITS. The Company agrees
that it shall at its own cost and expense and at all times during the term carry
and maintain or cause to be carried and maintained:

(i) CASUALTY INSURANCE -- "all risk" property insurance on the
Mortgaged Property in any amount equal to the replacement cost of the
Mortgaged Property, PROVIDED that flood and earthquake insurance shall be
subject to availability on commercially practicable terms;

(ii) LIABILITY INSURANCE -- comprehensive general liability
insurance (including, without limitation, blanket contractual, personal
injury, XCU hazards, products/completed operations, independent
contractors, sudden and accidental pollution liability, gradual pollution
liability, "failure to supply" and broad form property damage) applicable
to the Mortgaged Property in such amounts as from time to time are usually
carried by corporations similar to the Company owning or leasing and
operating similar properties in similar locations, PROVIDED that gradual
pollution liability, sudden and accidental pollution liability and "failure
to supply" shall be subject to availability on commercially practicable
terms; and PROVIDED FURTHER that the Company shall be required to carry and
maintain liability insurance applicable to the Mortgaged Property in a
minimum amount equal to $6,000,000;

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(iii) FIDELITY BONDS -- fidelity bonds covering all employees of the
Company who have responsibility for handling funds of the Company in the
minimum amount of $25,000 or in such greater amount as is usually carried
by corporations similar to the Company owning or leasing and operating
similar properties;

(iv) WORKER'S COMPENSATION -- worker's compensation insurance with
respect to employees of the Company sufficient to meet the statutory
requirements of the State of California; and

(v) OTHER INSURANCE -- such other insurance with respect to its
property and business of such a nature, with such terms and in such
amounts, as a reasonably prudent person would maintain with respect to
similar properties and a similar business, and, in any event, shall
maintain insurance on all its property of a character usually insured by
corporations engaged in the same or a similar business similarly situated
against loss or damage of the kinds and in the amounts customarily insured
against and for by such corporations.

All the foregoing insurance policies shall be subject to such deductible amounts
and retentions as are usual and customary for corporations similar to the
Company owning or leasing and operating similar properties, but in no event
greater than reasonably acceptable to the Noteholders. In addition, the Company
shall require worker's compensation and liability coverage by contractors and
major subcontractors at all times that any of the foregoing shall be performing
services on all or any portion of the Mortgaged Property.

(b) ADDITIONAL INSUREDS; LOSS PAYEES. All insurance hereunder
shall name the Mortgage Noteholders and such other parties as the Noteholders
may designate as additional insureds as their respective interests may appear
(in the case of insurance required by clauses (a)(iii) - (v), to the extent
permitted under applicable law and available from the respective insurers). All
insurance referred to in clause (a)(i) above shall name the Mortgage Noteholders
as loss payee. The Company agrees to effect all insurance provided for in this
Section 12.16 with the insurance companies presently providing insurance to the
Company specified in Item 2.16 of Schedule II or such other insurers as are
reasonably acceptable to the Mortgage Noteholders. All such policies referred
to in clauses (a)(i) and (a)(ii) and such other policies as to which the
Mortgage Noteholders are named as an additional insured or loss payee, as the
case may be, shall (i) provide that the same shall not be cancelled, materially
modified or terminated without at least thirty (30) days' (or twenty (20) days'
in the case of nonpayment of premium) prior written notice to each insured and
each loss payee named therein, (ii) provide for at least thirty (30) days' prior
written notice to each insured and each loss payee named therein of the date on
which such policies shall terminate by lapse of time if not renewed,
(iii) contain a breach-of-warranty clause providing that the respective
interests of the Mortgage Noteholders or any other additional insured or loss
payee shall not be invalidated by any action or inaction of the Company or any
other Person, (iv) insure the Mortgage Noteholders and any other additional
insured or loss payee regardless of any breach or violation by the Company or
any other Person of any warranties, declarations, or conditions contained in the
policies related to such insurance, (v) except for the insurance referred to in
clause (a)(iv) above, provide that the insurer thereunder waives all right of
subrogation against the Mortgage Noteholders and

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waives any right of set-off or counterclaim and any other right of deduction
whether by attachment or otherwise, (vi) be primary without right of
contribution from any other insurance carried by or on behalf of any Mortgage
Noteholder with respect to any interest in the Mortgaged Property, (vii) provide
that no person other than the Company shall have any liability for any premiums
with respect thereto and (viii) provide that inasmuch as the policies are
written to cover more than one insured, all terms and conditions, insuring
agreements and endorsements, with the exception of limits of liability, shall
operate in the same manner as if there were a separate policy covering each
insured. No Mortgage Noteholder shall, by reason of accepting, rejecting,
approving or obtaining insurance incur any liability for the existence,
nonexistence, form or legal sufficiency thereof, the solvency of any insurer, or
the payment of any losses.

(c) CERTIFICATE. On or prior to the Closing Date, and thereafter
not less than thirty (30) days prior to the expiration dates of the expiring
policies required pursuant to this Section 12.16, the Company shall deliver to
you certificates of insurance issued by the insurers thereunder or by an
insurance broker authorized to bind such insurers evidencing the insurance
maintained pursuant to this Section 12.16.

(d) PERFORMANCE BY NOTEHOLDERS. If the Company shall fail to
maintain insurance as herein provided, any Noteholder may at its option, but
without obligation, provide such insurance and, in such event, the Company
shall, upon demand from time to time, reimburse such Noteholder for the cost
thereof, together with interest on such cost from the date of payment of such
cost to the date of reimbursement.

(e) PROCEEDS. The amount collected under any such insurance
policies maintained pursuant to this Section 12.16 shall be distributed or
applied in accordance with the terms and provisions of this Securities Purchase
Agreement and the Deeds of Trust.

(f) SEPARATE INSURANCE. Nothing in this Section 12.16 shall be
construed to prohibit any Noteholder from insuring at its own expense its
interest therein, and any insurance so maintained shall not provide for or
result in a reduction of the coverage or the amounts payable under any of the
insurance required to be maintained by the Company under this Section 12.16 the
proceeds of which will be applicable against any obligation to indemnify
hereunder.

SECTION 12.17 FUNDED DEBT. Neither the Parent nor the Company shall,
and each shall not permit any of the Subsidiaries to, directly or indirectly,
expressly or by operation of law, create, incur, issue, assume, guarantee or in
any manner become or remain liable, contingently or otherwise, in respect of, or
suffer to exist, any Funded Debt, except for (a) Funded Debt evidenced by the
Mortgage Notes, (b) the Exchange Notes and (c) Permitted Funded Debt. As used
in this Section 12.17, "PERMITTED FUNDED DEBT" shall mean: (i) Senior Debt,
(ii) Indebtedness to the Parent and/or Affiliates to the extent the aggregate
principal amount of such Indebtedness does not exceed $1,300,000 at any time
outstanding, (iii) Indebtedness secured by property owned by the Company and/or
its Subsidiaries other than the Mortgaged Property, provided that, after giving
effect to such Indebtedness, the Parent and the Company are in compliance with
Section 12.18 hereof, (iv) Capitalized Lease Obligations to the extent not
exceeding

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$500,000 at any time, (v) other Indebtedness approved by the holders of 51% of
the aggregate outstanding principal amount of the Mortgage Notes and the holders
of 51% of the aggregate outstanding principal amount of the Exchange Notes and
(vi) other Indebtedness of the Company and/or its Subsidiaries not provided for
in clauses (i) through (v) above provided that, after giving effect to such
Indebtedness, the Parent and the Company are in compliance with Section 12.18
hereof; and PROVIDED FURTHER that the foregoing Indebtedness shall not be
considered "Permitted Funded Debt," if (A) a Default or Event of Default shall
have occurred and be continuing at the time such Indebtedness is incurred or
(B) the incurrence of such Indebtedness would otherwise result in a Default or
Event of Default.

SECTION 12.18 CONSOLIDATED FUNDED DEBT RATIO. Neither the Parent nor
the Company shall permit the ratio of Consolidated Funded Debt (other than any
Indebtedness under the Working Capital Facility or Indebtedness that is
specifically by its terms non-recourse to the Company and the Parent) to
Consolidated Total Capitalization, stated as a percentage, to exceed 68% for
each Fiscal Year ended 1995 through 1999 and 50% for each Fiscal Year
thereafter.

SECTION 12.19 CONSOLIDATED NET WORTH. Neither the Parent nor the
Company shall permit Consolidated Net Worth to be less than the sum of
(a) $16,000,000 plus (b) aggregate Consolidated Net Income for all Fiscal Years
ending after 1994 minus (c) Permitted Dividends paid after the Closing Date.

SECTION 12.20 WORKING CAPITAL. Neither the Parent nor the Company
shall permit Consolidated Current Assets less Consolidated Current Liabilities
to be less than $5,000,000 at any time.

SECTION 12.21 CONSOLIDATED FIXED CHARGE COVERAGE. Neither the Parent
nor the Company shall permit the following ratio to be less than 1.15/1.00 for
any four successive Fiscal Quarters ending with the Fiscal Quarter ended June
30, 1996, 1.25/1.00 for any subsequent four successive Fiscal Quarters ending
with the Fiscal Quarter ended June 30, 1998, and 1.50/1.00 for any four
successive Fiscal Quarters thereafter:

(a) the sum of (i) Consolidated Net Income for such period plus
(ii) the aggregate amounts deducted in determining such Consolidated Net Income
in respect of (A) Consolidated Interest Expense for such period, (B) income and
other taxes measured by income or profits for such period, (C) Consolidated
Depreciation Expense for such period and (D) Consolidated Operating Lease
Payments for such period less (iii) the Mandatory Capital Expenditure Amount for
such period

(b) the sum of (i) Consolidated Interest Expense for such period
plus (ii) Consolidated Operating Lease Payments for such period plus (iii) the
aggregate amount of all payments of principal for Funded Debt for such period.

SECTION 12.22 LIMITATION ON REPAYMENT OF AFFILIATE LOANS. Neither the
Parent nor the Company shall, and each shall not permit any Subsidiary to, make
any payment on any

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Indebtedness for Money Borrowed from any officer, shareholder or Affiliate if,
after giving effect to such payment, the Mortgage Notes would be in default in
any respect.

SECTION 12.23 MANDATORY CAPITAL EXPENDITURES. The Company shall make
capital improvements or repair and maintenance on the Mortgaged Property
consistent with prudent business practices, PROVIDED that in any event the
Company shall expend on capital improvements in each Fiscal Year an aggregate
amount of not less than $500,000 (the "MANDATORY CAPITAL EXPENDITURE AMOUNT").

SECTION 12.24 SALE OR SUBSTITUTION OF MORTGAGED PROPERTY. Subject to
the terms of the Deeds of Trust, the Company shall not, voluntarily or by
operation of law, sell or otherwise transfer any of the Mortgaged Property;
PROVIDED that the Company may replace machinery, equipment and other personal
property which is Mortgaged Property with property having a fair market value,
condition and utility at least equal to that of the property replaced if the
Noteholders will have a first priority security interest in the replacement
property.

SECTION 12.25 ADDITIONAL EQUITY; DILUTION. The Parent shall not sell
or issue (a) any shares of Senior Preferred Stock other than to then existing
holders of Senior Preferred Stock; (b) any shares of Class E Common Stock other
than to then existing holders of Class E Common Stock or (c) additional equity
interests in the Parent unless the dilution of the holders of Class E Common
Stock is no greater than the dilution of the other holders of Common Stock. The
Company shall not sell or issue any additional equity securities of the Company
or its Subsidiaries.

SECTION 12.26 TRANSFER AND SALE OF ASSETS. Neither the Company, the
Parent nor any Subsidiary shall, directly or indirectly, in a single transaction
or a series of transactions, sell, lease, transfer, abandon or otherwise dispose
of or suffer to be sold, leased, transferred, abandoned or otherwise disposed
of, all or any part of its assets other than in the ordinary course of its
business; PROVIDED that the Company, the Parent or any Subsidiary may sell,
lease, transfer, abandon or otherwise dispose of any of its assets so long as:
(a) the aggregate book value or fair market value, whichever is greater
(determined with respect to any asset at the time of sale, lease, transfer,
abandonment or disposition thereof), of all such assets of the Company, the
Parent and its Subsidiaries sold, leased, transferred, abandoned or otherwise
disposed of (i) during any Fiscal Year shall not exceed 10% of Consolidated
Assets as at the end of the most recently completed Fiscal Year and (ii) since
June 30, 1994, shall not exceed 20% of Consolidated Assets as at the end of the
Fiscal Year ended on such date; (b) immediately after giving effect to the
transaction, the Company shall be permitted by the provisions of Section 12.17
and Section 12.18 hereof to incur at least $1.00 of additional Funded Debt; and
(c) immediately before and after giving effect to the transaction, no Default or
an Event of Default shall exist.

SECTION 12.27 REPLACEMENT OF PERSONAL PROPERTY COLLATERAL. The Company
and its Subsidiaries shall not substitute or replace Personal Property
Collateral with other Personal Property Collateral unless (a) the value of the
replacement Personal Property Collateral exceeds the value of the replaced
Personal Property Collateral and (b) the Noteholders will

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have a perfected security interest of first priority in such replacement
Personal Property Collateral.

SECTION 12.28 OWNERSHIP. The Parent shall at all times own at least
90% of the outstanding capital stock of the Company, unless the Parent shall
have merged with and into the Company.

SECTION 12.29 RESIDENTIAL FACILITIES. All residential facilities
located on the Real Property Collateral will be occupied only by employees of
the Company under license agreements that terminate upon such employee's
termination of employment.

SECTION 13. EXPENSES.

Whether or not the Securities shall be sold or this Securities Purchase
Agreement shall be terminated, each of the Parent and the Company agrees to pay,
and to hold you harmless against liability for, all reasonable costs and
expenses relating to this Securities Purchase Agreement, any other documents
prepared in connection herewith and the Securities and to any modification,
amendment, alteration or enforcement of this Securities Purchase Agreement, any
additional documents prepared in connection herewith, the Securities or any
agreement or instrument contemplated hereby (whether or not the same shall have
come into effect), including, without limitation:

(a) the reasonable cost of preparing and reproducing this
Securities Purchase Agreement, any other documents prepared in connection
herewith, the Securities and every instrument of modification, amendment or
alteration hereof or thereof;

(b) the reasonable fees and disbursements of your special counsel,
which fees and disbursements the Company or the Parent shall pay on the Closing
Date to the extent reflected on any invoices delivered on or prior to such date,
and of all counsel for the Parent and the Company;

(c) the cost of delivering to your home office, to your depository
or as you may otherwise instruct in writing, insured to your reasonable
satisfaction, the Securities purchased by you on the Closing Date;

(d) all reasonable costs and expenses (including, without
limitation, reasonable legal fees and any disbursements and other out-of-pocket
expenses) relating to any modifications, amendments, waivers or consents
involving the provisions of this Securities Purchase Agreement, the Agreements,
any other documents prepared in connection herewith, or the Securities or
relating to the enforcement of this Securities Purchase Agreement, the
Agreements, or any other documents prepared in connection herewith or the
Securities;

(e) the broker's or finder's fees of the Agent in connection with
the sale of the Securities, subject to any agreement therewith;

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(f) the fees of Standard & Poor's CUSIP Service Bureau required to
be paid in connection with the assignment of a private placement number by it
with respect to the Senior Preferred Stock, the Class E Common Stock and the
Exchange Notes; and

(g) any issuance or similar taxes payable by the Company or the
Parent pursuant to Section 14.3 hereof.

The obligations of each of the Parent and the Company under this Section 13
shall survive the payment or prepayment of the Notes, the redemption of the
Senior Preferred Stock and the Class E Common Stock, the termination of this
Securities Purchase Agreement and the reconveyance of the Deeds of Trust.

SECTION 14. CERTAIN SPECIAL RIGHTS.

SECTION 14.1 HOME OFFICE PAYMENT.

(a) Subject to the other provisions of the Certificate of
Incorporation, the Mortgage Notes, the Senior Preferred Stock, the Class E
Common Stock, or, when issued, the Exchange Notes, the Parent or the Company, as
applicable, shall punctually pay in immediately available funds by 12:00 P.M.
New York City time on the date payment is due all amounts payable to you with
respect to any Mortgage Notes, Senior Preferred Stock, Class E Common Stock or,
when issued, the Exchange Notes held by you or your nominee (without the
necessity for any presentation or surrender thereof or any notation of such
payment thereon other than upon payment of the Liquidation Value thereof in the
case of Senior Preferred Stock) in the manner and at the address for such
purpose specified below your name in SCHEDULE I hereto, or at any other address
within the continental United States as you may from time to time direct in
writing. You agree that, as promptly as practicable after the payment or
prepayment in whole of any Mortgage Note held by you or your nominee and receipt
by you of a written request from the Company to surrender such Mortgage Note to
the Company for cancellation, you shall surrender such Mortgage Note at the
office of the Company maintained pursuant to Section 12.1 hereof. You agree
that if you sell, assign or transfer any Mortgage Note, you shall, prior to any
such sale, assignment or transfer, make a proper notation thereon of the amount
of principal paid thereon as of the date of such sale, assignment or transfer.

SECTION 14.2 DELIVERY EXPENSES. If you shall surrender any
certificate representing any Mortgage Note, Senior Preferred Stock, or Class E
Common Stock to the Company or the Parent, as applicable, pursuant to this
Securities Purchase Agreement, or if the Company or the Parent, as applicable,
shall issue any new Security pursuant to this Securities Purchase Agreement, the
Company or the Parent, as applicable, shall pay all reasonable costs and
expenses of delivery of the surrendered Security and any Security or Securities
issued in exchange or replacement for, or on registration of transfer of, the
surrendered Security or any such new Security, as the case may be, in each case
insured to your reasonable satisfaction. The obligations of the Company and the
Parent under this Section 14.2 shall survive the payment or prepayment of the
Notes, the redemption of the Senior Preferred Stock and the Class E

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Common Stock, the termination of this Securities Purchase Agreement and the
reconveyance of the Deeds of Trust.

SECTION 14.3 ISSUANCE TAXES. The Company or the Parent, as
applicable, shall pay all issuance and similar taxes, if any, in connection with
the execution and delivery of this Securities Purchase Agreement, the issuance
and sale of the Securities by the Company or the Parent and any modification of
this Securities Purchase Agreement or the Securities issued by it, and shall
save you and any subsequent holder of the Securities harmless, without
limitation as to time, against any and all liabilities (including, without
limitation, any interest or penalty for nonpayment or delay in payment, or any
income taxes paid by you in connection with any reimbursement by the Company or
the Parent of any such taxes paid by you) with respect to all such taxes. The
obligations of the Company and the Parent under this Section 14.2 shall survive
the payment or prepayment of the Notes, the redemption of the Senior Preferred
Stock and the Class E Common Stock, the termination of this Securities Purchase
Agreement and the reconveyance of the Deeds of Trust.

SECTION 15. INFORMATION TO BE FURNISHED TO
HOLDERS OF SECURITIES.

SECTION 15.1 FINANCIAL STATEMENTS OF THE COMPANY. The Parent or the
Company shall deliver to each holder of Securities one (1) copy of the
following:

(a) as soon as practicable and, in any case, within ninety (90)
days after the close of each Fiscal Year of the Parent, the audited consolidated
financial statements of the Parent and its Subsidiaries consisting of the
audited consolidated balance sheet of the Parent and its Subsidiaries as of the
end of such Fiscal Year and the audited consolidated statements of income,
changes in stockholders' equity and cash flows of the Parent and its
Subsidiaries for such Fiscal Year, setting forth in each case, in comparative
form, the figures for the preceding Fiscal Year, all in reasonable detail, such
consolidated financial statements to be accompanied by an opinion thereon of
Price Waterhouse or another firm of independent certified public accountants of
recognized national standing in the United States, which opinion (i) shall be
unqualified as to application of GAAP and unqualified as to audit scope, and
(ii) shall state that (A) the examination of such accountants in connection with
such financial statements has been made in accordance with generally accepted
auditing standards and, accordingly, included such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances, and (B) such financial statements present fairly the financial
position of the Parent and its Subsidiaries at such date and the results of
operations and cash flows thereof for such period and have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as otherwise disclosed therein with respect to changes in application in
which such accountants concur), and also accompanied by management's discussion
and analysis of variances;

(b) as soon as practicable and, in any case, within
forty-five (45) days after the end of each of the first three (3) Fiscal
Quarters in each Fiscal Year of the Parent, the unaudited consolidated financial
statements of the Parent and its Subsidiaries, consisting of the

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unaudited consolidated balance sheet of the Parent and its Subsidiaries as of
the end of such Fiscal Quarter and the unaudited consolidated statements of
income, changes in stockholders' equity and cash flows of the Parent and its
Subsidiaries for such Fiscal Quarter and for the Fiscal Year to date, setting
forth in each case in comparative form, the figures for the corresponding
periods of the preceding Fiscal Year, all in reasonable detail and certified by
the chief financial officer or the treasurer of the Parent as being a complete
and correct copy of the Parent's financial statements which have been prepared
in accordance with generally accepted accounting principles consistently applied
(except as otherwise disclosed therein) and which present fairly the financial
position of the Parent and its Subsidiaries and results of operations and cash
flows thereof subject, in each case, to changes resulting from year-end audit
adjustments, together with management's discussion and analysis of variances;

(c) as soon as practicable and, in any case, within thirty (30)
days after the end of each calendar month, the unaudited consolidated financial
statements of the Parent and its Subsidiaries, consisting of the unaudited
consolidated balance sheet of the Parent and its Subsidiaries as of the end of
such calendar month and the unaudited consolidated statements of income and cash
flows of the Parent and its Subsidiaries for such calendar month and for the
Fiscal Year to date and the figures for the corresponding periods of the
preceding Fiscal Year, all in reasonable detail and prepared and certified by
the chief financial officer or the treasurer of the Parent as being a complete
and correct copy of the Parent's financial statements which have been prepared
in accordance with generally accepted accounting principles consistently applied
(except as otherwise disclosed therein and except to the extent that footnotes
may be omitted or condensed) and which present fairly the financial position of
the Parent and its Subsidiaries and results of operations and cash flows thereof
subject, in each case, to changes resulting from year-end audit adjustments.

SECTION 15.2 OFFICER'S CERTIFICATES. Each set of financial statements
delivered pursuant to subsection (a) or (b) of Section 15.1 hereof shall be
accompanied by a certificate, signed by the president, the chief financial
officer or the treasurer of the Parent in such capacity, stating, in the opinion
of such officer and to the best of his or her knowledge and belief that, upon
the date of such certificate or at any time since the beginning of the period
covered by such financial statements, there was no Default or Event of Default
with respect to any of the provisions of this Securities Purchase Agreement or
the Mortgage Notes; PROVIDED that, if any such Default or Event of Default, as
the case may be, shall have occurred, such certificate shall so specify and
shall state whether such Default or Event of Default has been cured or is
continuing and, if continuing, what steps the Parent or the Company has taken or
is taking or proposes to take to cure such Default or Event of Default and an
estimate of the time necessary to cure such Default or Event of Default. Each
set of financial statements delivered pursuant to subsection (a) of Section 15.1
hereof shall be accompanied by a certificate, signed by the president, the chief
financial officer or the treasurer of the Parent in such capacity, setting forth
in reasonable detail the calculations made during such period and as of the end
of such period in determining compliance with the provisions of Sections 12.17,
12.18, 12.19, 12.20, 12.21, 12.22, 12.23 and 12.26 hereof. Each set of
financial statements delivered pursuant to subsection (b) of Section 15.1 hereof
shall be accompanied by a certificate, signed by the president, the chief
financial officer or the treasurer of the Parent in such capacity, setting forth
in reasonable detail the calculations made during such period and as of the end
of such period in

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determining compliance with the provisions of Sections 12.17, 12.19, 12.20,
12.21 and 12.23 hereof.

SECTION 15.3 ACCOUNTANTS' CERTIFICATES. Each set of financial
statements delivered pursuant to subsection (a) of Section 15.1 hereof shall be
accompanied by a report of the independent certified public accountants who
shall have reported on such financial statements (a) stating that such
accountants have read this Securities Purchase Agreement insofar as is necessary
for such report and that, in making the examination necessary to express an
opinion on such financial statements, such accountants have obtained no
knowledge of any condition or event pertaining to accounting or financial
matters, or the consolidated financial condition of the Parent and its
Subsidiaries, that then constitutes a Default or an Event of Default, or, if any
Default or Event of Default then exists, specifying the nature and period of
existence thereof and (b) stating that such accountants have examined the
Officer's Certificate delivered in connection with such financial statements
and, based upon their examination, nothing has come to their attention which
causes them to believe that the information contained therein is not correct or
that the matters set forth therein relating to determining compliance with the
provisions of Section 12 hereof have not been properly stated in accordance with
the terms of this Securities Purchase Agreement.

SECTION 15.4 NOTICE OF CERTAIN EVENTS AND CONDITIONS. Each of the
Parent or the Company shall give prompt written notice to each holder of
Securities of the following:

(a) any condition or event which constitutes a Default or an Event
of Default (such notice shall in any event be given within five (5) Business
Days after any officer of the Parent or the Company shall have knowledge of such
event or condition.);

(b) upon the Parent's or the Company's knowledge, any default or
event of default (whether by the Company, the Parent or any other party) under
any other agreement to which the Company or the Parent is a party, if such
default or event of default would cause, or in the future may cause, a Material
Adverse Effect;

(c) upon the Company's knowledge, any default or event of default
under any agreement relating to all or a portion of the Mortgaged Property to
which the Company is a party;

(d) any (i) ERISA Termination Event; (ii) "prohibited transaction"
(within the meaning of Section 4975 of the Code or Section 406 of ERISA) with
respect to any Plan maintained by the Parent, the Company or any of its
Subsidiaries, other than one to which an exemption applies; (iii) failure to
make a timely contribution to any Plan, if such failure has given rise to a Lien
imposed upon the Parent, the Company or any of its Subsidiaries under
Section 412(n) of the Code; or (iv) actual, asserted or alleged violation of
ERISA or the Code that, with respect to any of the events set forth in the
foregoing clauses (i) through (iv), is reasonably likely to result in the
imposition of a tax or other penalty on the Parent, the Company or any
Subsidiary in connection with any Plan that would result in a Material Adverse
Effect, including, when known, a description of any action taken by the Internal
Revenue Service, the U.S. Department of Labor or the PBGC with respect thereto;

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(e) the institution of any suit, action or proceeding (i) against
the Company, the Parent or any Subsidiary which is reasonably likely to have a
Material Adverse Effect, (ii) affecting all or a portion of the Mortgaged
Property in which the amount involved exceeds $1,000,000 or in which injunctive
or similar relief is sought or (iii) between the Company or the Parent and any
governmental authority (such notice shall in any event be given within
thirty (30) days after any officer of the Company or the Parent shall have
knowledge of such event or condition.);

(f) any claim exceeding $250,000 made under any insurance policy
with respect to all or a portion of the Mortgaged Property; and

(g) since the date hereof, to the knowledge of the Company or the
Parent, any Material Adverse Effect and any material adverse change in or to the
Mortgaged Property or any portion thereof.

Each notice pursuant to this Section 15.4 shall be in the form of an Officer's
Certificate of the Company or the Parent, as applicable, specifying (A) the
nature and period of existence of the particular event, (B) what action the
Company or the Parent has taken or is taking or proposes to take with respect
thereto and (C) if appropriate, an estimate of the time necessary to cure such
condition or event.

SECTION 15.5 OTHER INFORMATION. Each of the Parent or the Company
shall deliver to each holder of any Security the following:

(a) promptly after the submission thereof to the Parent, as the
case may be, copies of any detailed reports (including the auditors' comment
letter to management, if any such letter is prepared) submitted to the Parent by
its independent auditors in connection with each annual or interim audit of the
accounts of the Parent made by such accountants;

(b) promptly upon distribution thereof, copies of all financial or
other statements (including proxy statements), reports and notices as the
Company or the Parent shall send to any class of its shareholders, any of its
bank lenders or any holder of any of its Indebtedness for Money Borrowed;

(c) promptly upon the formation or the acquisition thereof, notice
of the formation or acquisition, as the case may be, of any new Subsidiary of
the Parent or the Company;

(d) at any time that the Parent is not subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act, promptly upon
the written request of the holder of any Mortgage Note, Senior Preferred Stock,
or Class E Common Stock issued upon the exercise thereof),(i)(A) a brief
statement of the nature of the business of the Parent and its Subsidiaries and
the products and services they offer and (B) the Parent's most recent balance
sheet and profit and loss and retained earnings statements, together with
similar financial statements for its two (2) preceding Fiscal Years, in each
case audited by an independent certified public accountant to the extent
reasonably available; the most recent balance sheet to

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be as of a date less than sixteen (16) months prior to the date of such request
and the profit and loss and retained earnings statements to be for the
twelve (12) months preceding the date of such balance sheet and, if such balance
sheet is not as of a date less than six (6) months before the date of such
request, it shall be accompanied by additional unaudited statements of profit
and loss and retained earnings for a period from the date of such balance sheet
to a date less than six (6) months before the date of such request, and
(ii) such other information as shall then be required to permit a resale of such
Securities by such holder pursuant to Rule 144A of the Securities Act (or any
superseding rule providing an exemption from registration under the Securities
Act for resales to Qualified Institutional Buyers); PROVIDED that, if such
request shall so indicate, the statement and financial statements or other
information shall be delivered to any named prospective purchaser of such
Securities as well as to the requesting holder, so long as the request states
that such holder reasonably believes such prospective purchaser to be a
Qualified Institutional Buyer;

(e) promptly, and in any event within ten (10) days after
transmission thereof, copies of all material press releases and other statements
made available generally by the Parent or any of its Subsidiaries to the public
concerning material developments in the business, earnings, prospects,
properties or condition (financial or other) of the Parent or any of its
Subsidiaries;

(f) prompt notice of any proposed amendment, modification or
supplement to the charter or bylaws of the Parent or the Company at least
fifteen (15) days prior to the proposed execution and delivery thereof by the
shareholders; and

(g) promptly upon request therefor, such other data, filings and
information concerning the Parent, the Company or any Subsidiary as any holder
of Mortgage Notes, Senior Preferred Stock, or Class E Common Stock that is a
Purchaser or an Institutional Investor or as any holder of a Mortgage Note may
from time to time reasonably request.

SECTION 16. INTERPRETATION OF AGREEMENT AND SECURITIES.

SECTION 16.1 DEFINITIONS. Except as the context shall otherwise
require, the following terms shall have the following meanings for all purposes
of this Securities Purchase Agreement (the definitions to be applicable to both
the singular and the plural form of the terms defined, where either such form is
used in this Securities Purchase Agreement):

"ACQUISITION" shall mean the purchase of at least 90% of the
outstanding capital stock of the Company by the Parent.

"AFFILIATE", with respect to any Person, shall mean (a) any director,
officer or employee of such Person, (b) any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person, and (c) any Person beneficially owning or holding 10% or more of
the Voting Stock of such Person or any corporation of which such Person
beneficially owns or holds, in the aggregate, 10% or more of the Voting Stock;
PROVIDED that neither you nor any Person directly or indirectly controlled by
you nor

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any other Person which is an institution shall be deemed to be an
Affiliate of the Parent, the Company or any Subsidiary solely by reason of
ownership of the Mortgage Notes, Senior Preferred Stock, Class E Common Stock or
other securities issued in exchange for any of such Securities or by reason of
having the benefits of any agreements or covenants of the Parent or the Company
contained in this Securities Purchase Agreement. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise. The term "AFFILIATE", when
used herein without reference to any Person, shall mean an Affiliate of the
Company of the Parent.

"AGENT" shall mean Lazard Freres & Co.

"AGREEMENTS" shall have the meaning set forth in Section 2.2(b).

"ASSETS", with respect to any Person, shall mean, as of the date of
any determination thereof, all assets of such Person determined in accordance
with generally accepted accounting principles applied on a consistent basis LESS
depreciation, depletion, obsolescence, amortization and all other reserves
properly established in accordance with generally accepted accounting principles
except (a) treasury stock of such Person, (b) cash set apart and held in any
sinking fund or similar or analogous fund for the purpose of redeeming or
otherwise retiring stock of such Person, and (c) any write-up of the book value
of any assets of such Person resulting from revaluation thereof subsequent to
(but not in connection with) the Acquisition.

"BENEFICIALLY OWNED" shall mean beneficial ownership of capital stock
determined in the manner set forth in Rule 13d-3 of the Securities Exchange Act
of 1934, as amended.

"BOARD" shall mean the Board of Directors of the Company and the
Parent.

"BUSINESS DAY" shall mean any day on which commercial banks are not
authorized or required to close in New York, New York or Boston, Massachusetts.

"CAPITAL LEASE" shall mean any lease which is required to be
capitalized on a balance sheet of the lessee in accordance with generally
accepted accounting principles or for which the amount of the asset and
liability thereunder as if so capitalized should be disclosed in a note to such
balance sheet.

"CAPITALIZED LEASE OBLIGATIONS" with respect to any Person, shall mean
the aggregate amount which, in accordance with generally accepted accounting
principles, is required to be reported as a liability on the balance sheet of
such Person at such time in respect of such Person's interest as lessee under a
Capital Lease.

"CERTIFICATE OF DESIGNATIONS" shall have the meaning set forth in
Section 4.9 hereof.

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"CERTIFICATE OF INCORPORATION" shall mean the Certificate of
Incorporation of the Parent, in the form annexed hereto as EXHIBIT F and, for
purposes other than those of Section 4.9 hereof, as it may be amended from time
to time.

"CLASS E COMMON STOCK" shall have the meaning set forth in Section
1.1(d) hereof.

"CLASS E COMMON STOCK PUT EVENT" shall mean any redemption of any
shares of Senior Preferred Stock prior to the date of redemption therefor
specified in the Certificate of Designations.

"CLASS E STOCKHOLDER NOTICE" shall have the meaning set forth in
Section 11.2(c) hereof.

"CLOSING DATE" shall have the meaning set forth in Section 1.2 hereof.

"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time. Reference to a specific section of the Code shall include such
section, any regulations promulgated thereunder and any comparable provision of
any future legislation amending, supplementing or superseding such section.

"COMMISSION" shall mean the Securities and Exchange Commission (or any
successor thereto performing similar functions).

"COMMON STOCK" shall mean the Common Stock, par value $.01 per share,
of the Company.

"COMMON STOCK REDEMPTION PRICE" shall have the meaning set forth in
Section 11.2(a).

"COMPANY" shall have the meaning set forth in the preamble hereto.

"CONSOLIDATED" when used with reference to Current Assets, Current
Liabilities, Funded Debt, Interest Expense, Depreciation Expense, Operating
Lease Payments, Assets and Capital Expenditures shall mean the aggregate of
Current Assets, Current Liabilities, Funded Debt, Interest Expense, Depreciation
Expense, Operating Lease Payments, Assets and Capital Expenditures, as the case
may be, of the Parent and its Subsidiaries, after eliminating all offsetting
debits and credits between the Parent and its Subsidiaries and all other terms
required to be eliminated in accordance with generally accepted accounting
principles.

"CONSOLIDATED NET INCOME" shall mean, for any period, the
consolidated net income (or loss) of the Parent and its Subsidiaries for such
period determined in accordance with generally accepted accounting principles
applied on a consistent basis, and eliminating all offsetting debits and credits
between the Parent and its Subsidiaries, operating expenses, provisions for all
taxes and reserves (including reserves for deferred income taxes) and other
items to be eliminated in accordance with generally accepted accounting
principles.

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"CONSOLIDATED NET WORTH" shall mean the aggregate sum of the value of
the Parent's common stock, preferred stock, capital surplus and retained
earnings accounts as determined in accordance with generally accepted accounting
principles.

"CONSOLIDATED TOTAL CAPITALIZATION" shall mean the sum of (a)
Consolidated Net Worth, plus (b) Consolidated Funded Debt.

"CONTROLLING STOCKHOLDER" shall mean (x) on any date prior to April
21, 2000, FAC, Ltd., a Cayman Islands corporation ("FAC"), and (y) on or after
April 21, 2000, collectively, FAC, SBIC Partners, L.P., a Texas limited
partnership, Exeter Equity Partners, L.P., a Delaware limited partnership, and
Exeter Venture Lenders, L.P., a Delaware limited partnership.

"CURRENT ASSETS" with respect to any Person, shall mean, as of the
date of any determination thereof, the current assets of such Person determined
in accordance with generally accepted accounting principles applied on a
consistent basis.

"CURRENT LIABILITIES", with respect to any Person, shall mean, as of
the date of any determination thereof, the current liabilities of such Person
determined in accordance with generally accepted accounting principles applied
on a consistent basis, but in any event, with respect to the Parent and the
Company, including the outstanding amount under the Working Capital Facility.

"DEEDS OF TRUST" shall have the meaning set forth in Section 5.5(b)
hereof.

"DEFAULT" shall mean an event which, with the passage of time or the
giving of notice, or both, would become an Event of Default or Exchange Note
Event of Default.

"DEPRECIATION EXPENSE" shall mean, for any Fiscal Year, without
duplication, the total expense of the Parent and its Subsidiaries during such
Fiscal Year for depreciation, amortization of intangible assets and other
noncash charges, all calculated in accordance with generally accepted accounting
principles.

"DIVIDEND PAYMENT DATE" shall mean any date on which dividends are
payable on the Senior Preferred Stock, which dates are April 1 and October 1 of
each year prior to June 30, 2007.

"EBITDA" shall mean, for any period, the Parent's Consolidated Net
Income for such period, plus Consolidated Interest Expense, provision for taxes,
depreciation and amortization for such period.

"ENVIRONMENTAL AUDIT REPORTS" shall mean the phase I environmental
site assessments and reports listed on Item 4.25 of Schedule II.

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"ENVIRONMENTAL INDEMNITY AGREEMENT" shall mean that certain
Environmental Indemnity Agreement, executed by the Company for the benefit of
the Purchaser, in the form attached as EXHIBIT J hereto.

"ENVIRONMENTAL LAWS" shall have the meaning set forth in the Deed of
Trust.

"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. Reference to a specific section of ERISA
shall include such section, any regulations promulgated thereunder and any
comparable provision of any future legislation amending, supplementing or
superseding such section.

"ERISA AFFILIATE" shall mean any Person (other than the Company or any
of its Subsidiaries) which is under "common control" (within the meaning of
Section 414(b) or (c) of the Code or Section 4001(a)(14) of ERISA) with the
Company or any Subsidiary thereof.

"ERISA TERMINATION EVENT" shall mean (a) a "reportable event" (within
the meaning of Section 4043 of ERISA) with respect to a Pension Plan (other than
a "reportable event" as to which the PBGC has by regulation waived the 30-day
notice requirement under Section 4043(a) of ERISA); PROVIDED that a failure to
meet the minimum funding standards of Section 412 of the Code shall be an ERISA
Termination Event regardless of the issuance of any waiver under Section 412(d)
of the Code; (b) the withdrawal of the Parent, the Company, any Subsidiary or
any ERISA Affiliate from a Pension Plan which is subject to Section 4063 of
ERISA during a plan year in which it was a "substantial employer" (within the
meaning of Section 4001(a)(2) of ERISA); (c) the complete or partial withdrawal
of the Company, any Subsidiary or any ERISA Affiliate from a Multiemployer Plan
under Section 4201 or 4204 or ERISA; (d) the receipt by the Company, any
Subsidiary or any ERISA Affiliate of notice from a Multiemployer Plan that it is
in reorganization or insolvent under Section 4241 or 4245 of ERISA or that it
intends to terminate or has terminated under Section 4041A or ERISA; (e) the
providing of a notice of intent to terminate a Pension Plan maintained by the
Parent, the Company or any of its Subsidiaries pursuant to Section 4041(a)(2) of
ERISA or the treatment of a Pension Plan amendment as a termination under
Section 4041(e) of ERISA; (f) the institution of proceedings by the PBGC to
terminate a Pension Plan or the appointment of a trustee to administer any such
Pension Plan under Section 4042 of ERISA; (g) the receipt by the Parent, the
Company or any Subsidiary of a notice from any Multiemployer Plan that any
action described in clause (f) has been taken with respect to that Multiemployer
Plan; or (h) any other event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan.

"EVENT OF DEFAULT" shall have the meaning set forth in Section 9.1
hereof.

"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.

"EXCHANGE DATE" shall have the meaning set forth in Section 10.4(b)
hereof.

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"EXCHANGE NOTE EVENT OF DEFAULT" shall have the meaning set forth in
Section 9.3(b)

"EXCHANGE NOTE MAKE-WHOLE AMOUNT" for any principal amount of the
Exchange Notes shall have the meaning set forth in Section 6.2(b) hereof.

"EXCHANGE NOTE PAYMENT DATE" shall have the meaning set forth in
Section 1.1(c).

"EXCHANGE NOTEHOLDER" shall mean each holder from time to time of an
outstanding Exchange Note.

"EXCHANGE NOTEHOLDER NOTICE" shall have the meaning set forth in
Section 6.3(c) hereof.

"EXCHANGE NOTES" shall have the meaning set forth in Section 1.1(c)
hereof.

"EXCHANGE NOTICE" shall have the meaning set forth in Section 10.4(b)
hereof.

"FINANCIAL STATEMENTS" shall have the meaning set forth in Section 2.8
hereof.

"FISCAL QUARTER" shall mean a fiscal quarter of the Parent, which
shall be any quarterly period ending on September 30, December 31, March 31 and
June 30 of any year.

"FISCAL YEAR" shall mean a fiscal year of the Parent, which as at the
Closing Date is a fiscal year ending June 30.

"FUNDED DEBT" of any Person shall mean, at any date, (a) all
Indebtedness for Money Borrowed of such Person which would, in accordance with
generally accepted accounting principles, be classified as long-term
Indebtedness at such date, but in any event including all such Indebtedness,
whether secured or unsecured, of such Person which matures (or which, pursuant
to the terms of a revolving credit agreement or otherwise, is directly or
indirectly renewable or extendible at the option of such Person for a period
ending) more than one year after the date of the creation thereof,
notwithstanding the fact that payments in respect thereof (whether installment,
serial maturity or sinking fund payments or otherwise) are required to be made
by such Person not more than one year after the date as of which the amount of
Funded Debt is being determined, other than any amount thereof which is at the
time included in current liabilities of such Person at such date and (b) without
duplication, all Guaranties by such Person at such date of Funded Debt of
others.

"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall mean, as of the date
of any determination with respect thereto, generally accepted accounting
principles as used by the Financial Accounting Standards Board and/or the
American Institute of Certified Public Accountants, consistently applied and
maintained throughout the periods indicated.

"GSV NAPA" shall mean Golden State Vintners Napa, a California
corporation.

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"GUARANTY", with respect to any Person, shall mean all obligations of
such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or
other obligation or investment of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, including without limitation,
obligations for which such Person is liable by reason of such Person being a
partner in or of the primary obligor or a member of a joint venture that is the
primary obligor, and obligations incurred through an agreement, contingent or
otherwise, (a) to purchase such Indebtedness, obligation or investment or any
property or assets constituting security therefor; (b) to advance or supply
funds (i) for the purchase or payment of such Indebtedness, obligation or
investment or (ii) to maintain working capital or equity capital, or otherwise
to advance or make available funds for the purchase or payment of such
Indebtedness, obligation or investment; (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of such Indebtedness,
obligation or investment of the ability of the primary obligor to make payment
of such Indebtedness, obligation or investment; or (d) otherwise to assure the
owner of such Indebtedness, obligation or investment against loss in respect
thereof.

"HAZARDOUS MATERIALS" shall have the meaning set forth in the Deed of
Trust.

"HOLDER", with respect to any of the Securities, shall mean the Person
in whose name such Securities shall be registered.

"IMPROVEMENTS" shall have the meaning as defined in the Deeds of Trust
with respect to each of the properties covered by the Deeds of Trust.

"INDEBTEDNESS," with respect to any Person, shall mean all items
(other than capital stock, capital surplus, retained earnings and deferred
credits), which in accordance with generally accepted accounting principles
would be included in determining total liabilities of such Person as shown on
the liability side of a balance sheet of such Person as at the date on which
Indebtedness is to be determined. The term "INDEBTEDNESS" shall also include,
whether or not so reflected, (a) indebtedness, obligations and liabilities
secured by any Lien on property of such Person whether or not the indebtedness
secured thereby shall have been assumed by such Person, (b) all obligations in
respect of Capital Leases and (c) all Guaranties of any of the above.
Notwithstanding the foregoing, in determining the indebtedness of the Parent,
the Company and its Subsidiaries, there shall be included all indebtedness of
the Parent, the Company or such Subsidiaries of the character referred to in the
foregoing clauses (a), (b) and (c) deemed to be extinguished under generally
accepted accounting principles but for which such Person remains legally liable.

"INDEBTEDNESS FOR MONEY BORROWED", with respect to any Person, shall
mean and include the aggregate amount of, without duplication: (a) all
obligations of such Person for borrowed money; (b) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments, and
all reimbursement or other obligations of such Person in respect of letters of
credit or banker's acceptances; (c) all obligations of such Person to pay the
deferred purchase price of assets or services; (d) all Capitalized Lease
Obligations of such Person; (e) all obligations or liabilities of others secured
by a Lien on any asset owned by such Person, irrespective of whether such
obligation or liability is assumed, to the extent of the

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lesser of such obligation or liability or the fair market value of such asset;
and (f) any Guaranties of such Person of any Indebtedness for Money Borrowed of
another Person.

"INDEMNIFIED PARTY" shall have the meaning set forth in Section 17.6
hereof.

"INSTITUTIONAL INVESTOR" shall mean any one or more of the following
Persons: (a) any bank, savings institution, trust company or national banking
association, acting for its own account or in a fiduciary capacity; (b) any
charitable foundation; (c) any insurance company or Affiliate thereof or
fraternal benefit association; (d) any pension, retirement or profit-sharing
trust or fund; (e) any public employees' pension or retirement system or any
other governmental agency supervising the investment of public funds; or (f) any
investment fund owned or managed by a Person described in clause (a), (b), (c),
(d) or (e) above, or by an Affiliate of such Person.

"INTEREST EXPENSE", with respect to any Person for any period, shall
mean the aggregate of all interest paid or accrued by such Person during such
period in accordance with generally accepted accounting principles (including
without limitation the interest portion of Capitalized Lease Obligations of such
Person and capitalized interest).

"INTEREST PAYMENT DATE" shall have the meaning set forth in Section
1.1(b) hereof.

"INVESTMENT" shall mean, with respect to any Person, any investment
made by such Person in any other Person by stock purchase, capital contribution,
loan, advance, acquisition of Indebtedness (other than acquisition of accounts
receivable in the ordinary course of business), Guaranty or otherwise.

"JUNIOR SECURITIES" shall mean securities ranking junior to the
Mortgage Notes in right of payment or with regard to rights to receive
distributions upon dissolution, liquidation or winding up of the Parent.

"JUNIOR PREFERRED STOCK" shall have the meaning set forth in Section
2.1(a) hereof

"JUNIOR STOCK" shall mean common stock or any other class or series of
stock ranking junior to the Senior Preferred Stock with regard to rights to
receive dividends and distributions upon dissolution, liquidation or winding up
of the Parent.

"LIEN" shall mean any interest in property securing an obligation owed
to, or a claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, statute or contract, whether or not
such interest shall be recorded or perfected and whether or not such interest
shall be contingent upon the occurrence of some future event or events or the
existence of some future circumstance or circumstances, and including the lien
or security interest arising from a mortgage, encumbrance, pledge, adverse claim
or charge, conditional sale or trust receipt, or from a lease, consignment or
bailment for security purposes. The term "LIEN" shall also include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property. For the purposes of this Securities

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Purchase Agreement, a Person shall be deemed to be the owner of any property
that such Person shall have acquired or shall hold subject to a conditional sale
agreement or other arrangement (including a leasing arrangement) pursuant to
which title to the property shall have been retained by or vested in some other
Person for security purposes.

"LIQUIDATION VALUE" shall mean $100.00 per share of Senior Preferred
Stock.

"MANDATORY CAPITAL EXPENDITURE AMOUNT" shall have the meaning
specified in Section 10.24.

"MATERIAL ADVERSE EFFECT" shall mean, with respect to any event or
occurrence, an effect that is materially adverse to the business, prospects,
earnings, properties or condition (financial or other) of the Parent, the
Company and its Subsidiaries, taken as a whole.

"MORTGAGE NOTE MAKE-WHOLE AMOUNT" for any principal amount of the
Mortgage Notes shall have the meaning set forth in Section 5.2(b) hereof.

"MORTGAGE NOTE PAYMENT DATE" shall have the meaning set forth in
Section 1.1(a).

"MORTGAGE NOTEHOLDER" shall mean each holder from time to time of an
outstanding Mortgage Note.

"MORTGAGE NOTEHOLDER NOTICE" shall have the meaning set forth in
Section 5.3(c) hereof.

"MORTGAGE NOTE DOCUMENTS" shall mean, collectively, this Securities
Purchase Agreement, the Mortgage Notes, and the Security Documents, and shall
not include the Environmental Indemnity Agreement.

"MORTGAGE NOTES" shall have the meaning set forth in Section 1.1(a)
hereof.

"MORTGAGED PROPERTY" shall mean the Personal Property Collateral and
the Real Property Collateral.

"MULTIEMPLOYER PLAN" shall mean any Pension Plan that is a
"multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA).

"NAIC" shall mean the National Association of Insurance Commissioners.

"NOTE" shall mean each Mortgage Note and each Exchange Note.

"NOTEHOLDER" shall mean each Mortgage Noteholder and each Exchange
Noteholder.

"NOTEHOLDER NOTICE" shall have the meaning set forth in Section 5.3(b)
hereof.

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"NOTICE AND OFFER TO PREPAY" shall have the meaning set forth in
Section 5.3(b) hereof.

"NOTICE AND OFFER TO REDEEM PREFERRED STOCK" shall have the meaning
set forth in Section 10.3(b) hereof.

"NOTICE AND OFFER TO REDEEM COMMON STOCK" shall have the meaning set
forth in Section 11.2(b).

"OBLIGATIONS" shall mean:

(a) all principal of and interest and premium, if any, due on the
Mortgage Notes from time to time outstanding (including, without
limitation, any Mortgage Note Make-Whole Amount), and of all other items
payable under the Security Documents and any modifications, extensions or
renewals thereof (including, without limitation, (i) modifications of the
required principal, interest and/or payment dates, deferring or
accelerating said payment dates in whole or in part, and/or
(ii) modifications, extensions or renewals at a different rate of interest,
whether or not any such modification, extension or renewal is evidenced by
a new or additional promissory note or notes);

(b) payment, satisfaction, observance and performance of all other
debts, obligations, covenants, agreements, and liabilities of the Company
to the Noteholders arising out of, connected with, or related to the
Mortgage Notes and the Security Documents and the transactions contemplated
thereby (including, without limitation, all interest, fees, charges,
expenses, reasonable attorneys' fees and accountants' fees); and

(c) with respect to each of the foregoing, whether now existing or
hereafter arising, voluntary or involuntary, whether or not jointly owed
with others, direct or indirect, absolute or contingent, liquidated or
unliquidated, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all amendments,
revisions or renewals thereof.

"OFFERING MEMORANDUM" shall have the meaning set forth in Section
2.7(c) hereof.

"OFFICER'S CERTIFICATE" shall mean a certificate executed on behalf of
a corporation by any of its chief executive officer, president or chief
financial officer.

"OPERATING LEASE" shall mean any lease or other agreement for the use
of property (whether real, personal or mixed) which is not a Capital Lease.

"OPERATING LEASE PAYMENTS" for any Fiscal Year for any Person shall
mean the aggregate of all amounts paid or accrued in respect of rental
obligations for which such Person is directly or indirectly liable (as a lessee
or guarantor or other surety) under all Operating Leases in effect or to be in
effect at any time during such Fiscal Year, as determined in accordance with
generally accepted accounting principles.

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"OPTIONAL EXCHANGE NOTE PREPAYMENT DATE" shall have the meaning set
forth in Section 6.2(c) hereof.

"OPTIONAL EXCHANGE NOTE PREPAYMENT PRICE" shall have the meaning set
forth in Section 6.2(a) hereof.

"OPTIONAL MORTGAGE NOTE PREPAYMENT DATE" shall have the meaning set
forth in Section 5.2(c) hereof.

"OPTIONAL MORTGAGE NOTE PREPAYMENT PRICE" shall have the meaning set
forth in Section 5.2(a) hereof.

"OPTIONAL REDEMPTION DATE" shall have the meaning set forth in Section
10.2(c) hereof.

"OPTIONAL REDEMPTION PREMIUM" for any Liquidation Value shall have the
meaning set forth in Section 10.2(b) hereof.

"OPTIONAL REDEMPTION PRICE" shall have the meaning set forth in
Section 10.2(a) hereof.

"OVERDUE RATE" shall have the meaning given to such term in Section
1.1(a) hereof.

"OUTSTANDING", with respect to any of the Securities or the Exchange
Notes, shall mean, as of the date of determination, all Securities and Exchange
Notes theretofore delivered pursuant to this Securities Purchase Agreement,
except (a) Securities theretofore cancelled or delivered for cancellation,
(b) in the case of the Senior Preferred Stock, shares thereof theretofore
converted and (c) Securities in exchange or replacement for which other
Securities have been delivered pursuant to this Securities Purchase Agreement;
PROVIDED that in determining whether the holders of the requisite aggregate
unpaid principal amount of the Notes, or the requisite holders of Senior
Preferred Stock or Class E Common Stock, as the case may be, outstanding have
given any notice or taken any action hereunder, the Notes, Senior Preferred
Stock and Class E Common Stock, as the case may be, held or owned, directly or
indirectly, by the Parent, the Company, or by any Subsidiary or any Affiliate of
the Company shall be disregarded and deemed not to be outstanding.

"PARENT" shall have the meaning set forth in the preamble hereto.

"PARENT GUARANTY" shall mean the Parent Guaranty in the form of
EXHIBIT L hereto.

"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.

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"PBGC DEMAND" shall mean a request or demand for payment which has
been made by the PBGC in respect of an actual or asserted obligation or
liability of the Parent, the Company, a Subsidiary or an ERISA Affiliate of the
Company.

"PBGC LIEN" shall mean a Lien in favor of the PBGC on any asset of the
Parent, the Company or a Subsidiary.

"PENSION PLAN" shall mean any Plan that is an "employee pension
benefit plan" (within the meaning of Section 3(2) of ERISA) subject to Title IV
of ERISA.

"PERMITTED DIVIDENDS" shall mean all dividends permitted to be paid
pursuant to Section 12.13 hereof.

"PERMITTED ENCUMBRANCES" shall mean the Liens described in
Subparagraphs (d) and (e) of the definition of "PERMITTED LIENS."

"PERMITTED LIENS" shall mean:

(a) Liens securing taxes, assessments, governmental charges or
levies, statutory Liens of landlords and Liens of carriers, warehousemen,
materialmen, mechanics and other like Persons not yet due or the payment of
which is not then required by Section 12.11 hereof; PROVIDED that this
clause (a) shall not be deemed to permit any Liens which may be imposed
pursuant to Section 4068 of ERISA or Section 412(n) of the Code;

(b) Liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have expired,
or in respect of which the obligor shall at any time in good faith be
prosecuting an appeal or proceeding for a review and in respect of which a
stay of execution pending such appeal or proceeding for review shall have
been secured;

(c) Liens incurred or deposits made in the ordinary course of
business (i) in connection with workers' compensation, unemployment
insurance and other types of social security, or (ii) to secure (or to
obtain letters of credit that secure) the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, performance bonds,
purchase, construction or sales contracts and other similar obligations;
PROVIDED that (A) any such Lien shall not be created in connection with and
shall not secure Indebtedness for Money Borrowed; (B) any obligation
secured by any such Lien shall not be overdue or, if overdue, is being
contested in good faith by appropriate actions or proceedings during which
there is no right to exercise remedies and adequate book reserves have been
established in accordance with generally accepted accounting principles;
and (C) all such Liens, pledges and deposits shall not in the aggregate
materially impair the use or value of the properties of the Parent, the
Company or any Subsidiary in the operation of its respective businesses;
and, PROVIDED FURTHER that this clause (c) shall not be deemed to permit
any Liens which may be imposed pursuant to Section 4068 of ERISA or
Section 412(n) of the Code;

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(d) current real property taxes and assessments not yet
delinquent;

(e) items which are shown on Schedule B, Part I of the Title
Policy, and encumbrances, easements or reservations, encroachments or
rights of others for rights-of-way, utilities and easements and other
similar purposes, or zoning or other covenants, conditions or restrictions
as to the use of real properties which could not have a material adverse
effect on the current use and enjoyment of all or any portion of the Real
Property Collateral;

(f) Liens on property hereafter acquired, including purchase
money mortgages, mortgages existing on property at the time of acquisition
thereof, and Liens under conditional sale, lease purchase or other title
retention agreements (including Liens created in connection with the
issuance of industrial revenue bonds, pollution control financing or other
similar financing); PROVIDED that (i) any such Liens shall not extend to
any other property, (ii) any such Liens shall be created not later than
ninety (90) days after the acquisition of the property subject to such
Liens and (iii) the Indebtedness secured by any such Liens referred to in
this clause (f) in the aggregate shall not exceed ten percent (10%) of
Consolidated Assets;

(g) Liens on inventory, accounts receivable, crops, crop
proceeds, rolling stock and wine grape contracts granted in connection with
the Working Capital Facility; and

(h) replacement, extension or renewal of debt secured by
permitted mortgages or Liens, PROVIDED that the principal amount of any
debt shall not be increased and, except in the case of Liens on inventory
or accounts receivable, the Lien shall not be extended to any other
property or assets.

"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, estate, unincorporated
organization or government (or any agency or political subdivision thereof), or
any other entity, whether acting in an individual, fiduciary or other capacity.

"PERSONAL PROPERTY COLLATERAL" shall mean "Collateral" as defined in
the Security Agreement.

"PLAN" shall mean any "employee benefit plan" (within the meaning of
Section 3(3) of ERISA) that the Parent, the Company, any Subsidiary or any ERISA
Affiliate maintains, contributes to or is obligated to contribute to for the
benefit of employees or former employees of the Parent, the Company, any
Subsidiary or any ERISA Affiliate.

"PREFERRED TREASURY RATE" shall have the meaning set forth Section
10.2(b) hereof.

"PROJECTIONS" shall have the meaning set forth in Section 2.8(b)
hereof.

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"PURCHASER" shall mean the purchaser of Securities named in SCHEDULE I
hereto.

"PURCHASE PRICE" shall have the meaning set forth in Section 1.2(a)
hereof.

"PUT EVENT" shall mean with respect to the Notes, Senior Preferred
Stock and Class E Common Stock, any event or transaction or series of related
events or transactions (whether occurring or obtaining by reason of any current
or future law or otherwise) in connection with or as a consequence of which any
of the following occur:

(i at any time prior to the occurrence of either of the events
described in clauses (B) or (D) of the proviso to this sentence below, at least
a majority (by number of votes) of the outstanding shares of Voting Stock of the
Parent (all classes of such Voting Stock being taken, for purposes of this
clause (i) as one class) shall not be or shall cease to be Beneficially Owned by
the Controlling Stockholder, either directly or indirectly through beneficial
ownership of a majority of the Voting Stock of a corporation, partnership or
other entity;

(ii at any time prior to the occurrence of either of the events
described in clauses (B) or (D) of the proviso to this sentence below, the power
to elect or appoint or cause the election or appointment of at least a majority
of the members of the full Board of the Parent shall not be or shall cease to be
exercisable by the Controlling Stockholder, either directly or indirectly
through a corporation, partnership or other entity, acting through its board of
directors (or equivalent governing body) in its sole discretion; or

(iii any Person acquires a percentage of Voting Stock greater
than that held by the Controlling Stockholder;

PROVIDED, HOWEVER, that no Put Event shall be deemed to occur or have occurred:
(A) if the holders of the Senior Preferred Stock shall have the power to elect
or appoint or cause the election or appointment of at least a majority of the
members of the full Board of Directors of the Corporation as a result of any
failure by the Parent to pay dividends or make mandatory redemptions of Senior
Preferred Stock; (B) if the Parent engages in an initial or secondary public
offering of its Common Stock and immediately after consummation of such public
offering no Person holds a percentage of Voting Stock of the Corporation greater
than the percentage of Voting Stock held by the Controlling Stockholder
immediately prior to the consummation of such public offering; (C) upon any
transfer of Common Stock by the Controlling Stockholder to any Affiliate of such
Controlling Stockholder; or (D) upon the occurrence of any merger or sale of
substantially all of the stock or assets of the Parent with respect to which
prior approval has been obtained by the holders of a majority of the Senior
Preferred Stock, with respect to the Senior Preferred Stock, a majority (by
outstanding principal balance) of the Mortgage Notes, with respect to the
Mortgage Notes, a majority (by outstanding principal balance) of the Exchange
Notes, with respect to the Exchange Notes, or a majority of the Class E Common
Stock, with respect to the Class E Common Stock.

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Solely for purposes of this definition of "Put Event," "Affiliate"
shall mean, with respect to any Person, a Person or entity that, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person. The term "control" (including the
terms "controlling, "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
shares, by contract or otherwise.

"QUALIFIED INSTITUTIONAL BUYER" shall have the meaning set forth in
Rule 144A of the Securities Act.

"REAL PROPERTY COLLATERAL" shall mean the real property described
under Section 2.11 of SCHEDULE II.

"RULE 144A" shall mean Rule 144A under the Securities Act, as
presently in effect and as hereafter amended from time to time, or any
superseding or substituted rule adopted by the Commission from time to time.

"SECTION 5.3 RESPONSE" shall have the meaning set forth in Section
5.3(d) hereof.

"SECTION 6.3 RESPONSE" shall have the meaning set forth in Section
6.3(d) hereof.

"SECTION 10.3 RESPONSE" shall have the meaning set forth in Section
10.3(d) hereof.

"SECTION 10.4 EXCHANGE" shall have the meaning set forth in Section
10.4(a) hereof.

"SECTION 11.2 RESPONSE" shall have the meaning set forth in Section
11.2(d) hereof.

"SECURITIES" shall have the meaning set forth in Section 1.2 hereof.

"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time.

"SECURITIES PURCHASE AGREEMENT" shall mean this Securities Purchase
Agreement (including the annexed Exhibits and Schedules), as it may from time to
time be amended, supplemented or modified in accordance with its terms.

"SECURITY AGREEMENT" shall mean the Security Agreement in the form of
EXHIBIT H hereto.

"SECURITY DOCUMENTS" shall mean collectively the Security Agreement
and the Deeds of Trust.

"SENIOR DEBT" shall have the meaning set forth in Section 9.3(d).

"SENIOR PREFERRED STOCK" shall have the meaning set forth in Section
1.1(b) hereof.

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"SOLVENT" shall have the meaning set forth in Section 2.30 hereof.

"STOCK PURCHASE AGREEMENT" shall have the meaning set forth in Section
2.25 hereof.

"STOCKHOLDER NOTICE" shall have the meaning set forth in Section 10.3
hereof.

"STOCKHOLDER AGREEMENT" shall mean the Stockholder Agreement in the
form of EXHIBIT K hereto.

"SUBORDINATED INDEBTEDNESS" shall have the meaning set forth in
Section 9.3(d)

"SUBSIDIARY", with respect to any corporation (the "PARENT"), shall
mean a corporation or partnership of which the parent, at the time in respect of
which such term is used, owns directly, or controls with power to vote,
indirectly through one or more Subsidiaries, shares comprising more than fifty
percent (50%) of its Voting Stock. The term "SUBSIDIARY", when used herein
without reference to any particular Person, shall mean a Subsidiary of the
Parent. Notwithstanding the foregoing, for purposes of Sections 2.16, 9.1(n),
12.7 and 15.4(d), and for the definitions of ERISA Affiliate, ERISA Termination
Event and Plan hereunder, the term "SUBSIDIARY" shall be defined by substituting
the words "at least eighty percent (80%)" for "greater than fifty percent (50%)"
in the immediately preceding sentence.

"WEIGHTED AVERAGE LIFE TO MATURITY" of any borrowed funds, as of the
date of the determination thereof, shall mean the number of years obtained by
dividing the then Remaining Dollar-years of such borrowed funds by the then
outstanding principal amount thereof. The term "REMAINING DOLLAR-YEARS" of any
borrowed funds or funds representing the redemption price of preferred stock
subject to mandatory redemption shall mean the amount obtained by
(a) multiplying the amount of each then remaining sinking fund, serial maturity
or other required repayment or redemption price, including repayment at final
maturity, by the number of years (calculated to the nearest one-twelfth) which
will elapse between the time in question and the date of the repayment,
repricing or redemption and (b) totaling all of the products obtained in
clause (a).

"WORKING CAPITAL FACILITY" shall mean the revolving credit facility
provided by Sanwa Bank California pursuant to the Accounts Receivable Credit
Agreement dated as of the date hereof between Sanwa Bank California and the
Company.

SECTION 16.2 DIRECTLY OR INDIRECTLY. Any provision in this Securities
Purchase Agreement referring to action to be taken by any Person, or that such
Person if prohibited from taking, shall be applicable whether such action is
taken directly or indirectly by such Person.

SECTION 16.3 ACCOUNTING TERMS. All accounting terms used herein that are
not otherwise expressly defined shall have the respective meanings given to them
in accordance with

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generally accepted accounting principles at the particular time. If any changes
in accounting principles from those currently employed become effective by the
promulgation of rules, regulations, pronouncements and opinions by or required
by the Financial Accounting Standards Board (FASB) or the American Institute of
Certified Public Accountants (AICPA), or any successor entity thereto, resulting
in a change in the financial covenant calculations necessary for compliance with
provisions of this Securities Purchase Agreement, the Noteholders shall agree to
negotiate in good faith an amendment to such provisions so as to reflect
equitably such changes with the desired result that the criteria for evaluating
the financial condition of the Parent and its Subsidiaries shall be
substantially the same as if such changes had not been made. If no agreement can
be reached regarding such amendments, then the Parent shall continue to make
those financial covenant calculations without any change in the accounting
principles used.

SECTION 16.4 GOVERNING LAW. THIS AGREEMENT AND THE SECURITIES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA.

SECTION 16.5 INDEPENDENCE OF COVENANTS. Each covenant made by the Parent
and the Company herein is independent of each other covenant so made. The fact
that the operation of any such covenant permits a particular action to be taken
or condition to exist does not mean that such action or condition is not
prohibited, restricted or conditioned by the operation of the provisions of any
other covenant herein.

SECTION 16.6 SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed
day for the taking of any action required or permitted hereby or by the
Certificate of Incorporation or the Mortgage Notes (including, but not limited
to, the payment of dividends on the Senior Preferred Stock or the payment of
principal of, or interest or premium, if any, on, the Mortgage Notes) shall be a
Saturday, Sunday or a day which is not a Business Day, then such action may be
taken on the next succeeding day which is a Business Day in such city; PROVIDED
that if, pursuant to the provisions of this Section 16.6, the time for the
payment of any amount in respect of the Mortgage Notes is postponed, interest on
such amount shall continue to accrue during the period of such postponement.

SECTION 17. MISCELLANEOUS.

SECTION 17.1 NOTICES.

(a) All communications under this Securities Purchase Agreement or
any of the Securities shall be in writing and shall be delivered, mailed or sent
by overnight air courier (i) if to you, to you at your address set forth in
SCHEDULE I hereto, marked for attention as there indicated, or at such other
address as you may have furnished to the Parent or the Company in writing,
(ii) if to any other holder of Senior Preferred Stock or Class E Common Stock,
to it at its address listed in the books for registration and registration of
transfer of the Senior Preferred Stock and Class E Common Stock to be maintained
by the Parent, or at such other address as such holder shall have furnished to
the Parent in writing, (iii) if to any other

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holder of Mortgage Notes, to it at its address listed in the books for
registration and registration of transfer of the Mortgage Notes to be maintained
by the Company, or at such other address as such holder shall have furnished to
the Company in writing and (iv) if to the Parent or the Company, to it at the
address shown at the head of this Securities Purchase Agreement, or at such
other address as it shall have given notice of to you and all other holders of
Securities issued by it and at the time outstanding in accordance with the terms
of this Section 17.1.

(b) Any written communication so addressed shall be deemed to have
been given upon receipt thereof, and if delivery is refused, receipt shall be
deemed to have been given when such delivery is refused.

SECTION 17.2 SURVIVAL. All representations, warranties and covenants
made by the Parent and the Company herein or in any certificate or other
instrument delivered under or in connection with this Securities Purchase
Agreement shall be considered to have been relied upon by you and shall survive
the delivery to you of the Securities regardless of any investigation made by
you or on your behalf. All statements in any such certificate or other
instrument shall constitute representations and warranties of the Parent and the
Company as applicable hereunder.

SECTION 17.3 SUCCESSORS AND ASSIGNS; TRANSFER OF SECURITIES. This
Securities Purchase Agreement shall be binding upon the parties hereto and their
respective successors and permitted assigns and shall inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
permitted assigns hereunder. Whether or not expressly so stated, but subject to
the restrictions set forth therein, the provisions of (a) Sections 1 through 4
and Sections 12 through 17 of this Securities Purchase Agreement are intended to
be for your benefit and for the benefit of all holders from time to time of any
of the Securities, (b) Section 5 is intended for your benefit as a holder of
Mortgage Notes and for the benefit of all holders from time to time of any
Mortgage Notes, (c) Section 6 is for your benefit as a holder of Exchange Notes
and for the benefit of all holders from time to time of any Exchange Notes, (d)
Sections 7 through 9 are for your benefit as a holder of Notes and for the
benefit of all holders from time to time of any Notes, (e) Section 8 is intended
for your benefit as a holder of Senior Preferred Stock and for the benefit of
all holders from time to time of any shares of Senior Preferred Stock and
(f) Section 11 is intended for your benefit as a holder of Class E Common Stock
and for the benefit of all holders from time to time of any Class E Common
Stock, and shall be enforceable by you and any other such holder whether or not
an express assignment to such holder of rights under this Securities Purchase
Agreement shall have been made by you or your successors or assigns; PROVIDED
FURTHER that the provisions of Section 7.4, Section 12.1 and Section 12.10,
Section 13 and Sections 14.2 and 14.3 hereof shall also be for the benefit of,
and shall be enforceable by, any Person who shall no longer be a holder of any
Security but who shall have incurred any expense or been subjected to any
liability referred to therein while, or on the basis of being, such a holder.

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SECTION 17.4 AMENDMENT AND WAIVER.

(a) This Securities Purchase Agreement may be amended or
supplemented, and the observance of any term hereof or thereof may be waived,
with the written consent of the Parent and the Company and (A) on or prior to
the Closing Date, you, and (B) after the Closing Date, the holders of 51% of the
outstanding Senior Preferred Stock, the holders of 51% of the aggregate
outstanding principal amount of the Exchange Notes and the holders of 51% of the
aggregate outstanding principal amount of the Mortgage Notes; PROVIDED that:

(i) The Mortgage Notes and Section 5, Section 6, Section 7,
Section 8 and Section 9 of this Securities Purchase Agreement may be
amended or supplemented, and the observance of any term thereof may be
waived with the written consent of the Parent, the Company and the holders
of 51% of the aggregate outstanding principal amount of the Mortgage Notes,
the holders of 51% of the aggregate outstanding principal amount of the
Exchange Notes and the holders of 51% of the outstanding Senior Preferred
Stock; PROVIDED that no amendment, supplement or waiver described in this
clause (i) shall, without the written consent of the holders of all the
Mortgage Notes, Senior Preferred Stock and Class E Common Stock then
outstanding, (1) change, with respect to any Note, the amount or time of
any required prepayment or payment of principal or premium or the rate or
time of payment of interest, or change the funds in which any prepayment or
payment on any Note is required to be made; (2) amend, supplement or waive
any default arising by reason of the failure of the Parent or the Company
to comply with Section 9 hereof; or (3) amend, supplement or waive any
default arising by reason of the failure of the Parent or the Company to
comply with this Section 17.4;

(ii) Section 10 of this Securities Purchase Agreement may be
amended or supplemented, and the observance of any term thereof may be
waived with the written consent of the Parent and the holders of 51% of the
issued and outstanding shares of the Senior Preferred Stock; and

(iii) Section 11 of this Securities Purchase Agreement may be
amended or supplemented, and the observance of any term thereof may be
waived with the written consent of the Parent and the holders of 51% of the
issued and outstanding shares of the Class E Common Stock.

(b) Each of the Parent and the Company shall not solicit, request or
negotiate for or with respect to any proposed waiver or amendment of any of the
provisions of this Securities Purchase Agreement or the Securities unless each
holder of the Securities (irrespective of the amount of Securities then owned by
it) shall be informed thereof by the Parent or the Company and shall be afforded
the opportunity, if eligible to participate, of considering the same and shall
be supplied by the Parent or the Company with sufficient information to enable
it to make an informed decision with respect thereto. Executed or true and
correct copies of any waiver effected pursuant to the provisions of this Section
17.4 shall be delivered by the Parent or the Company to each holder of
outstanding Securities forthwith following the date on which the same shall have
been executed and delivered by the holder or

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holders of the requisite percentage of outstanding Securities. Each of the
Parent and the Company shall not, directly or indirectly, pay or cause to be
paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, to any holder of the Securities as consideration for or as an
inducement to the entering into by any holder of the Securities of any waiver or
amendment of any of the terms and provisions of this Securities Purchase
Agreement unless such enumeration is concurrently paid, on the same terms,
ratably to the holders of all of the Securities then outstanding.

SECTION 17.5 CONFIDENTIALITY. The information contained in the financial
statements and any information contained in any other document and delivered by
the Parent or the Company to, and any other information received by, any holder
of Securities pursuant to this Securities Purchase Agreement that shall have
been designated in writing as confidential shall be held in confidence by such
holder in accordance with such internal procedures as such holder shall apply
generally to confidential information; PROVIDED that such holder may disclose
any such information (a) as has become generally available to the public, (b) as
may be required in any report, statement or testimony required to be submitted
to any municipal, state or federal regulatory body having or claiming to have
jurisdiction over such holder including, without limitation, the NAIC or similar
organizations or their successors, (c) as may be required in response to any
summons or subpoena or in connection with any litigation,(d) to the extent that
such holder believes it appropriate in order to comply with any law, order,
regulation or ruling applicable to such holder, (e) to a prospective transferee
in connection with any contemplated transfer of a Security or Exchange Note by
such holder (PROVIDED that such prospective transferee agrees to be bound by the
terms of this Section 17.5) and (f) otherwise as may be reasonably necessary to
the enforcement of such holder's rights with respect to any Note or under this
Securities Purchase Agreement.

SECTION 17.6 INDEMNITY FOR FUNDS AVAILABILITY AT CLOSING. In connection
with the closing under this Securities Purchase Agreement, each of the Parent
and the Company is requesting that you make available for funding an amount
equal to the Purchase Price. If, for any reason other than your failure to
observe your obligation to close, the closing does not occur as scheduled on the
Closing Date, each of the Parent and the Company hereby agrees to protect,
indemnify and hold you harmless from and against any and all losses,
liabilities, obligations, expenses (including, without limitation, reasonable
attorneys' fees and expenses) imposed upon or incurred by or asserted against
you in any way resulting from, caused by or arising out of the failure of the
closing to occur as scheduled on the Closing Date, including, without
limitation, any and all losses resulting from the inability to reinvest any
amounts reserved, set aside or otherwise to be made available at the scheduled
closing at a rate of interest equal to or greater than the rate of interest on
the Mortgage Notes. The obligations of the Parent and the Company under this
Section 17.6 shall survive the payment or prepayment of the Notes, the
redemption of the Senior Preferred Stock and Class E Common Stock, the
termination of this Securities Purchase Agreement and the reconveyance of the
Deeds of Trust.

SECTION 17.7 ADDITIONAL SECURITY. Without notice to or consent of the
Company, and without impairment of the Lien and rights created by the Security
Documents, the Mortgage Noteholders may accept from the Company or from any
other Person additional security for the obligations secured hereby. Neither
the execution of the Security Documents nor the

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acceptance of any such additional security shall prevent the Mortgage
Noteholders from resorting first to such additional security, or first to the
security created by the Security Documents, or concurrently, to both, in any
case without affecting the Mortgage Noteholders' Lien and rights under the
Security Documents.

SECTION 17.8 INTEGRATION. This Securities Purchase Agreement together
with all exhibits and schedules hereto, the Security Documents, the Securities,
the Exchange Notes and the other Agreements constitute the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior agreements, understandings, negotiations and discussions, whether oral
or written, of the parties.

SECTION 17.9 NO PARTNERSHIP, ETC. Neither the execution or delivery of
this Securities Purchase Agreement or any of the other agreements or instruments
executed and delivered or contemplated to be executed and delivered in order to
consummate the transactions contemplated hereby, nor the performance of this
Securities Purchase Agreement or any of such other agreements or instruments,
shall constitute you or any subsequent holder of a Mortgage Note as a partner or
a joint venturer in or of the Parent or the Company, or shall constitute or
evidence the agreement of any of such Persons to undertake or assume any
liabilities of the Parent or the Company or share in any losses from the
ownership and operation of the Mortgaged Property.

SECTION 17.10 CONSENT TO JURISDICTION AND VENUE. Each of the Parent and
the Company hereby irrevocably (a) agrees that any suit, action or other legal
proceeding arising out of or relating to this Securities Purchase Agreement, the
Agreements or any Security may be brought in a court of record in the State of
California or in the courts of the United States of America located in such
State, (b) consents to the jurisdiction of each such court in any such suit,
action or proceeding, and (c) waives any objection which it may have to the
laying of venue of any such claim that any such suit, action or proceeding has
been brought in an inconvenient forum and covenants that it shall not seek to
challenge the jurisdiction of any such court or seek to oust the jurisdiction of
any such court, whether on the basis of inconvenient forum or otherwise. Each
of the Parent and the Company irrevocably consents to the service of any and all
process in any such suit, action or proceeding by mail copies of such process to
each of the Parent and the Company at its address for notices provided in
Section 17.1 hereof. Each of the Parent and the Company agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. All mailings under this Section 17.10 shall be by registered
or certified mail, return receipt requested. Nothing in this Section 17.10
shall affect your right to serve legal process in any other manner permitted by
law or affect your right to bring any suit, action or proceeding against each of
the Parent or the Company or any of its properties in the courts of any other
jurisdiction.

SECTION 17.11 WAIVER OF JURY TRIAL. ALL PARTIES HERETO IRREVOCABLY WAIVE
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING OUT OF OR IN CONNECTION WITH
THIS SECURITIES PURCHASE AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS SECURITIES PURCHASE AGREEMENT. The scope of this waiver
is intended to be all-

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encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this Securities Purchase Agreement, including,
without limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. The parties each acknowledge that this
waiver is a material inducement to enter into a business relationship, that each
party will rely on this waiver, and that each will continue to rely on this
waiver in their related future dealings. Each party further warrants and
represents that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
SECURITIES PURCHASE AGREEMENT. In the event of litigation, this Securities
Purchase Agreement may be filed as a written consent to a trial by the court.

SECTION 17.12 COUNTERPARTS. This Securities Purchase Agreement may be
executed and delivered to you simultaneously in one or more counterparts, each
of which shall be deemed an original, but all such counterparts shall together
constitute but one and the same instrument.

SECTION 17.13 REPRODUCTION OF DOCUMENTS. This Securities Purchase
Agreement, and all documents relating hereto (other than the Mortgage Notes, the
Senior Preferred Stock, the Class E Common Stock and, when issued, Exchange
Notes), including, without limitation, (a) consents, waivers and modifications
that may hereafter be executed, (b) documents received by you at the closing of
your purchase of Securities, and (c) financial statements, certificates and
other information heretofore or hereafter furnished to you, may be reproduced by
you by any photographic or other similar process and you may destroy any
original document so reproduced. Each of the Parent and the Company agrees and
stipulates that, to the extent permitted by applicable law and court or agency
rules, any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or not the original
is in existence and whether or not such reproduction was made by you in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall be admissible in evidence to the same
extent.

89
<PAGE>

If the foregoing is satisfactory to you, please sign the form of acceptance
on the enclosed counterparts hereof and return the same to the Parent and the
Company, whereupon this Securities Purchase Agreement, as so accepted, shall
become a binding contract between you and the undersigned.

Very truly yours,

GOLDEN STATE VINTNERS

By:
-----------------------------------
Name:
Title:

GOLDEN STATE ACQUISITION CORP.

By:
-----------------------------------
Name:
Title:

The foregoing Securities
Purchase Agreement is
hereby accepted.

JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY

By:
-----------------------------------
Name: Phillip Peters
Title: Sr. Agribusiness Investment Officer

90
<PAGE>

EXECUTION VERSION

FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT

THIS FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT, dated as of April
25, 1996 (this "AMENDMENT"), is entered into by and among John Hancock Mutual
Life Insurance Company (the "PURCHASER"), Golden State Vintners, a California
corporation (the "COMPANY"), and Golden State Acquisition Corp., a Delaware
corporation (the "PARENT").

RECITALS

A. The Purchaser, the Company and the Parent are parties to that certain
Securities Purchase Agreement dated as of April 21, 1995 (the "SECURITIES
PURCHASE AGREEMENT"), pursuant to which the Purchaser purchased Mortgage Notes
from the Company and Senior Preferred Stock, Exchange Notes and Class E Common
Stock from the Parent (collectively, the "SECURITIES").

B. The Purchaser is the holder of record of all of the Securities sold by
the Company and the Parent pursuant to the Securities Purchase Agreement.

C. The Company and the Parent have requested that the Purchaser amend the
Securities Purchase Agreement in certain respects.

AGREEMENT

NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Purchaser, the Company and the Parent hereby agree as follows:

1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless
otherwise defined herein, all other capitalized terms used herein shall have the
respective meanings given to those terms in the Securities Purchase Agreement,
as amended by this Amendment.

2. AMENDMENT TO AGREEMENT. Section 9.3(d) of the Securities Purchase
Agreement is hereby amended and replaced, to read in its entirety as follows:

<PAGE>

(i) the Mortgage Notes, together with any amendments, refinancings,
refundings, deferrals, renewals, modifications or extensions thereof,
(ii) Indebtedness of the Company not to exceed $9,000,000 in principal
amount under the Working Capital Facility, (iii) Indebtedness of the
Company not to exceed $1,800,000 in principal amount payable pursuant to
the proposed Business Loan Agreements to be entered into by the Company and
The Grape Group, Inc., with Bank of America NTSA, as guaranteed by E.&J.
Gallo Winery, (iv) Indebtedness of the Company not to exceed $2,724,156 in
principal amount payable pursuant to the installment note secured by deed
of trust dated September 30, 1986, as amended, executed by The Grape Group,
Inc. in favor of The Prudential Insurance Company of America,(v)
Indebtedness of the Company not to exceed $452,791.17 in principal amount
payable pursuant to the demand note dated September 30, 1986 executed by
The Grape Group, Inc. in favor of Cottonwood Vineyard, (vi) Indebtedness of
the Company not to exceed $1,696,209 in principal amount payable pursuant
to the proposed Purchase Agreement between the Company and The Grape Group,
Inc. and (vii) Indebtedness of the Company in a principal amount not to
exceed the lesser of $4,500,000 and 75% of the appraised value of the
brandy and dessert wine production and storage facility located in Reedley,
California payable to Sanwa Bank California solely in connection with the
Company's acquisition of such facility.

3. REPRESENTATIONS AND WARRANTIES. Each of the Company and the Parent
hereby represents and warrants to the Purchaser that the following are true and
correct on the date of this Amendment after giving effect to the amendments set
forth in PARAGRAPH 2 above:

(a) The representations and warranties of the Company and the Parent
set forth in Section 2 of the Securities Purchase Agreement and in the
other Agreements are true and correct in all material respects as if made
on the date hereof (except for representations and warranties expressly
made as of a specified date, which shall be true and correct as of such
date);

(b) No Default or Event of Default has occurred and is continuing;
and

4. EFFECT OF THIS AMENDMENT. On and after the date hereof, each
reference in the Securities Purchase Agreement shall mean the Securities
Purchase Agreement as amended hereby. Except as specifically amended above, (a)
the Securities Purchase Agreement and the other Agreements shall remain in full
force and effect and are hereby ratified and confirmed and (b) the execution,
delivery and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power, or remedy of the
Purchaser, nor constitute a

<PAGE>

waiver of any provision of the Securities Purchase Agreement or any other
Agreements.

5. EXPENSES. Pursuant to Section 13 of the Securities Purchase
Agreement, the Company shall pay to the Purchaser all reasonable attorney costs
and other reasonable fees and expenses payable to third parties incurred by the
Purchaser in connection with the preparation, negotiation, execution and
delivery of this Amendment.

6. COUNTERPARTS. This Amendment may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.

7. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.

IN WITNESS WHEREOF, the Purchaser, the Parent and the Company have caused
this Amendment to be executed as of the day and year first above written.

GOLDEN STATE VINTNERS

By:
-----------------------------------
Name:
Title:

GOLDEN STATE ACQUISITION CORP.

By:
-----------------------------------
Name:
Title:

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

By:
-----------------------------------
Name: Phillip Peters
Title: Sr. Agribusiness Investment
Officer

<PAGE>

EXECUTION VERSION

SECOND AMENDMENT TO SECURITIES PURCHASE AGREEMENT

THIS SECOND AMENDMENT TO SECURITIES PURCHASE AGREEMENT, dated as of July
26, 1996 (this "AMENDMENT"), is entered into by and among John Hancock Mutual
Life Insurance Company (the "PURCHASER"), Golden State Vintners, a California
corporation (the "COMPANY"), and Golden State Acquisition Corp., a Delaware
corporation (the "PARENT").

RECITALS

A. The Purchaser, the Company and the Parent are parties to that certain
Securities Purchase Agreement dated as of April 21, 1995, as amended by the
First Amendment thereto dated April 25, 1996 (the "SECURITIES PURCHASE
AGREEMENT"), pursuant to which the Purchaser purchased Mortgage Notes from the
Company and Senior Preferred Stock, Exchange Notes and Class E Common Stock from
the Parent (collectively, the "SECURITIES").

B. The Purchaser is the holder of record of all of the Securities sold by
the Company and the Parent pursuant to the Securities Purchase Agreement.

C. The Company and the Parent have requested that the Purchaser amend the
Securities Purchase Agreement in certain respects.

AGREEMENT

2. AMENDMENT TO AGREEMENT. Section 9.3(d) of the Securities Purchase
Agreement is hereby amended and replaced, to read in its entirety as follows:

<PAGE>

mean the principal of, premium, if any, and interest on (i) the Mortgage
Notes, together with any amendments, refinancings, refundings, deferrals,
renewals, modifications or extensions thereof, (ii) Indebtedness of the
Company not to exceed $24,000,000 in principal amount under the Working
Capital Facility, (iii) Indebtedness of the Company not to exceed
$1,800,000 in principal amount payable pursuant to the proposed Business
Loan Agreements to be entered into by the Company and The Grape Group,
Inc., with Bank of America NTSA, as guaranteed by E.&J. Gallo Winery,
(iv) Indebtedness of the Company not to exceed $2,724,156 in principal
amount payable pursuant to the installment note secured by deed of trust
dated September 30, 1986, as amended, executed by The Grape Group, Inc. in
favor of The Prudential Insurance Company of America,(v) Indebtedness of
the Company not to exceed $452,791.17 in principal amount payable pursuant
to the demand note dated September 30, 1986 executed by The Grape Group,
Inc. in favor of Cottonwood Vineyard, (vi) Indebtedness of the Company not
to exceed $1,696,209 in principal amount payable pursuant to the proposed
Purchase Agreement between the Company and The Grape Group, Inc. and
(vii) Indebtedness of the Company in a principal amount not to exceed the
lesser of $4,500,000 and 75% of the appraised value of the brandy and
dessert wine production and storage facility located in Reedley, California
payable to Sanwa Bank California solely in connection with the Company's
acquisition of such facility.

3. REPLACEMENT OF DEFINITION. The definition of "Working Capital
Facility" included in Section 16.1 of the Securities Purchase Agreement is
hereby amended and replaced, to read in its entirety as follows:

"WORKING CAPITAL FACILITY" shall mean the revolving credit facility
provided by Sanwa Bank California pursuant to the Accounts Receivable
Credit Agreement dated as of July 26, 1996 between Sanwa Bank California
and the Company.

4. REPRESENTATIONS AND WARRANTIES. Each of the Company and the Parent
hereby represents and warrants to the Purchaser that the following are true and
correct on the date of this Amendment after giving effect to the amendments set
forth in PARAGRAPHS 2 AND 3 above:

(b) No Default or Event of Default has occurred and is continuing;
and

<PAGE>

5. EFFECT OF THIS AMENDMENT. On and after the date hereof, each
reference in the Securities Purchase Agreement shall mean the Securities
Purchase Agreement as amended hereby. Except as specifically amended above, (a)
the Securities Purchase Agreement and the other Agreements shall remain in full
force and effect and are hereby ratified and confirmed and (b) the execution,
delivery and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power, or remedy of the
Purchaser, nor constitute a waiver of any provision of the Securities Purchase
Agreement or any other Agreements.

6. EXPENSES. Pursuant to Section 13 of the Securities Purchase
Agreement, the Company shall pay to the Purchaser all reasonable attorney costs
and other reasonable fees and expenses payable to third parties incurred by the
Purchaser in connection with the preparation, negotiation, execution and
delivery of this Amendment.

7. COUNTERPARTS. This Amendment may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.

8. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.

<PAGE>

IN WITNESS WHEREOF, the Purchaser, the Parent and the Company have caused
this Amendment to be executed as of the day and year first above written.

GOLDEN STATE VINTNERS

By:
-----------------------------------
Name:
Title:

GOLDEN STATE ACQUISITION CORP.

By:
-----------------------------------
Name:
Title:

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

By:
-----------------------------------
Name: Phillip Peters
Title: Sr. Agribusiness Investment
Officer

<PAGE>

CONSENT, WAIVER AND THIRD AMENDMENT
TO SECURITIES PURCHASE AGREEMENT

THIS CONSENT, WAIVER AND THIRD AMENDMENT TO SECURITIES PURCHASE AGREEMENT,
dated as of _________________, 1996 (this "AMENDMENT"), is entered into by and
among John Hancock Mutual Life Insurance Company (the "PURCHASER"), Golden State
Vintners, a California corporation (the "COMPANY"), and Golden State Acquisition
Corp., a Delaware corporation (the "PARENT").

RECITALS

A. The Purchaser, the Company and the Parent are parties to that certain
Securities Purchase Agreement dated as of April 21, 1995, as amended by the
First Amendment thereto dated April 25, 1996 and the Second Amendment thereto
dated July 26, 1996 (the "SECURITIES PURCHASE AGREEMENT"), pursuant to which the
Purchaser purchased Mortgage Notes from the Company and Senior Preferred Stock,
Exchange Notes and Class E Common Stock from the Parent (collectively, the
"SECURITIES").

B. The Purchaser is the holder of record of all of the Securities sold by
the Company and the Parent pursuant to the Securities Purchase Agreement.

C. The Parent has entered into a Securities Purchase Agreement dated as
of August 22, 1996 (the "FAC PURCHASE AGREEMENT") by and among the Parent, Smith
McDonnell & Co., Inc., FAC, Ltd., Exeter Venture Management Corporation, Exeter
Equity Partners, L.P. and Exeter Venture Lenders, L.P., pursuant to which a "Put
Event" (as defined in the Securities Purchase Agreement) will occur.

D. In order to consummate the transactions contemplated by the FAC
Purchase Agreement, the Company and the Parent have requested that the Purchaser
(i) consent to the matters described herein, (ii) waive certain rights that the
Purchaser has as a result of the occurrence of a Put Event and (iii) amend the
Securities Purchase Agreement as described herein.

AGREEMENT

1. DEFINITIONS, INTERPRETATION. All capitalized terms defined above and
elsewhere in this Amendment shall be used herein as so defined. Unless
otherwise indicated herein, all other capitalized terms used herein shall have
the respective meanings given to those terms in the Securities Purchase
Agreement, as amended by this Amendment.

2. CERTIFICATE OF INCORPORATION.

<PAGE>

(a) The Purchaser hereby approves and consents to the Amended and
Restated Certificate of Incorporation of the Parent in the form attached as
EXHIBIT A hereto.

(b) The Purchaser hereby waives its right under Section (C)(3) of
Article IV of the Certificate of Incorporation of the Parent to require delivery
of a Notice and Offer to Redeem Common Stock as a result of the occurrence of a
Put Event pursuant to the FAC Purchase Agreement.

3. CERTIFICATE OF DESIGNATIONS.

(a) The Purchaser hereby approves and consents to the amendment to
the Certificate of Designations of the 12% Senior Redeemable Exchangeable
Preferred Stock of the Parent (the "CERTIFICATE OF DESIGNATIONS") in the form
attached as EXHIBIT B hereto.

(b) The Purchaser hereby waives its right under Section 7 of the
Certificate of Designations to require delivery of a Notice and Offer to Redeem
as a result of the occurrence of a "Change of Control" (as defined in the
Certificate of Designations) pursuant to the FAC Purchase Agreement.

4. SECURITIES PURCHASE AGREEMENT.

(a) The definition of "Controlling Stockholder" set forth in Section
16.1 of the Securities Purchase Agreement is hereby amended and replaced, to
read in its entirety as follows:

"CONTROLLING STOCKHOLDER" shall mean SBIC Partners, L.P., a Texas
limited partnership, and its Affiliates.

(b) The Purchaser hereby waives its rights under the following
provisions of the Securities Purchase Agreement arising from the occurrence of a
"Put Event" pursuant to the FAC Purchase Agreement:

(i) delivery of Mortgage Note Notice and Offer to Prepay, as
defined in Section 5.3(b);

(ii) declaration of an Event of Default under Section 9.1(d);

(iii) delivery of a Notice and Offer to Redeem Preferred Stock,
as defined under Section 10.3(b); and

(iv) delivery of a Notice and Offer to Redeem Common Stock, as
defined under Section 11.2(b).

5. CONSENT TO REGISTRATION RIGHTS AGREEMENT. The Purchaser hereby
approves and consents to the Registration Rights Agreement to be entered into by
the Parent, SBIC Partners, L.P. and Jeffrey B. O'Neill with respect to the
Parent's Class B Common Shares in the form attached as EXHIBIT C hereto.

<PAGE>

6. REPRESENTATIONS AND WARRANTIES. Each of the Company and the Parent
hereby represents and warrants to the Purchaser that the following are true and
correct on the date of this Amendment after giving effect to the foregoing
provisions of this Amendment:

(b) No Default or Event of Default has occurred and is continuing;
and

7. EFFECT OF THIS AMENDMENT. On and after the date hereof, each
reference in the Securities Purchase Agreement shall mean the Securities
Purchase Agreement as amended hereby. Except as specifically amended above, (a)
the Securities Purchase Agreement and the other Agreements shall remain in full
force and effect and are hereby ratified and confirmed and (b) the execution,
delivery and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power, or remedy of the
Purchaser, nor constitute a waiver of any provision of the Securities Purchase
Agreement or any other Agreements.

8. EXPENSES. Pursuant to Section 13 of the Securities Purchase
Agreement, the Company shall pay to the Purchaser all reasonable attorney costs
and other reasonable fees and expenses payable to third parties incurred by the
Purchaser in connection with the preparation, negotiation, execution and
delivery of this Amendment.

9. COUNTERPARTS. This Amendment may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.

10. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.

<PAGE>

IN WITNESS WHEREOF, the Purchaser, the Parent and the Company have caused
this Amendment to be executed as of the day and year first above written.

GOLDEN STATE VINTNERS

By:
-----------------------------------
Name:
Title:

GOLDEN STATE ACQUISITION CORP.

By:
-----------------------------------
Name:
Title:

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY

By:
-----------------------------------
Name: Phillip Peters
Title: Senior Investment Officer

<PAGE>

FORM OF FIRST MORTGAGE NOTE

GOLDEN STATE VINTNERS

Mortgage Note
due April 1, 2005

$35,000,000.00 April 27, 1995
New York, New York

Golden State Vintners, a California corporation (the "Company"), for value
received, hereby promises to pay to John Hancock Mutual Life Insurance Company
or registered assigns, the principal sum of THIRTY FIVE MILLION DOLLARS
($35,000,000.00) on April 1, 2005; and to pay interest on the unpaid principal
balance hereof until this Note shall become due and payable in accordance with
the terms hereof and of that certain Securities Purchase Agreement dated as of
April 21, 1995 (the "Securities Purchase Agreement") between the Company and
John Hancock Mutual Life Insurance Company as follows: (a) from and after the
date hereof until April 21, 2000, at the rate of nine and sixty-nine one
hundredths percent (9.69%) per annum, and (b) on and after April 21, 2000, at
the rate of two and seventy five one hundredths percent (2.75%) plus the rate of
interest then payable on United States Treasury Notes maturing in five years, as
published in THE WALL STREET JOURNAL (or any successor publication) on such date
or the next preceding Business Day. Interest shall be payable commencing on
October 1, 1995 and on the first day of each month thereafter (each a "MORTGAGE
NOTE PAYMENT DATE"). If the Company shall fail to pay any principal, premium or
interest when due and after any applicable grace period, a late charge of two
percent (2%) of any such payment of principal, premium or interest shall be due
and payable. If the Company shall fail to pay any such payment for more than
thirty (30) days after the date when such payment was due, effective as of such
date the interest rate payable on the entire outstanding principal balance of
this Note and all other amounts due hereunder shall increase to the interest
rate payable on this note plus two percent (2%) per annum. Until such time as
all amounts past due hereunder have been paid in full Interest on this Note
shall be computed on the basis of a 360-day year of twelve 30-day months.

If the Company shall have paid or agreed to pay any interest or premium on
this Note in excess of that permitted by law, then it is the express intent of
the Company and the holder hereof that all excess amounts previously paid or to
be paid by the Company be applied to reduce the principal balance of this Note,
and the provisions hereof immediately be deemed reformed and the amounts
thereafter collectable hereunder reduced, without the necessity of the execution
of any new document, so as to comply with the then applicable law, but also so
as to permit the recovery of the fullest amount otherwise called for hereunder.

A-1
<PAGE>

Interest accrued to and excluding October 1, 1995 in the amount of
$1,695,750.00 shall be payable on October 1, 1995, together with principal in an
amount equal to $86,876.99. Thereafter, combined payments of principal and
interest shall be due and payable monthly on the first day of each calendar
month commencing November 1, 1995. Notwithstanding anything to the contrary
contained herein or in the Securities Purchase Agreement, however, the final
payment due hereunder (whether at maturity, by acceleration or otherwise) shall
be in an amount sufficient to pay in full all outstanding principal, together
with all accrued interest and premiums due hereon.

This Note is one of a series of Mortgage Notes issued in the aggregate
principal amount of $35,000,000 pursuant to the Securities Purchase Agreement,
and is entitled to the benefits thereof. All capitalized terms not otherwise
defined herein shall have the meanings set forth therein in the Securities
Purchase Agreement. The Company agrees to perform and observe duly and
punctually each of the covenants and agreements set forth in the Securities
Purchase Agreement. All such covenants and agreements are incorporated by
reference in this Note, and this Note shall be interpreted and construed as if
all such covenants and agreements were set forth in full in this Note at this
place.

As and to the extent provided in the Securities Purchase Agreement, this
Note is subject to prepayment, in whole or in part, with premium. The Company
agrees to make required prepayments on account of this Note in accordance with
the provisions of the Securities Purchase Agreement. Under certain
circumstances, as specified in the Securities Purchase Agreement, the principal
of and accrued interest on this Note may be declared due and payable in the
manner and with the effect provided in the Securities Purchase Agreement.

The payment of principal of and premium, if any, and interest on this Note
has been unconditionally secured by the Company by Liens on the Mortgaged
Property and an absolute assignment of rents pursuant to the Deeds of Trust and
the Security Agreement. Executed counterparts of the Security Agreement and the
Deeds of Trust are available for examination at the office of the Company
maintained pursuant to Section 12.1 of the Securities Purchase Agreement.

This Note has not been registered under the Securities Act of 1933, as
amended, or the laws of any state and may be transferred in whole or in part
only pursuant to an effective registration statement under such Act and
applicable state laws or under an exemption from such registration available
under such Act and applicable state law. Subject to the foregoing, transfers of
this Note shall be registered upon registration books maintained for such
purpose by or on behalf of the Company as provided in the Securities Purchase
Agreement.

Payment of principal, premium, if any, and interest shall be made to the
registered holder hereof by direct wire transfer of immediately available funds
pursuant to the instructions provided by the registered holder or shall
otherwise be made by such other method as directed by the registered holder
hereof in accordance with the Securities Purchase Agreement. Prior to
presentation of this Note for registration of transfer, the Company shall treat
the registered holder hereof as the owner and holder of this Note for the
purpose of receiving all payments of principal and interest hereon and for all
other purposes whatsoever,

A-2
<PAGE>

whether or not this Note shall be overdue, and the Company shall not be affected
by notice to the contrary.

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
THE STATE OF CALIFORNIA.

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.

GOLDEN STATE VINTNERS,
a California corporation

By:
--------------------------------
Name:

A-3

<PAGE>

CONTINUING CORPORATE GUARANTY

FOR VALUE RECEIVED, and in consideration of any loan or other
financial accommodation heretofore or hereafter at any time made or granted to
Golden State Vintners, a California corporation ("Borrower"), by the purchaser
of the First Mortgage Notes Due April 1, 2005 issued by Borrower (together with
any successors and assigns, "Purchaser"), the undersigned, Golden State
Acquisition Corp., a Delaware corporation ("Guarantor"), hereby agrees as
follows:

1. GUARANTY OF OBLIGATIONS. Guarantor unconditionally, absolutely
and irrevocably guarantees the full and prompt payment and performance when due,
whether by acceleration or otherwise, and at all times thereafter, of all
obligations of Borrower to Purchaser, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, or now or hereafter existing
or due or to become due, including, without limitation, under or in connection
with that certain Securities Purchase Agreement dated as of the date hereof,
among Borrower, Guarantor and Purchaser (the "Securities Purchase Agreement")
and each of the documents, instruments and agreements executed and delivered in
connection therewith, as each may be modified, amended, supplemented or replaced
from time to time (all such obligations are herein referred to, collectively, as
the "Liabilities," and all documents evidencing or securing any of the
Liabilities are herein referred to, collectively, as the "Loan Documents").
This Continuing Corporate Guaranty (this "Continuing Guaranty") is a guaranty of
payment and performance when due and not of collection.

In the event of any default by Borrower in making payment of, or
default by Borrower in performance of, any of the Liabilities, Guarantor agrees
on demand by Purchaser to pay and perform all of the Liabilities as are then or
thereafter become due and owing or are to be performed under the terms of the
Loan Documents. Guarantor further agrees to pay all expenses (including
reasonable attorneys' fees and expenses) paid or incurred by Purchaser in
endeavoring to collect the Liabilities, or any part thereof, and in enforcing
this Continuing Guaranty.

2. CONTINUING NATURE OF GUARANTY AND LIABILITIES. This Continuing
Guaranty shall be continuing and shall not be discharged, impaired or affected
by:

a. the insolvency of Borrower;

b. the power or authority or lack thereof of Borrower to incur
the Liabilities;

c. the validity or invalidity of any of the Loan Documents or
the documents securing the same;

<PAGE>

d. the existence or non-existence of Borrower as a legal
entity;

e. any transfer by Borrower of all or any part of any
collateral in which Purchaser has been granted a lien or security interest
pursuant to the Loan Documents;

f. any statute of limitations affecting the liability of
Guarantor under this Continuing Guaranty or the Loan Documents or the
ability of Purchaser to enforce this Continuing Guaranty or any provision
of the Loan Documents; or

g. any right of offset, counterclaim or defense of Guarantor,
including, without limitation, those which have been waived by Guarantor
pursuant to Paragraph 9 hereof.

3. INSOLVENCY OF BORROWER OR GUARANTOR. Without limiting the
generality of any other provision hereof, Guarantor agrees that, in the event of
the dissolution or insolvency of Borrower or Guarantor or the inability of
Borrower or Guarantor to pay their respective debts as they mature, or an
assignment by Borrower or Guarantor for the benefit of creditors, or the
institution of any proceeding by or against Borrower or Guarantor alleging that
Borrower or Guarantor is insolvent or unable to pay its respective debts as they
mature which has not been dismissed within sixty (60) days of the date of
filing, Guarantor will pay to Purchaser forthwith the full amount which would be
payable hereunder by Guarantor if all of the Liabilities were then due and
payable, whether or not such event occurs at a time when any of the Liabilities
are otherwise due and payable.

4. PAYMENT OF THE LIABILITIES. Any amounts received by Purchaser
from whatever source on account of the Liabilities may be applied by Purchaser
toward the payment of such of the Liabilities, and in such order of application,
as Purchaser may from time to time elect, and notwithstanding any payments made
by or for the account of Guarantor pursuant to this Continuing Guaranty.

Guarantor agrees that, if at any time all or any part of any payment
theretofore applied by Purchaser to any of the Liabilities is or must be
rescinded or returned by Purchaser for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of Borrower), such
Liabilities shall, for the purposes of this Continuing Guaranty and to the
extent that such payment is or must be rescinded or returned, be deemed to have
continued in existence notwithstanding such application by Purchaser, and this
Continuing Guaranty shall continue to be effective or be reinstated, as the case
may be, as to such Liabilities, all as though such application by Purchaser had
not been made.

5. PERMITTED ACTIONS OF PURCHASER. Purchaser may from time to time,
in its sole discretion and without notice to Guarantor, take any or all of the
following actions:

a. retain or obtain a security interest in any assets of
Borrower or any third party to secure any of the Liabilities or any
obligations of Guarantor hereunder;

<PAGE>

b. retain or obtain the primary or secondary obligation of any
obligor or obligors, in addition to Guarantor, with respect to any of the
Liabilities;

c. extend or renew for one or more periods (whether or not
longer than the original period), alter or exchange any of the Liabilities;

d. waive, ignore or forbear from taking action or otherwise
exercising any of its default rights or remedies with respect to any
default by Borrower under the Loan Documents;

e. release, waive or compromise any obligation of Guarantor
hereunder or any obligation of any nature of any other obligor primarily or
secondarily obligated with respect to any of the Liabilities;

f. release its security interest in, or surrender, release or
permit any substitution or exchange for, all or any part of any collateral
now or hereafter securing any of the Liabilities or any obligation
hereunder, or extend or renew for one or more periods (whether or not
longer than the original period) or release, waive, compromise, alter or
exchange any obligations of any nature of any obligor with respect to any
such property; and

g. demand payment or performance of any of the Liabilities from
Guarantor at any time or from time to time, whether or not Purchaser shall
have exercised any of its rights or remedies with respect to any property
securing any of the Liabilities or any obligation hereunder, or proceeded
against any other obligor primarily or secondarily liable for payment or
performance of any of the Liabilities.

6. SPECIFIC WAIVERS. Without limiting the generality of any other
provision of this Continuing Guaranty, Guarantor hereby expressly waives:

a. notice of the acceptance by Purchaser of this Continuing
Guaranty;

b. notice of the existence, creation, payment, nonpayment,
performance or nonperformance of all or any of the Liabilities;

c. presentment, demand, notice of dishonor, protest, notice of
protest and all other notices whatsoever with respect to the payment or
performance of the Liabilities or the amount thereof or any payment or
performance by Guarantor hereunder;

d. all diligence in collection or protection of or realization
upon the Liabilities or any thereof, any obligation hereunder or any
security for or guaranty of any of the foregoing;

<PAGE>

e. any right to direct or affect the manner or timing of
Purchaser's enforcement of its rights or remedies;

f. any and all defenses which would otherwise arise upon the
occurrence of any event or contingency described in Paragraph 1 hereof or
upon the taking of any action by Purchaser permitted hereunder;

g. any defense, right of set-off, claim or counterclaim
whatsoever and any and all other rights, benefits, protections and other
defenses available to Guarantor now or at any time hereafter, including,
without limitation, under California Civil Code Sections 2787 to 2855,
inclusive, and California Code of Civil Procedure Sections 580a, 580b, 580d
or 726, and all successor sections; and

h. all other principles or provisions of law, if any, that
conflict with the terms of this Continuing Guaranty, including, without
limitation, the effect of any circumstances that may or might constitute a
legal or equitable discharge of a guarantor or surety.

7. IRREVOCABILITY. Guarantor hereby further waives all rights to
revoke this Continuing Guaranty at any time, and all rights to revoke any
agreement executed by Guarantor at any time to secure the payment and
performance of Guarantor's obligations under this Continuing Guaranty.

8. STATUTORY WAIVER OF RIGHTS AND DEFENSES REGARDING ELECTION OF
REMEDIES. Guarantor waives all rights and defenses arising out of an election of
remedies by Purchaser, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed Guarantor's rights of subrogation and reimbursement against
Borrower by the operation of Section 580d of the California Code of Civil
Procedure or otherwise.

9. SUBORDINATION. Guarantor hereby subordinates any and all
indebtedness of Borrower to Guarantor to the full and prompt payment and
performance of all of the Liabilities. Guarantor agrees that Purchaser shall be
entitled to receive payment of all Liabilities prior to Guarantor's receipt of
payment of any amount of any indebtedness of Borrower to Guarantor. Any
payments on such indebtedness to Guarantor, if Purchaser so requests, shall be
collected, enforced and received by Guarantor, in trust, as trustee for
Purchaser and shall be paid over to Purchaser on account of the Liabilities, but
without reducing or affecting in any manner the liability of Guarantor under the
other provisions of this Guaranty. Purchaser is authorized and empowered, but
not obligated, in its discretion, (a) in the name of Guarantor, to collect and
enforce, and to submit claims in respect of, indebtedness of Borrower to
Guarantor and to apply any amounts received thereon to the Liabilities, and
(b) to require Guarantor (i) to collect and enforce, and to submit claims in
respect of, any indebtedness of Borrower to Guarantor, and (ii) to pay any
amounts received on such indebtedness to Purchaser for application to the
Liabilities.

<PAGE>

10. SUBROGATION. Guarantor will not exercise any rights which it may
acquire by way of subrogation under this Continuing Guaranty, by any payment
hereunder or otherwise, until all of the Liabilities have been paid in full, in
cash, and Purchaser shall have no further obligations to Borrowers under the
Loan Documents or otherwise. If any amount shall be paid to Guarantor on
account of such subrogation rights at any other time, such amount shall be held
in trust for the benefit of Purchaser and shall be forthwith paid to Purchaser
to be credited and applied to the Liabilities, whether matured or unmatured, in
such manner as Purchaser shall determine in its sole discretion.

11. ASSIGNMENT OF PURCHASER'S RIGHTS. Purchaser may, from time to
time, without notice to Guarantor, assign or transfer any or all of the
Liabilities or any interest therein and, notwithstanding any such assignment or
transfer of the Liabilities or any subsequent assignment or transfer thereof,
the Liabilities shall be and remain the Liabilities for the purpose of this
Continuing Guaranty. Each and every immediate and successive assignee or
transferee of any of the Liabilities or of any interest therein shall, to the
extent of such party's interest in the Liabilities, be entitled to the benefits
of this Continuing Guaranty to the same extent as if such assignee or transferee
were Purchaser; PROVIDED, HOWEVER, that unless Purchaser shall otherwise consent
in writing, Purchaser shall have an unimpaired right, prior and superior to that
of any such assignee or transferee, to enforce this Continuing Guaranty for its
own benefit as to those of the Liabilities which Purchaser has not assigned or
transferred.

12. INDULGENCES NOT WAIVERS. No delay in the exercise of any right
or remedy shall operate as a waiver thereof, and no single or partial exercise
by Purchaser of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy; nor shall any modification
or waiver of any of the provisions of this Continuing Guaranty be binding upon
Purchaser, except as expressly set forth in a writing duly signed and delivered
by Purchaser. No action of Purchaser permitted hereunder shall in any way
affect or impair the rights of Purchaser or the obligations of Guarantor under
this Continuing Guaranty.

13. FINANCIAL CONDITION OF BORROWER. Guarantor represents and
warrants that it is fully aware of the financial condition of Borrower, and
Guarantor delivers this Continuing Guaranty based solely upon its own
independent investigation of Borrower's financial condition and in no part upon
any representation or statement of Purchaser with respect thereto. Guarantor
further represents and warrants that it is in a position to and hereby does
assume full responsibility for obtaining such additional information concerning
Borrower's financial condition as Guarantor may deem material to its obligations
hereunder, and Guarantor is not relying upon, nor expecting Purchaser to furnish
it any information in Purchaser's possession concerning Borrower's financial
condition or concerning any circumstances bearing on the existence or creation,
or the risk of nonpayment or nonperformance of the Liabilities.

Guarantor hereby waives any duty on the part of Purchaser to disclose
to Guarantor any facts it may now or hereafter know about Borrower, regardless
of whether Purchaser has reason to believe that any such facts materially
increase the risk beyond that

<PAGE>

which Guarantor intends to assume, or has reason to believe that such facts are
unknown to Guarantor.

Guarantor hereby knowingly accepts the full range of risk encompassed
within a contract of "Continuing Guaranty" which includes, without limitation,
the possibility that Borrower will contract for additional indebtedness for
which Guarantor may be liable hereunder after Borrower's financial condition or
ability to pay its lawful debts when they fall due has deteriorated.

14. REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Purchaser that each of the following statements is accurate and
complete as of the date of this Continuing Guaranty:

a. Guarantor is a corporation duly organized, validly, existing
and in good standing under the laws of its state of incorporation and is
duly qualified and in good standing in each jurisdiction where the nature
of its business or properties requires such qualification, except where the
failure to qualify could not have a material adverse effect on the
condition (financial or otherwise), business, operations, properties or
prospects of Guarantor (a "Material Adverse Effect");

b. the execution, delivery and performance by Guarantor of this
Continuing Guaranty are within the power of Guarantor and have been duly
authorized by all necessary actions on the part of Guarantor or its
shareholders;

c. this Continuing Guaranty has been duly executed and
delivered by Guarantor and constitutes a legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with
its terms, except as limited by applicable bankruptcy, insolvency and
similar laws regarding debtor/creditor relationships and the effect of
general principles of equity;

d. the execution, delivery and performance of this Continuing
Guaranty do not (i) violate any provisions of law or any order of any court
or other agency of government (each, a "Requirement of Law"),
(ii) contravene any provision of Guarantor's Certificate of Incorporation,
Bylaws or any material contract or agreement to which Guarantor is a party
or by which Guarantor or Guarantor's assets are bound (each, a "Contractual
Obligation"), or (iii) result in the creation or imposition of any lien,
charge or encumbrance of any nature upon any property, asset or revenue of
Guarantor;

e. all consents, approvals, orders and authorizations of, and
registrations, declarations and filings with, any governmental agency or
authority or other person or entity (including, without limitation, the
shareholders or partners of any entity), if any, which are required to be
obtained in connection with the execution and delivery of this Continuing
Guaranty or the performance of Guarantor's obligations hereunder have been
obtained, and each is in full force and effect;

<PAGE>

f. Guarantor has paid all taxes and other charges imposed by
any governmental agency or authority due and payable by Guarantor other
than those which are being challenged in good faith by appropriate
proceedings and for which adequate reserves have been established;

g. Guarantor is not in violation of any Requirement of Law or
Contractual Obligation other than any violation the consequences of which
could not have a Material Adverse Effect;

h. Guarantor is neither an investment company (as defined in
the Investment Company Act of 1940) nor controlled by an investment
company; and

i. no action, proceeding, investigation or litigation is
pending or, to the knowledge of Guarantor, overtly threatened against
Guarantor which, if adversely determined, could have a Material Adverse
Effect.

15. GUARANTOR FINANCIAL INFORMATION. Guarantor will provide
Purchaser in writing such financial and other information with respect to
Guarantor's assets and liabilities as Purchaser shall reasonably request from
time to time, in form satisfactory to Purchaser.

16. BINDING UPON SUCCESSORS. This Continuing Guaranty shall be
binding upon Guarantor and Guarantor's successors and assigns and shall inure to
the benefit of Purchaser and its successors and assigns. All references herein
to Borrower shall be deemed to include its successors and assigns, and all
references herein to Guarantor shall be deemed to include Guarantor and
Guarantor's successors and assigns.

In addition and notwithstanding anything to the contrary contained in
this Continuing Guaranty or in any other document, instrument or agreement
between or among any of Purchaser, Borrower, Guarantor or any third party, the
obligations of Guarantor with respect to the Liabilities shall be joint and
several with any other person or entity that now or hereafter executes a
guaranty of any of the Liabilities separate from this Continuing Guaranty.

17. NOTICES. All notices required or permitted to be given hereunder
shall be given in accordance with the terms of the Securities Purchase
Agreement.

18. GOVERNING LAW; ADDITIONAL WAIVERS. This Continuing Guaranty has
been delivered and shall be governed by and construed in accordance with the
internal laws (as opposed to the conflicts of law provisions) of the State of
California.

GUARANTOR HEREBY

(i) WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR
DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS CONTINUING GUARANTY, AND
ACKNOWLEDGES THAT PURCHASER ALSO WAIVES SUCH RIGHT;

<PAGE>

(ii) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED IN THE STATE OF CALIFORNIA, OVER ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS CONTINUING
GUARANTY;

(iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT GUARANTOR MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE
OF ANY SUCH ACTION OR PROCEEDING;

(iv) agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in any other jurisdictions by suit
on the judgment or in any other manner provided by law; and

(v) agrees not to institute any legal action or proceeding against
Purchaser or any of Purchaser's directors, officers, employees, agents or
property concerning any matter arising out of or relating to this
Continuing Guaranty in any court other than one located in the State of
California.

Nothing herein shall affect or impair Purchaser's right to serve legal
process in any manner permitted by law or Purchaser's right to bring any action
or proceeding against Guarantor or its property in the courts of any other
jurisdiction. Wherever possible each provision of this Continuing Guaranty
shall be interpreted as to be effective and valid under applicable law, but if
any provision of this Continuing Guaranty shall be prohibited by or invalid
under such law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Continuing Guaranty.

19. ADVICE OF COUNSEL. GUARANTOR ACKNOWLEDGES THAT IT HAS EITHER
OBTAINED THE ADVICE OF COUNSEL OR HAS HAD THE OPPORTUNITY TO OBTAIN SUCH ADVICE
IN CONNECTION WITH THE TERMS AND PROVISIONS OF THIS CONTINUING GUARANTY.

20. ENTIRE AGREEMENT. This Continuing Guaranty contains the complete
understanding of the parties hereto with respect to the subject matter herein.
Guarantor acknowledges that it is not relying upon any statements or
representations of Purchaser not contained in this Continuing Guaranty and that
such statements or representations, if any, are of no force or effect and are
fully superseded by this Continuing Guaranty. This Continuing Guaranty may only
be modified by a writing executed by Guarantor and Purchaser.

<PAGE>

IN WITNESS WHEREOF, Guarantor has caused this Continuing Guaranty to
be duly executed this ____ day of April, 1995.

"Guarantor"

GOLDEN STATE ACQUISITION CORP.

-----------------------------------
By:
--------------------------------
Title:
-------------------------

<PAGE>

Exhibit 10.9

SECURITY AGREEMENT

This SECURITY AGREEMENT (this "Security Agreement") dated as of
April 21 1995, is entered into by GOLDEN STATE VINTNERS, a California
corporation (the "Company"), in favor of JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY (the "Secured Party").

W I T N E S S E T H:

A. The Company owns certain real property located in the State of
California, as more particularly described on SCHEDULE I attached hereto and
incorporated herein by this reference, together with certain improvements
thereon (collectively, the "Real Property") and certain personal property used
in connection with the Real Property and certain intangible property associated
with the Real Property.

B. Pursuant to that certain Securities Purchase Agreement, dated as
of April 21, 1995 (as amended, supplemented, or restated from time to time, the
"Securities Purchase Agreement"), by and between the Company, as the issuer, and
the Purchasers of the Securities (including, without limitation, the Secured
Party as Purchaser of the Mortgage Notes and any successor Mortgage
Noteholders), the Company has authorized the issuance and sale of up to
$35,000,000 in aggregate principal amount of its First Mortgage Notes due 2005
(as further described in the Securities Purchase Agreement, the "Mortgage
Notes").

In furtherance of the foregoing, the Company hereby agrees as follows:

SECTION 1. DEFINITIONS

Capitalized terms used herein without other definition are used as
defined in the Securities Purchase Agreement.

SECTION 2. SECURITY AGREEMENT

Section 2.1 GRANT OF SECURITY INTEREST: COLLATERAL ASSIGNMENTS. The
Company hereby pledges, assigns, transfers and grants to the Secured Party for
the benefit of the Mortgage Noteholders a security interest in and to the
property described in Section 2.2 below (collectively and severally, the
"Collateral") to secure the Obligations (as defined in Section 2.3 below).

Section 2.2 COLLATERAL. The Collateral shall consist of the
following:

(a) all of the Company's right, title and interest in and to the
following personal property of any kind or description relating to, attached to,
located on or used in the operation of or in connection with the Real Property,
wherever located and whether now

<PAGE>

existing, owned or held or hereafter acquired or arising, including, without
limitation, the following (collectively, the "Goods"; and, together with the
Real Property, the "Property"):

(i) All goods, farm products, machinery, equipment, apparatus,
fittings and fixtures of every kind and nature whatsoever, wherever
located, and all parts thereof relating to, attached to, located on or used
in the operation of or in connection with the Real Property, whether
located at the Real Property or elsewhere (including, without limitation,
all crops (growing and severed), vines, fruit and vegetable products
(including grapes), timber, tanks, pipes, fittings, hoses, packaging lines,
bottling lines, tractors, plows, harvesters, fork lifts, trellises, stakes,
posts, wires, water supply equipment, irrigation equipment, pumps, scales,
tanks, cooperage, pipes, computers, laboratory equipment, tools,
appliances, heating, ventilating and air conditioning systems, plumbing,
mechanical and electrical systems, elevators, lighting, alarm systems, fire
control systems, carpets and carpet furnishings, furniture, service
equipment and building or maintenance equipment, storage facilities and
furniture) and all additions and accessions thereto and replacements
therefore, whether now owned or had or hereafter acquired;

(ii) All proceeds and claims arising on account of any damage to
or taking of the Goods or any part thereof and all causes of action and
recoveries for any loss or diminution in the value of any of the Goods or
any portion thereof, now owned or hereafter acquired; and

(iii) All inventory now owned or hereafter acquired by the
Company, including but not limited to, all raw materials, work in progress,
finished goods, merchandise, parts and supplies of every kind or
description relating to, located on or used in the operation of or in
connection with the Real Property, whether located at the Real Property or
elsewhere, together with all returns on accounts;

(b) All general intangibles relating to or used in connection with
the Property or any part thereof or in the ownership, occupancy, operation,
maintenance or leasing of the Property or any part thereof, and all amendments,
supplements, substitutions and renewals thereof, now owned or hereafter
acquired, including, without limitation:

(i) all contracts and agreements now or hereafter existing with
respect to the Property or the ownership, occupancy, operation, maintenance
or leasing of the Property or any part thereof (including, without
limitation, (A) insurance policies with respect to the Real Property or the
Goods, (B) all proceeds of and any unearned premiums on all policies
required under the Securities Purchase Agreement or otherwise carried by
the Company, and (C) contracts for the purchase or sale of the Real
Property or the Goods), and including, without limitation, the contracts
described on SCHEDULE II attached hereto and incorporated herein by this
reference;

(ii) all patents, copyrights, trademarks, tradenames and service
marks relating to the Property and all reissues, extensions or renewals
thereof and all licenses

<PAGE>

thereof and all licenses to use, applications for and other rights to
copyrights, trademarks, tradenames and service marks relating to the
Property.

(iii) all governmental approvals pertaining to the Property to the
extent such governmental approvals can be assigned or subjected to security
interests under applicable law and all consents, licenses, permits,
authorizations and agreements and any other rights necessary for the
Property or to own, occupy, operate, maintain and lease any of the Property
or any part thereof;

(iv) all books, records, customer and supplier lists, and other
information in whatever form and however stored relating to the Property or
any part thereof;

(v) all goodwill in any way relating to the Property or any part
thereof;

(vi) all warranties, indemnities and guaranties with respect to
the Property or any part thereof; and

(vii) all claims arising thereunder and all rights to compel
performance of the terms of any of the foregoing;

(c) All architectural drawings, specifications and plans relating to
the Property or any part thereof and all operating, maintenance and repair
manuals, plans, specifications, drawings, schedules and similar papers relating
to the Property or any part thereof or necessary or useful for the ownership,
occupancy, leasing and maintenance of the Property or any part thereof, wherever
located, now owned or hereafter acquired;

(d) All data and information relating to or used in connection with
the Property or any part thereof, including, without limitation, patented and
unpatented inventions, trade secrets, know-how, techniques, engineering
information, construction information, operation information and other similar
information, now owned or hereafter acquired;

(e) All reciprocal easement agreements;

(f) All building and use permits issued by any governmental agency;

(g) All of the estate, interest or other claim or demand, which the
Company now has or may hereafter acquire, in and to the Real Property described
in this Security Agreement including, without limitation, all deposits made with
or other security given to utility companies by the Company with respect to the
Real Property and the improvements thereon, and all advance payments of
insurance premiums made by the Company with respect to the Property and claims
or demands relating to insurance;

(h) Insofar as permitted by applicable law, all licenses including,
but not limited to, any operating licenses, contracts, management contracts or
agreements, franchise

<PAGE>

agreements, permits, authorizations or certificates required or used in
connection with the operation or maintenance of the Property;

(i) All damages, royalties and revenue of every kind, nature and
description whatsoever that the Company may be entitled to receive from any
person or entity owning or having or hereafter acquiring a right to the oil, gas
or mineral rights and reservations regarding the Real Property, with the right
in Secured Party to receive and receipt therefor and apply the same to the
Obligations secured hereby either before or after any default hereunder, and
Secured Party may demand, sue for and recover any such payments but shall not be
required to do so;

(j) All accounts, instruments, documents and chattel paper now or
hereafter acquired or created by the Company; and

(k) All products or proceeds of the foregoing Collateral.

For purposes of this Security Agreement, the term "proceeds" includes, without
limitation, whatever is receivable or received when Collateral or proceeds are
sold, collected, exchanged, or otherwise disposed of, whether such disposition
is voluntary or involuntary, and includes, without limitation, all rights to
payment, including, without limitation, return premiums and insurance proceeds,
with respect to any insurance relating thereto (whether or not the Secured Party
is the loss payee thereof), any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the Collateral
and all rights to payment with respect to any cause of action affecting or
relating to the Collateral.

Section 2.3 OBLIGATIONS. The "Obligations" secured by this Security
Agreement shall consist of the following:

(a) Payment in full to the Secured Party and the Mortgage Noteholders
of all principal of and interest and premium, if any, due on the Mortgage Notes
from time to time outstanding (including, without limitation, any Mortgage Note
Make-Whole Amount), and of all other amounts payable under the Mortgage Note
Documents, and any modifications, extensions or renewals thereof (including,
without limitation, (i) modifications of the required principal, interest and/or
payment dates, deferring or accelerating said payment dates in whole or in part,
and/or (ii) modifications, extensions or renewals at a different rate of
interest, whether or not any such modification, extension or renewal is
evidenced by a new or additional promissory note or notes); and

(b) The payment, satisfaction, observance and performance of all
other debts, obligations, covenants, agreements, and liabilities of the Company
to the Secured Party and the Mortgage Noteholders arising out of, connected
with, or related to this Security Agreement, and the other Mortgage Note
Documents, and the transactions contemplated thereby (including, without
limitation, all interest, fees, charges, expenses, reasonable attorneys' fees
and reasonable accountants' fees); and

<PAGE>

(c) With respect to each of the foregoing, whether now existing or
hereafter arising, voluntary or involuntary, whether or not jointly owed with
others, direct or indirect, absolute or contingent, liquidated or unliquidated,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all amendments, revisions or renewals
thereof.

Section 2.4 IMMEDIATE GRANT. The grant in Section 2.1 shall
constitute an immediate and present assignment by the Company to the Secured
Party of all rights of the Company to receive and to enforce the payment of the
full amount of all insurance proceeds, warranty, condemnation or requisition
payments or other payments of any kind for or with respect to any of the
Collateral or any part thereof, subject to the rights to rebuild, replace or
repair any Collateral or similar rights set forth in the Mortgage Note Documents
and the Deeds of Trust. The Secured Party shall exercise such rights and apply
such payments in accordance with the terms and conditions of this Security
Agreement, Mortgage Note Documents and the Deeds of Trust.

Section 2.5 APPOINTMENT OF THE SECURED PARTY AS ATTORNEY. The Company
hereby irrevocably constitutes the Secured Party the true and lawful attorney of
the Company with full power coupled with an interest to ask, require, demand,
receive, compound and give acquittance (in the name of the Company or otherwise)
for any and all monies and claims for monies due and to become due to the
Company as described in Section 2.4, to endorse any checks or other instruments
or orders in connection therewith and to file any claims or take any action or
institute any proceedings which the Secured Party may deem to be necessary or
advisable.

Section 2.6 FURTHER ASSURANCES; FINANCING STATEMENTS; NAME CHANGE.

(a) The Company hereby authorizes the Secured Party, at the Company's
expense, to file this Security Agreement or Uniform Commercial Code financing
statements with respect to the Secured Party's security interest in the
Collateral with any appropriate governmental office in order to perfect such
security interest in accordance with (i) the Uniform Commercial Code as adopted
in the state in which the Collateral is or will be located or (ii) any other law
applicable to establishing lien priority in and to the Collateral.

(b) At any time and from time to time, upon the request of the
Secured Party, the Company shall promptly and duly execute and deliver any and
all such further instruments and documents as may be specified in such request
and as are deemed by Secured Party to be necessary or desirable to perfect,
preserve or protect the mortgages, liens, security interests and assignments
created or intended to be created by the Security Documents, or to obtain for
the Secured Party the full benefit of the specific rights and powers herein and
therein granted, including, without limitation, the execution and delivery of
Uniform Commercial Code financing statements and continuation statements or
amendments with respect thereto, or similar instruments relating to the
perfection of the mortgages, liens, security interests or assignments created or
intended to be created by the Security Documents.

(c) The Company shall not change its name unless and until it has
(i) delivered written notice of such name change to Secured Party not less than
thirty (30) days

<PAGE>

before such name change is to take effect, and (ii) caused to be completed and
executed by the Company, in connection with any such name change, such
instruments and documents as may be requested by Secured Party and as are deemed
by Secured Party to be necessary or desirable to perfect, preserve or protect
the mortgages, liens, security interests and assignments created or intended to
be created by the Security Documents, or to obtain for the Secured Party the
full benefit of the specific rights and powers herein and therein granted,
including, without limitation, the execution and delivery of Uniform Commercial
Code financing statements, continuation statements or amendments with respect
thereto, or similar instruments relating to the perfection of the mortgages,
liens, security interests or assignments created or intended to be created by
the Security Documents. All reasonable fees, costs and expenses in connection
with the foregoing shall be the sole responsibility of the Company.

Section 2.7 TERMINATION OF INTEREST IN COLLATERAL. The Secured Party
shall have no further interest in, or other right with respect to, the
Collateral, and no further right under this Security Agreement, when and if the
principal of, premium, if any, and interest on, all Mortgage Notes and all other
Obligations due and owing shall have been paid in full (other than contingent
obligations which are not claimed, due or liquidated but that, by their terms,
may survive the termination of this Security Agreement) whereupon the Secured
Party shall, upon the written request of the Company, execute and deliver to, or
as directed in writing by, the Company an appropriate instrument (in due form
for recording) and Uniform Commercial Code Termination Statements on form UCC-2
sufficient to release from the Lien of this Security Agreement the Collateral
and all other property subject therein.

Section 2.8 ADDITIONAL SECURITY. Without notice to or consent of the
Company, and without impairment of the Lien and rights created by this Security
Agreement and the other Security Documents, the Secured Party may accept from
the Company or from any other Person additional security for the obligations
secured hereby. Neither the giving of this Security Agreement nor the
acceptance of any such additional security shall prevent the Secured Party from
resorting first to such additional security, or first to the security created by
the Security Documents, or concurrently, to both, in any case without affecting
the Secured Party's Lien and rights under the Security Documents.

Section 2.9 LIMITATION ON REPRESENTATIONS AND WARRANTIES. THE SECURED
PARTY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, (a) AS TO THE
TITLE, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE
OF THE COLLATERAL, OR ANY OTHER REPRESENTATION OF WARRANTY WITH RESPECT TO THE
COLLATERAL WHATSOEVER, (b) as to the validity or enforceability of this Security
Agreement, the other Security Documents, the Mortgage Notes or the other
Mortgage Note Documents, or (c) as to the correctness of any statement contained
in any thereof.

<PAGE>

SECTION 3. DEFAULTS AND REMEDIES.

Section 3.1 REMEDIES UPON AN EVENT OF DEFAULT. Upon the occurrence of
an Event of Default and the acceleration of the Mortgage Notes pursuant to the
Securities Purchase Agreement, the Secured Party, without further notice to the
Company, at its option and in addition to all other rights and remedies
available to the Secured Party, may do any one or more of the following:

(i) proceed to protect and enforce the rights, privileges and remedies
granted to it by this Security Agreement and the Deeds of Trust by such judicial
proceedings as the Secured Party shall deem necessary or appropriate, either at
law, in equity, in bankruptcy or otherwise, whether for specific enforcement of
any covenant or agreement contained in this Security Agreement, or any other
Mortgage Note Document, or in aid of the exercise of any right, power, privilege
or remedy therein or herein granted;

(ii) Foreclose or otherwise enforce the Secured Party's security
interest in any manner permitted by law, or provided for in this Security
Agreement, and exercise at any time all rights and remedies of a secured party
under the Uniform Commercial Code in effect in the State of California, or for
any foreclosure of the Collateral provided under the Security Documents and sale
under any judgment or decree in any judicial proceeding, or to enforce any other
legal or equitable right or remedy granted or otherwise available to the Secured
Party hereunder or under the Mortgage Note Documents;

(iii) Enter onto property where any Collateral is located and take
possession thereof with or without judicial action;

(iv) Prior to the disposition of the Collateral, store, process,
repair or recondition it or otherwise prepare it for disposition in any manner
and to the extent the Secured Party deems appropriate and in connection with
such preparation and disposition, without charge, use any copyright, patent,
technical process permit, approval, license, consent or governmental approval
used or held by the Company;

(v) Demand, sue for, collect or receive any money or property at any
time payable to or receivable by the Company on account of or in exchange for
any part of the Collateral;

(vi) Secure the appointment of a receiver without notice to the
Company;

(vii) Sell, lease, or otherwise dispose of any Collateral at one or
more public or private sales, whether or not such Collateral is present at the
place of sale, without assumption of any credit risk, for cash or credit or
future delivery, on such terms and in such manner as the Secured Party may
determine in its sole and complete discretion and in light of its own best
interests, with or without any previous demand on or notice to the Company or
advertisement of any such sale or other disposal (the Obligations being the
equivalent of cash for the purposes of such sale); and for the aforesaid
purposes, all notice of sale, advertisement, and demand, and any right or equity
of redemption otherwise required by, or available to the

<PAGE>

Company under the law are hereby waived by the Company to the fullest extent
permitted by law;, other than as required by the Uniform Commercial Code; and in
any case where notice of any sale or disposition of any of the Collateral is
required by law, the Company hereby agrees that ten (10) days notice of such
sale is reasonable; the power of sale hereunder shall not be exhausted by one or
more sales, and the Secured Party may from time to time adjourn any sale to be
made hereunder; the Secured Party or any other Person may be the purchaser of
any or all of the Collateral so sold and thereafter hold the same absolutely
free from any claim or right of whatsoever kind, including any equity of
redemption, of the Company; to the extent permitted by law, the Company waives
all claims, damages and demands against the Secured Party arising out of the
repossession, retention or sale of the Collateral, except for claims based on
the gross negligence or wilful misconduct of the Secured Party; and

(viii) Take any other action and seek any other remedy available to a
secured party under the law.

Section 3.2 WAIVER OF APPRAISEMENT, VALUATION, ETC.. To the full
extent it may lawfully do so, the Company, for itself and for any other Person
who may claim through or under it, hereby (a) agrees that neither it nor any
such Person will set up, plead, claim or in any manner whatsoever take advantage
of, any appraisal, valuation, stay, moratorium, extension or redemption laws,
now or hereafter in force, or any rights of marshalling in the event of any sale
of the Collateral or any part thereof or any interest therein, (b) waives all
benefit or advantage of any such laws and waives and releases any and all such
rights and covenants not to hinder, delay or impede the exercise of any right or
remedy permitted herein or in the Deeds of Trust but to suffer and permit every
such right or remedy as though no such laws were in effect, (c) consents and
agrees that the Property and the Collateral may be sold by the Secured Party as
an entirety or in parts and (d) agrees that it will neither claim, demand or
otherwise be entitled to any credit against or deduction from the principal of
or premium, if any, or interest on the Mortgage Notes or any other sums which
may become payable under the terms of this Security Agreement or the Deeds of
Trust by reason of the payment of any tax, assessment or other municipal or
governmental charge or imposition on or relating to the Property or the
Collateral or any part thereof, nor claim or otherwise be entitled to any
deduction from the taxable or assessed value of the Property or the Collateral
or any part thereof by reason of this Security Agreement, the Deeds of Trust or
the Mortgage Notes.

Section 3.3 WAIVER OF MARSHALLING AND OTHER DEFENSES. The Company
hereby (a) waives any and all rights of marshalling and specifically agrees that
in the event of foreclosure, whether by action or advertisement, all of the
Collateral and all interests in the Collateral may, at the option of the Secured
Party, be sold together in a single sale, and (b) agrees that the Lien of the
Security Documents as to the interests of the Company will not be released,
impaired or subordinated by any amendment to or termination of any Debt
Document, any extension of time or waiver of right or remedy under any Debt
Document, or any other act, inaction or thing which, but for this provision,
would so release, impair or subordinate.

<PAGE>

Section 3.4 REMEDIES CUMULATIVE. Each and every right, power and
remedy herein or in the other Mortgage Note Documents specifically given to the
Secured Party or otherwise in this Security Agreement shall be cumulative and
shall be in addition to every other right, power and remedy herein or in the
other Mortgage Note Documents specifically given or now or hereafter existing at
law, in equity or by statute or otherwise, and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed expedient by
the Secured Party, and the exercise or the beginning of the exercise of any
right, power or remedy shall not be construed to be a waiver of the right to
exercise at the same time or thereafter any other right, power or remedy.
Secured Party shall exercise all such rights and remedies in a commercially
reasonable manner.

Section 3.5 DISCONTINUANCE OF PROCEEDINGS. If the Secured Party shall
have proceeded to enforce any right, power or remedy under this Security
Agreement or the other Security Documents by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Secured Party, then, and in every
such case, the Company and the Secured Party shall be restored to their former
positions and rights hereunder and under the other Security Documents with
respect to the Real Property and the Collateral, and all rights, powers and
remedies of the Secured Party shall continue as if no such proceedings had been
taken.

Section 3.6 COSTS AND EXPENSES, ATTORNEYS FEES, ETC. OF THE SECURED
PARTY. The Company shall pay all reasonable costs, fees and expenses of the
Secured Party, its agents and counsel in connection with the performance of its
duties hereunder and under the other Security Documents, including, without
limitation, the reasonable cost of any trustee's sale guaranty or other title
insurance coverage ordered in connection with any foreclosure proceedings
hereunder, and shall pay all taxes (except federal and state income taxes) or
other governmental charges or impositions imposed on the Secured Party by reason
of its interest in the Mortgage Notes, this Security Agreement, the other
Mortgage Note Documents, the Real Property or the Collateral. The Company shall
pay to the Secured Party on demand any reasonable costs and expenses, including
reasonable attorneys fees and expenses, paid or incurred by the Secured Party in
connection with the collection of any amount payable by the Company to the
Secured Party hereunder, whether or not any legal proceeding is commenced
hereunder and whether or not any Default or Event of Default shall have occurred
and is continuing, together with interest thereon at the Overdue Rate from the
date of payment or incurring by the Secured Party until paid by the Company.

Section 3.7 NO WAIVER, ETC. The failure of the Secured Party to
exercise or delay in exercising, or to insist on the strict performance of, any
right, remedy, power or privilege under this Security Agreement shall not impair
or operate as a waiver of any such right, remedy, power or privilege or a waiver
of any Default or Event of Default. The single or partial exercise of any
right, remedy, power or privilege hereunder by the Secured Party shall not
preclude any other or further exercise of the same or of any other right,
remedy, power or privilege. No waiver by the Secured Party of any Default or
Event of Default shall be deemed to be a waiver of any other or similar,
previous or subsequent Default or Event of Default or affect or alter this
Security Agreement or the other Mortgage Note Documents which shall

<PAGE>

continue in full force and effect. By accepting payment of any amount secured
by the Security Documents after its due date, the Secured Party shall not be
deemed to waive its right either to require prompt payment when due of all other
amounts payable hereunder or under the other Security Documents or any other
Debt Document or to declare a default for failure to effect such prompt payment.

Section 3.8 COMPROMISE OF ACTIONS, ETC. Any action, suit or
proceeding brought by the Secured Party pursuant to any of the terms of this
Security Agreement, the other Mortgage Note Documents or otherwise, and any
claim made by the Secured Party hereunder or thereunder, may be compromised,
withdrawn or otherwise dealt with by the Secured Party upon notice to, but
without approval of, the Company.

Section 3.9 RIGHT OF THE SECURED PARTY TO PERFORM THE COMPANY'S
COVENANTS, ETC. If (a) the Company shall fail to make any payment or perform
any act which failure would constitute an Default or Event of Default, or
(b) any action or proceeding is commenced that materially and adversely affects
the Secured Party's interest in the Real Property or the Collateral or any part
thereof, the Secured Party with notice to, but without demand upon, the Company,
and without waiving or releasing any Obligation, Default or Event of Default,
may at any time thereafter make such appearances or such payment or perform such
act for the account and at the expense of the Company, and may enter upon the
Real Property for such purpose, and take all such action thereon as, in the
Secured Party's opinion, may be necessary or appropriate therefor, including,
without limitation, payment, purchase, contest or compromise of any Lien that in
the judgment of the Secured Party appears to be prior or superior to the Lien of
the Security Documents. No such entry and no such action shall be deemed an
eviction of any lessee of the Real Property, the Collateral or any part thereof.
All sums so paid by the Secured Party and all reasonable costs and expenses
(including, without limitation, reasonable attorneys fees and expenses) so
incurred, together with interest thereon at the Overdue Rate from the date of
payment or incurring, shall constitute additional Obligations secured by the
Security Documents and shall be paid by the Company to the Secured Party on
demand. The Secured Party shall not be liable for any damages resulting from
any such payment or action unless such damages shall be a consequence of willful
misconduct or gross negligence on the part of the Secured Party.

SECTION 4. THE COMPANY

Section 4.1 CERTAIN COVENANTS OF THE COMPANY.

(a) NO OTHER LIENS ON COLLATERAL. The Company warrants and
represents that except for Permitted Liens, it has not assigned or pledged, and
hereby covenants that except for Permitted Liens, and except as expressly
permitted by the Securities Purchase Agreement and the Deeds of Trust, it will
not assign or pledge, so long as this Security Agreement and the other Security
Documents shall remain in effect, any of its estate, right, title or interest in
the Collateral pledged and assigned or intended to be pledged or assigned by the
Security Documents to anyone other than the Secured Party. The Company will, in
its individual capacity and at its own cost and expense, promptly take such
action as may be necessary to discharge any such Lien on any of its estate,
right, title or interest in the

<PAGE>

Collateral so pledged or assigned or intended to be pledged or assigned under
the Security Documents.

(b) PAYMENT OF MONIES TO THE SECURED PARTY. Promptly on receipt
thereof, the Company will transfer to the Secured Party any and all monies from
time to time received by it and constituting part of the Collateral or otherwise
assigned or pledged to the Secured Party under the Security Documents, in each
case for application by the Secured Party pursuant to this Security Agreement,
subject to the terms of the Mortgage Note Documents and the Deeds of Trust.

(c) NOTICES OF DEFAULT. The Company shall give prompt telex,
telegraphic, facsimile or telephonic notice (confirmed by certified mail, return
receipt requested) to the Secured Party of any Default or Event of Default of
which the Company shall have knowledge. The notice shall set forth in
reasonable detail the circumstances of such default known to the Company and
shall describe in reasonable detail the action the Company is taking or proposes
to take in respect thereof.

Section 4.2 THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The Company
hereby confirms for the benefit of each Mortgage Noteholder that each of its
representations and warranties in the Securities Purchase Agreement was true and
correct when made and on the Closing Date thereunder.

SECTION 5. MISCELLANEOUS

Section 5.1 PROVISIONS SUBJECT TO APPLICABLE LAW. All rights, powers
and remedies provided in this Security Agreement may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law and are intended to be limited to the extent necessary so that they will not
render this Security Agreement invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any applicable law. If
any term of this Security Agreement or any application thereof shall be invalid
or unenforceable, the remainder of this Security Agreement and any other
application of such term shall not be affected thereby.

Section 5.2 NO LEGAL TITLE TO COLLATERAL IN MORTGAGE NOTEHOLDERS. No
Mortgage Noteholder shall have legal title to any part of the Collateral. No
transfer, by operation of law or otherwise, of any Mortgage Note or other right,
title and interest of any Mortgage Noteholder in and to the Collateral or
hereunder shall operate to terminate the Security Documents or entitle any
successor or transferee of such Mortgage Noteholder to an accounting or to the
transfer to it of legal title to any part of the Collateral.

Section 5.3 BENEFITS OF SECURITY AGREEMENT. Nothing in this Security
Agreement or the other Security Documents, whether express or implied, shall be
construed to give to any Person other than the parties hereto and the Mortgage
Noteholders any legal or equitable right, remedy or claim under or in respect of
this Security Agreement or the other Security

<PAGE>

Documents, and this Security Agreement and the other Security Documents shall be
held for the sole and exclusive benefit of the parties hereto and thereto and
the Mortgage Noteholders.

Section 5.4 NOTICES. Unless otherwise specifically provided herein,
all notices, requests, demands, instructions, consents and other communications
required or contemplated by the provisions hereof shall be in writing or by
telex or telegraph or facsimile (if by facsimile, confirmed by certified mail,
return receipt requested), and shall be deemed to have been given or made when
received (or upon rejection if receipt is rejected) if sent as required by
Section 17.1 of the Securities Purchase Agreement, or, if to any Mortgage
Noteholder not a party to the Securities Purchase Agreement, if sent to the
address of such Mortgage Noteholder appearing on the register or other record of
Mortgage Noteholders maintained pursuant to Section 8.1 of the Securities
Purchase Agreement.

Section 5.5 SEVERABILITY. Any provision of this Security Agreement
that is illegal, invalid, prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such illegality,
invalidity, prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such illegality, invalidity, prohibition or
unenforceability in any jurisdiction shall not of itself invalidate or render
unenforceable such provision in any other jurisdiction.

Section 5.6 AMENDMENTS; WAIVERS; MODIFICATIONS. No term or provision
of this Security Agreement or any Mortgage Note may be amended, modified,
supplemented, changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
amendment, modification, change, waiver, discharge or termination is sought; and
no such instrument shall be effective, unless a signed copy thereof shall have
been delivered to the Secured Party.

Section 5.7 COUNTERPARTS. This Security Agreement may be executed by
the parties hereto in separate counterparts and or any number of counterparts,
each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.

Section 5.8 BINDING EFFECT; SUCCESSORS AND ASSIGNS. The terms and
provisions of this Security Agreement and the respective rights and obligations
of the parties hereunder and the Mortgage Noteholders shall be binding upon, and
inure to the benefit of, their respective permitted successors and assigns.

Section 5.9 CAPTIONS; REFERENCES; RULES OF CONSTRUCTION. The captions
in this Security Agreement are for convenience of reference only and shall not
define, affect or limit any of the terms or provisions hereof. Reference herein
to Sections, subsections, clauses, paragraphs, Exhibits or Schedules without
reference to the document in which they are contained are references to
Sections, subsections, clauses, paragraphs, Exhibits or Schedules of or to this
Security Agreement.

Section 5.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE

<PAGE>

STATE OF CALIFORNIA. THIS SECURITY AGREEMENT HAS BEEN NEGOTIATED WITH REFERENCE
TO THE LAWS OF, AND IS BEING MADE AND DELIVERED IN, THE STATE OF CALIFORNIA.

Section 5.11 INTEGRATION. This Security Agreement, together with all
exhibits and schedules hereto, the other Security Documents, the Mortgage Notes
and the Mortgage Note Documents constitute the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties.

Section 5.12 DIRECTLY OR INDIRECTLY. Any provision in this Security
Agreement, or the other Security Documents, the Mortgage Notes and the Mortgage
Note Documents referring to action to be taken by any Person, or that such
Person if prohibited from taking, shall be applicable whether such action is
taken directly or indirectly by such Person.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.

The Company: GOLDEN STATE VINTNERS,
a California corporation

By
-----------------------------
Name:
------------------------
Title:
-----------------------

<PAGE>

RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:

ORRICK, HERRINGTON & SUTCLIFFE
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
Attention: Douglas C. Sands

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

INTERCREDITOR AGREEMENT

THIS INTERCREDITOR AGREEMENT dated as of April 21, 1995 (this
"Intercreditor Agreement"), is entered into by and between Golden State
Vintners, a California corporation (the "Company"), John Hancock Mutual Life
Insurance Company, a Massachusetts life insurance company ("John Hancock"), and
Sanwa Bank California, a California banking corporation ("Sanwa Bank").

RECITALS

WHEREAS, John Hancock proposes to purchase from the Company $35,000,000 in
aggregate principal amount of mortgage notes (the "MORTGAGE NOTES") pursuant to
that certain Securities Purchase Agreement dated the date hereof (the "JOHN
HANCOCK AGREEMENT");

WHEREAS, the Company's obligations under the Mortgage Notes are secured by
each Deed of Trust with Assignment of Rents and Fixture Filing dated as of the
date hereof (collectively, the "MORTGAGES") executed by the Company in favor of
John Hancock, which encumbers certain real property more particularly described
on SCHEDULE I hereto (the "REAL PROPERTY"), and which are being recorded
concurrently herewith in the Official Records of the Counties of Fresno, Kern,
Madera, Napa and Tulare, California;

WHEREAS, the Company has granted a security interest in certain collateral
to John Hancock to secure the Company's obligations under the Mortgage Notes
pursuant to the Security Agreement dated the date hereof between the Company and
John Hancock (the "JOHN HANCOCK SECURITY AGREEMENT");

WHEREAS, Sanwa Bank proposes to make an $8,000,000 revolving credit
facility (the "REVOLVER") available to the Company pursuant to that certain
Account Receivables Credit Agreement dated the date hereof between the Company
and Sanwa Bank (the "REVOLVER AGREEMENT");

<PAGE>

WHEREAS, Sanwa Bank proposes to lend to the Company a term loan in a
principal amount not to exceed the lesser of $4,500,000 or 75% of the appraised
value of a brandy processing facility located in Reedley, California (together
with the Revolver, the "SANWA LOAN"), pursuant to that certain Term Loan Credit
Agreement to be entered into by the Company and Sanwa Bank (together with the
Revolver Agreement, the "SANWA AGREEMENTS");

WHEREAS, the Company has granted a security interest in certain collateral
to Sanwa Bank to secure the Company's obligations under the Sanwa Agreements
pursuant to a Security Agreement dated the date hereof between the Company and
Sanwa Bank (the "SANWA SECURITY AGREEMENT");

WHEREAS, the Company, John Hancock and Sanwa Bank desire to enter into this
Intercreditor Agreement with respect to the relative priorities, utilization
and enforcement of remedies with respect to the collateral described herein
pursuant to the John Hancock Agreement, the Mortgages, the John Hancock Security
Agreement, the Sanwa Agreements and the Sanwa Security Agreement.

NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

1. DESCRIPTION OF COLLATERAL. The Company, John Hancock and Sanwa Bank
agree and acknowledge that, notwithstanding the date, manner or order of
perfection of the security interests granted to John Hancock and Sanwa Bank, any
provision of the California Uniform Commercial Code or any other applicable law
or decision, or any provisions in the John Hancock Security Agreement, the Sanwa
Security Agreement or any other agreement:

(a) Sanwa Bank has a first priority security interest in the
Company's interests in (i) the collateral described on SCHEDULE II hereto,
except for Permitted Liens as described in the Sanwa Agreements, and
(ii) the wine grape and processing contracts to which the Company is a
party (the "GRAPE CONTRACTS").

(b) The security interests of Sanwa Bank and John Hancock in all of
the Company's interests in (i) the promissory note payable to the Company
for $1,300,000 in initial principal amount executed by Golden State
Acquisition Corporation (the "INTERCOMPANY NOTE") and (ii) general
intangibles (other than the Wine Grape Contracts to the extent they
constitute general intangibles), including, but not limited to, all
goodwill, trademarks, trade styles, trade names, customer lists and
business records, shall rank equally and pari passu. Sanwa Bank agrees
that it has possession of the Intercompany Note on behalf of itself and
John Hancock.

(c) John Hancock has a first priority security interest in all of the
Company's interests in the Real Property and the fixtures thereto, and in
all other personal property not described in paragraphs (a) and (b) of this

<PAGE>

Section 1, except for Permitted Liens (as defined in the John Hancock
Agreement), and a second priority security interest in the Sanwa Bank
collateral described in paragraph (a) of this Section 1.

2. JOHN HANCOCK AS OWNER. In the event that John Hancock acquires title
to the Real Property by foreclosure or deed in lieu of foreclosure:

(a) Prior to or within three (3) Business Days after acquiring title
to any Real Property by foreclosure or deed in lieu of foreclosure, John
Hancock shall send written notice to Sanwa Bank of such event (the "JOHN
HANCOCK NOTICE"). Sanwa Bank shall notify John Hancock in writing as to
whether it will exercise any of its rights under Section 2(b) and/or
Section 2(c) hereof (the "SANWA BANK NOTICE") (i) within five (5) Business
Days of receipt of the John Hancock Notice if the John Hancock Notice is
received by Sanwa Bank on or after August 1 but prior to October 31 of any
year or (ii) within fourteen (14) Business Days of receipt of the John
Hancock Notice if the John Hancock Notice is received by Sanwa Bank at any
other time of the year. If John Hancock does not receive the Sanwa Bank
Notice within the period specified above, it shall have no further
obligation to Sanwa Bank with respect to the collateral located on the Real
Property. For purposes of this Intercreditor Agreement, the term "BUSINESS
DAY" shall mean any day on which commercial banks are not authorized or
required to close in San Francisco, California, or Boston, Massachusetts.

(b) John Hancock agrees to permit Sanwa Bank, in accordance with
Section 2(e) below, for up to one hundred and twenty (120) days following
the date of the Sanwa Bank Notice (or such longer period as may be agreed
to by John Hancock and Sanwa Bank), to enter upon the Real Property for the
purpose of exercising any right Sanwa Bank may have under the Sanwa
Security Agreement with respect to the collateral described in paragraphs
(a) and (b) of SCHEDULE II hereto, together with any proceeds thereof (the
"GOODS"), including without limitation the right to appraise, maintain,
remove, repair, prepare for public or private sale, exhibit and sell the
goods, provided that Sanwa Bank shall reimburse John Hancock for the
reasonable cost of repair of, and shall pay John Hancock the amount of any
damages resulting from, any physical injury to the Real Property caused by
the removal of the Goods (excluding diminution in value to the Real
Property resulting from the removal of the Goods).

(c) John Hancock agrees to permit Sanwa Bank, in accordance with
Section 2(e) below, for the time period specified in Section 2(d), to enter
upon the Real Property for the purpose of exercising any right Sanwa Bank
may have under the Sanwa Security Agreement with respect to the crops (and
the proceeds and products thereof) and the farm products described in
paragraphs (f) and (g) of SCHEDULE II

<PAGE>

hereto, together with any proceeds thereof (the "CROPS AND FARM PRODUCTS").
Such right shall include the right to farm, cultivate, irrigate, fertilize,
fumigate, prune and perform any other act or acts appropriate or necessary
to grow, care for, preserve and protect the Crops and the Farm Products
(using any water located in, on or adjacent to the Real Property); harvest
and remove the Crops and the Farm Products from the Real Property; and
appraise, store, prepare for public or private sale, exhibit, market and
sell the Crops and the Farm Products; provided that Sanwa Bank shall
reimburse John Hancock for the reasonable cost of repair of, and shall pay
John Hancock the amount of any damages resulting from, any physical injury
to the Real Property caused by the removal of the Crops or the Farm
Products (excluding diminution in value to the Real Property resulting from
the removal of the Crops or the Farm Products).

(d) Sanwa Bank's right to enter the Real Property for the purpose of
exercising its rights under Section 2(c) shall terminate at the end of the
harvest season during which all growing crops have been harvested and
removed from the Real Property immediately following the earliest to occur
of:

(i) The date that Sanwa commences foreclosure proceedings with
respect to its collateral.

(ii) The date that John Hancock commences a judicial foreclosure or
files a notice of default under the John Hancock Agreement.

(iii) The date that the Company shall: commence a voluntary case under
any chapter of the Federal Bankruptcy Code (11 U.S.C. Section
101, ET SEQ., as amended) as now or hereafter in effect; consent
to (or fail to controvert in a timely manner) the commencement of
an involuntary case against the Company under said Code;
institute proceedings for liquidation, rehabilitation,
readjustment or composition (or for any related or similar
purpose) under any law relating to financially distressed
debtors, their creditors or property; consent to (or fail to
controvert in a timely manner) the institution of any such
proceedings against the Company; make an assignment for the
benefit of creditors or enter into any arrangement for the
adjustment or composition of debts or claims; or apply for or
consent to the appointment of, or the taking possession by, a
receiver, liquidator, assignee, trustee, custodian or
sequestrator (or other similar official) of itself or any of its
property.

(e) Sanwa Bank shall undertake activities described in Sections 2(b)
and 2(c) consisting of horticultural activities relating to the cultivation
and harvesting of

<PAGE>

crops and activities relating to the operation of the wineries, such as
storing and processing wine, through a management company mutually agreed
to by John Hancock and Sanwa Bank.

(f) Commencing at the time that Sanwa Bank occupies the Real Property
pursuant to Section 3(b) or Section 3(c) hereof until such time as Sanwa
Bank vacates the Real Property, Sanwa Bank shall pay John Hancock a daily
license fee equivalent to 1/30th of an amount equivalent to the monthly
payment based upon a 30-year amortization of the original principal amount
of the Mortgage Notes at the then applicable interest rate under the
Mortgage Notes.

(g) In all cases, John Hancock shall not be obligated to incur any
expense towards the preservation or maintenance of Sanwa Bank's collateral
unless both parties have agreed in writing as to such reimbursement.

(h) In all cases, the Company, John Hancock and Sanwa Bank shall
cooperate at the direction of the management company appointed pursuant to
Section 2(e) to operate the properties in accordance with prudent customary
horticultural practices and to maximize the long-term economic value of the
collateral described herein and the Real Property. To the extent that the
management company determines that certain actions that are consistent with
prudent customary horticultural practices should be taken in connection
with the removal of Sanwa Bank's collateral to enhance the economic value
of the remaining collateral and Real Property, John Hancock agrees to pay
its allocable portion of such actions.

(i) Upon the expiration of the period of time that Sanwa Bank is
permitted to enter the Real Property pursuant to Section 2(d), Sanwa Bank
shall release its security interest in the Grape Contracts; provided,
however, that in no event shall such release constitute a release by Sanwa
Bank of its security interest in the right to the payment of money or other
rights under the Grape Contracts relating to deliveries under such Grape
Contracts prior to the expiration of the period of time that Sanwa Bank is
permitted to enter the Real Property under Section 2(d).

3. NOTICE OF DEFAULT. John Hancock and Sanwa Bank shall give to each
other prompt written notice with respect to:

(a) any event which with notice and/or lapse of time would constitute
an Event of Default (as defined in the John Hancock Agreement or the Sanwa
Agreements); or

(b) any other occurrence that would give John Hancock or Sanwa Bank
the right (whether immediately or with notice or lapse of time or both) to
accelerate the maturity or require prepayment of all or any portion of the
Mortgage Notes or the Sanwa Loan.

<PAGE>

Each of John Hancock and Sanwa Bank shall use its best efforts to give such
notice before it exercises any right or remedy available to it under any
agreement or at law.

4. EFFECT OF THIS AGREEMENT. The purpose of this Intercreditor Agreement
is solely to set forth the agreement of John Hancock and Sanwa Bank with respect
to the relative priorities, utilization, and enforcement of remedies with
respect to, the collateral described herein. Except as expressly set forth
herein, this Intercreditor Agreement shall not affect the exercise by John
Hancock or Sanwa Bank of any of its rights and remedies with respect to the
Company or its respective collateral under the John Hancock Agreement, the
Mortgage Notes issued pursuant thereto, the John Hancock Security Agreement, the
Sanwa Agreements or the Sanwa Security Agreement.

5. NO ADDITIONAL COMPANY RIGHTS. This Intercreditor Agreement shall not
be construed as creating any rights enforceable by the Company. If either John
Hancock or Sanwa Bank shall enforce its rights or remedies in violation of this
Intercreditor Agreement, the Company agrees that it shall not use such violation
as a defense of its liabilities to John Hancock or Sanwa Bank, nor assert such
violation as a counterclaim or basis for setoff or recoupment against such
person.

6. TERMINATION. This Intercreditor Agreement shall terminate upon the
earliest to occur of:

(a) full payment and performance of all of the Company's obligations
to John Hancock under the Mortgage Notes; or

(b) full payment and performance of all of the Company's obligations
to Sanwa Bank under the Sanwa Agreements and termination of Sanwa Bank's
commitment to lend the Revolver.

7. NOTICES. All notices shall be in writing and delivered by hand or
mail, first class postage prepaid, or sent by nationally recognized overnight
courier or by confirmed telecopy transmission (confirmed by hand delivery or
overnight courier copy sent the same day such telecopy is sent), in each case
addressed to the party to which such notice is requested or permitted to be
given or made, at the respective address or telecopy number indicated on
SCHEDULE III below or at such other address or telecopy number of which such
person shall have notified in writing the party giving such notice.

8. GOVERNING LAW. This Intercreditor Agreement shall be governed by and
construed in accordance with the laws of the State of California.

9. SEVERABILITY. If one or more of the provisions contained in this
Intercreditor Agreement shall be invalid, illegal, or unenforceable in any
respect, the remaining provisions shall not in any way be affected or impaired.

<PAGE>

10. SUCCESSOR AND ASSIGNS. This Intercreditor Agreement shall be binding
upon and shall inure to the benefit of the respective successors and assigns of
the parties hereto.

11. COUNTERPARTS. This Intercreditor Agreement may be executed in
multiple counterparts each of which shall constitute an original, but all of
which taken together shall constitute one and the same instrument.

12. HEADINGS. Headings herein are for convenience only and shall not be
relied upon in interpreting or enforcing this Intercreditor Agreement.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Intercreditor
Agreement as of the date first written above.

GOLDEN STATE VINTNERS

By:
--------------------------------
Name:
Title:

JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY

By:
-------------------------------
Name:
Title:

SANWA BANK

By:
------------------------------
Name:
Title:

<PAGE>

ACCOUNTS RECEIVABLE CREDIT AGREEMENT

This Accounts Receivable Credit Agreement (the "Agreement") is made and
entered into as of this ____ day of April, 1998, by and between SANWA BANK
CALIFORNIA (the "Bank") and GOLDEN STATE VINTNERS (the "Borrower"), on the terms
and conditions that follow:s

SECTION 1

DEFINITIONS

1.01 CERTAIN DEFINED TERMS: Unless elsewhere defined in this Agreement,
the following terms shall have the following meanings (such meanings to be
generally applicable to the singular and plural forms of the terms defined):

(a) "ACCEPTABLE INVENTORY": shall mean inventory consisting of
bulk wine and bottled wine as cased goods, but EXCLUDING: (i) inventory which
is not owned by the Borrower free and clear of all security interests, liens,
encumbrances or claims of any third party, excluding permitted liens; (ii)
inventory which is not permanently located in the State of California; (iii)
inventory which the Bank, in its sole discretion, deems to be obsolete,
unsalable, damaged, defective or unfit for further processing; (iv) inventory
that is used in the winery tasting room; (v) inventory which consists of bottled
wine in the Borrower's possession more than 15 months from the date of bottling;
(vi) inventory which consists of bulk red wine in the Borrower's possession more
than 36 months; and (vii) inventory which consists of bulk white wine in the
Borrower's possession more than 24 months.

(b) "ACCOUNT DEBTOR": shall mean the person or entity obligated
to the Borrower upon an account.

(d) "BORROWING BASE": shall mean, as determined by the Bank from
time to time, the lesser of: (i)the sum of (a) 80% of the aggregate amount of
Eligible Accounts of the Borrower, plus (b) 65% of the lesser of actual costs
incurred in connection with growing crops or projected costs of growing crops as
reflected on the Crop Budget, plus (c) 50% of the Value of Acceptable Inventory;
or (ii) $22,500,000.

(e) "BUSINESS DAY": shall mean a day other than a Saturday or
Sunday on which commercial banks are open for business in California.

(f) "COLLATERAL": shall mean the property described in Section
4.01, together with any other personal or real property in which the Bank may be
granted a lien or security interest to secure payment of the Obligations.

(g) "CROP BUDGET": shall mean the crop budget dated ________ for
the crop production year commencing on November 1, 1997and ending on October 31,
1998 (the "Current Crop Year, which budget is attached hereto as Exhibit "A"
(the "Crop Budget").

(h) "DEBT": shall mean, on a consolidated basis with Golden State
Acquisition Corp., all liabilities of the Borrower less Subordinated Debt.

(i) "EFFECTIVE TANGIBLE NET WORTH": shall mean, on a consolidated
basis with Golden State Acquisition Corp., the Borrower's stated net worth plus
Subordinated Debt but less all intangible assets (other than goodwill) of the
Borrower (i.e., trademarks, patents, copyrights, organization expense and
similar intangible items).

(j) "ELIGIBLE ACCOUNT": shall mean, at any time, the gross
amount, less returns, discounts, credits or offsets of any nature, of the trade
accounts owing to the Borrower by Account Debtors containing selling terms not
exceeding 30 days or extended selling terms not exceeding equal installments of
30, 60 and 90 days by any Account Debtor but excluding the following:

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<PAGE>

(1) Accounts with respect to which the Account Debtor is an
officer, employee or agent of the Borrower.

(2) Accounts with respect to which goods are placed on
consignment, guarantied sale or other terms by reason of which the payment by
the Account Debtor may be conditional.

(3) Accounts with respect to which the Account Debtor is
not a resident of the United States except Cardia Brights of Canada and except
to the extent such accounts are supported by adequate Eximbank insurance or
other insurance acceptable to the Bank or by irrevocable letters of credit
issued by banks satisfactory to the Bank.

(4) Accounts with respect to which the Account Debtor is
the United States or any department or agency thereof.

(5) Accounts with respect to which the Account Debtor is a
subsidiary of, or affiliated with, the Borrower or its shareholders, officers or
directors.

(6) Accounts with respect to which the Borrower is or may
become liable to the Account Debtor for goods sold or services rendered by the
Account Debtor to the Borrower.

(7) That portion of the accounts of any single Account
Debtor that exceeds 15% of all of the Borrower's accounts, other than the
following Account Debtors: Heublein, Wine World (Beringer), Sebastiani, Sutter
Home, Gallo Winery, Kendall Jackson Winery, Canandaigua Wine Company, Cardia
Brights, and Vie-Del.

(8) Accounts which have not been paid in full within 60
days from the date payment was due or 90 days from the original date of invoice,
whichever is less.

(9) All accounts of any single Account Debtor if 25% or
more of the dollar amount of all such accounts are represented by accounts which
have not been paid in full within 60 days from the date payment was due or 90
days from the original date of invoice, whichever is less.

(10) Accounts which are subject to dispute, counterclaim or
setoff.

(11) Accounts with respect to which the goods have not been
shipped or delivered, or the services have not been rendered, to the Account
Debtor.

(12) Accounts with respect to which the Bank, in its sole
discretion, deems the creditworthiness or financial condition of the Account
Debtor to be unsatisfactory.

(13) Accounts of any Account Debtor who has filed or had
filed against it a petition in bankruptcy, or an application for relief under
any provision of any state or federal bankruptcy, insolvency or debtor-in-relief
acts; or who has had appointed a trustee, custodian or receiver for the assets
of such Account Debtor; or who has made an assignment for the benefit of
creditors or has become insolvent or fails generally to pay its debts (including
its payrolls) as such debts become due.

(k) "ERISA": shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, including (unless the context
otherwise requires) any rules or regulations promulgated thereunder.

(l) "EVENT OF DEFAULT": shall have the meaning set forth in
Section 8.

(m) "EXPIRATION DATE": shall mean March 5, 1999, or the date of
termination of the Bank's commitment to lend under this Agreement pursuant to
Section 8, whichever shall occur first.

(n) "INDEBTEDNESS": shall mean, with respect to the Borrower, (i)
all indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which the Borrower is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which the
Borrower otherwise assures a creditor against loss and (ii) obligations under
leases which shall have been or should be, in accordance with generally accepted
accounting principles, reported as capital leases in respect of which the
Borrower is liable, contingently or otherwise, or in respect of which the
Borrower otherwise assures a creditor against loss.

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<PAGE>

(o) "LINE OF CREDIT": shall mean the credit facility described in
Section 2.

(p) "OBLIGATIONS": shall mean all amounts owing by the Borrower
to the Bank pursuant to this Agreement including, but not limited to, the unpaid
principal amount of Advances.

(q) "PERMITTED LIENS": shall mean: (i) liens and security
interests securing indebtedness owed by the Borrower to the Bank; (ii) liens for
taxes, assessments or similar charges either not yet due or being contested in
good faith; (iii) liens of materialmen, mechanics, warehousemen, carriers or
grape suppliers or other like liens arising in the ordinary course of business
and securing obligations which are not yet delinquent; (iv) purchase money liens
or purchase money security interests upon or in any property acquired or held by
the Borrower in the ordinary course of business to secure Indebtedness
outstanding on the date hereof or permitted to be incurred under Section 7.09
hereof; (v) liens and security interests which, as of the date hereof, have been
disclosed to and approved by the Bank in writing; (vi) liens and encumbrances
securing indebtedness of up to $45,000,000 owed to other financial institutions;
(vii) liens and security interests in connection with capital expenditures of up
to $6,000,000 in any one fiscal year, excluding any capital expenditures
associated with grafting and or planting programs; and (viii) those liens and
security interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of the Borrower's
assets.

(r) "REFERENCE RATE": shall mean an index for a variable interest
rate which is quoted, published or announced from time to time by the Bank as
its reference rate and as to which loans may be made by the Bank at, below or
above such reference rate.

(s) "SUBORDINATED DEBT": shall mean such liabilities of the
Borrower which have been subordinated to those owed to the Bank in a manner
acceptable to the Bank.

(t) "VALUE": shall mean the lesser of the Borrower's cost of
Acceptable Inventory or the wholesale market value thereof in such quantities
and on such terms as the Bank in its sole discretion may deem appropriate, less
any grower payables.

1.02 ACCOUNTING TERMS: All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.

1.03 OTHER TERMS: Other terms not otherwise defined shall have the
meanings attributed to such terms in the California Commercial Code.

SECTION 2

THE LINE OF CREDIT

2.01 THE LINE OF CREDIT: On terms and conditions as set forth herein,
the Bank agrees to make Advances to the Borrower from time to time from the date
hereof to the Expiration Date, provided the aggregate amount of such Advances
outstanding at any time does not exceed the Borrowing Base. Within the foregoing
limits, the Borrower may borrow, partially or wholly prepay, and reborrow under
this Section 2.01.

2.02 MAKING LINE ADVANCES: Each Advance shall be conclusively deemed to
have been made at the request of and for the benefit of the Borrower (i) when
credited to any deposit account of the Borrower maintained with the Bank or (ii)
when paid in accordance with the Borrower's written instructions. Subject to
the requirements of Section 4, Advances shall be made by the Bank upon
telephonic or written request in form acceptable to the Bank received from the
Borrower, which request shall be received not later than 2:30 p.m. (California
time) on the date specified for such Advance, which date shall be a Business
Day. Requests for Advances received after such time may, at the Bank's option,
be deemed to be a request for an Advance to be made on the next succeeding
Business Day.

2.03 MANDATORY REPAYMENTS:

(a) If at any time the aggregate principal amount of the
outstanding Advances shall exceed the applicable Borrowing Base, the Borrower
hereby promises and agrees, immediately upon written or telephonic notice from
the Bank, to

3 -
<PAGE>

pay to the Bank an amount equal to the difference between the outstanding
principal balance of the Advances and the Borrowing Base.

(b) On the Expiration Date, the Borrower hereby promises and
agrees to pay to the Bank in full the aggregate unpaid principal amount of all
Advances then outstanding, together with all accrued and unpaid interest
thereon.

2.04 INTEREST ON ADVANCES: Interest shall accrue from the date of each
Advance under the Line of Credit at one of the following rates, as quoted by the
Bank and as elected by the Borrower pursuant to paragraph 2.05 or paragraph 2.06
below:

1. VARIABLE RATE ADVANCES: A variable rate equivalent to
the Reference Rate per annum (the "Variable Rate"). Interest shall be adjusted
concurrently with any change in the Reference Rate. An Advance based upon the
Variable Rate is hereinafter referred to as a "Variable Rate Advance".

2. FIXED RATE ADVANCES: A fixed rate quoted by the Bank
for 30, 60, 90, 120, 180 or 360 days or for such other period of time that the
Bank may quote and offer (provided that any such period of time does not extend
beyond the Expiration Date) [the "Interest Period"] for Advances in the minimum
amount of $250,000 and in $250,000 increments thereafter. Such interest rate
shall be a percentage approximately equivalent to 1.70% in excess of the rate
which the Bank determines in its sole and absolute discretion to be equal to the
Bank's cost of acquiring funds (adjusted for any and all assessments, surcharges
and reserve requirements pertaining to the Bank's borrowing or purchase of such
funds) in an amount approximately equal to the amount of the relevant Advance
and for a period of time approximately equal to the relevant Interest Period
(the "Fixed Rate"). An Advance based upon the Fixed Rate is hereinafter
referred to as a "Fixed Rate Advance".

3. EURODOLLAR ADVANCES: A fixed rate quoted by the Bank
for 30, 60, 90, 120, or 180 days or for such other period of time that the Bank
may quote and offer (provided that any such period of time does not extend
beyond the Expiration Date) [the "Eurodollar Interest Period"] for Advances in
the minimum amount of $250,000 and in $250,000 increments thereafter. Such
interest rate shall be a percentage approximately equivalent to 1.70% in excess
of the Bank's Eurodollar Rate which is that rate determined by the Bank's
Treasury Desk as being the approximate rate at which the Bank could purchase
offshore U.S. dollar deposits in an amount approximately equal to the amount of
the relevant Advance and for a period of time approximately equal to the
relevant Eurodollar Interest Period (adjusted for any and all assessments,
surcharges and reserve requirements pertaining to the purchase by the Bank of
such U.S. dollar deposits) [the "Eurodollar Rate"]. An Advance based upon the
Eurodollar Rate is hereinafter referred to as the "Eurodollar Advance".

Interest on any Advance shall be computed on the basis of 360
days per year, but charged on the actual number of days elapsed.

Interest on Variable Rate Advances, Eurodollar Advances and
Fixed Rate Advances shall be paid in monthly installments commencing on the
fifth day of the month following the date of the first such Advance and
continuing on the fifth day of each month thereafter.

If interest is not paid as and when it is due, it shall be
added to the principal, become and be treated as a part thereof, and shall
thereafter bear like interest.

2.05 NOTICE OF ELECTION TO ADJUST INTEREST RATE: The Borrower may
elect:

1. That interest on a Variable Rate Advance shall be
adjusted to accrue at the Fixed Rate or the Eurodollar Rate; provided, however,
that such notice shall be received by the Bank no later than the same business
day as the day (which shall be a business day) on which the Borrower requests
that interest be adjusted to accrue at the Fixed Rate.

2. That interest on a Fixed Rate Advance or Eurodollar
Advance shall continue to accrue at a newly quoted Fixed Rate or Eurodollar Rate
or shall be adjusted to commence to accrue at the Variable Rate; provided,
however, that such notice shall be received by the Bank no later than two
business days prior to the last day of the Interest Period pertaining to such
Fixed Rate Advance. If the Bank shall not have received notice (as prescribed
herein) of the Borrower's election that interest on any Fixed Rate Advance or
Eurodollar Rate shall continue to accrue at the newly quoted Fixed Rate or
Eurodollar Rate as the case may be the Borrower shall be deemed to have elected
that interest thereon shall be adjusted to accrue at the Variable Rate upon the
expiration of the relevant Interest Period or Eurodollar Interest Period

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<PAGE>

pertaining to such Advance.

2.06 PREPAYMENT: The Borrower may prepay any Advance in whole or in
part, at any time and without penalty, provided, however, that: (i) any partial
prepayment shall first be applied, at the Bank's option, to accrued and unpaid
interest and next to the outstanding principal balance; and (ii) during any
period of time in which interest is accruing on any Advance on the basis of the
Fixed Rate or Eurodollar Rate, no prepayment shall be made except on a day which
is the last day of the Interest Period or Eurodollar Interest Period pertaining
thereto. If the whole or any part of any Fixed Rate Advance or Eurodollar
Advance is prepaid by reason of acceleration or otherwise, the Borrower shall,
upon the Bank's request, promptly pay to and indemnify the Bank for all costs
and any loss (including interest) actually incurred by the Bank and any loss
(including loss of profit resulting from the re-employment of funds) sustained
by the Bank as a consequence of such prepayment.

2.07 INDEMNIFICATION FOR FIXED RATE AND EURODOLLAR RATE COSTS: During
any period of time in which interest on any Advance is accruing on the basis of
the Fixed Rate or the Eurodollar Rate the Borrower shall, upon the Bank's
request, promptly pay to and reimburse the Bank for all costs incurred and
payments made by the Bank by reason of any future assessment, reserve, deposit
or similar requirement or any surcharge, tax or fee imposed upon the Bank or as
a result of the Bank's compliance with any directive or requirement of any
regulatory authority pertaining or relating to funds used by the Bank in quoting
and determining the Fixed Rate or Eurodollar Rate.

2.08 CONVERSION FROM FIXED RATE OR EURODOLLAR RATE TO VARIABLE RATE: In
the event that the Bank shall at any time determine that the accrual of interest
on the basis of the Fixed Rate or Eurodollar Rate (i) is infeasible because the
Bank is unable to determine the Fixed Rate or Eurodollar Rate due to the
unavailability of U.S. dollar deposits, contracts or certificates of deposit in
an amount approximately equal to the amount of the relevant Advance and for a
period of time approximately equal to the relevant Interest Period or Eurodollar
Interest Period or (ii) is or has become unlawful or infeasible by reason of the
Bank's compliance with any new law, rule, regulation, guideline or order, or any
new interpretation of any present law, rule, regulation, guideline or order,
then the Bank shall give telephonic notice thereof (confirmed in writing) to the
Borrower, in which event the relevant Fixed Rate Advance or Eurodollar Advance,
shall be deemed to be a Variable Rate Advance and interest shall thereupon
immediately accrue at the Variable Rate.

2.09 LINE ACCOUNT:

(a) The Bank shall maintain on its books a record of account in
which the Bank shall make entries for each Advance and such other debits and
credits as shall be appropriate in connection with the Line of Credit (the "Line
Account"). The Bank shall provide the Borrower with a monthly statement of the
Borrower's Line Account, which statement shall be considered to be correct and
conclusively binding on the Borrower unless the Borrower notifies the Bank to
the contrary within 30 days after the Borrower's receipt of any such statement
which it deems to be incorrect.

(b) The Borrower hereby authorizes the Bank, if and to the extent
payment owed to the Bank under the Line of Credit is not made when due, to
charge, from time to time, against any or all of the Borrower's deposit accounts
with the Bank any amount so due.

2.10 LATE PAYMENT: If any payment of principal (other than a principal
payment due pursuant to Section 2.03(b)) or interest, or any portion thereof,
under this Agreement is not paid within ten (10) calendar days after it is due,
a late payment charge equal to five percent (5%) of such past due payment may be
assessed and shall be immediately payable.

SECTION 3

LETTERS OF CREDIT

3.01 LETTER OF CREDIT FACILITY: Subject to the terms of the Agreement
and those contained herein, the Bank agrees to issue stand-by letters of credit
(each a "Letter of Credit") on behalf of the Borrower. At no time, however,
shall the total face amount of all Letters of Credit outstanding, less any
partial draws paid by the Bank, exceed the sum of $3,000,000 and, together with
the total principal amount of all Advances, exceed the Borrowing Base.

(a) Upon the Bank's request, the Borrower shall promptly pay to
the Bank issuance fees of 1.5% of the face amount of each Letter of Credit
and such other fees, commissions, costs and any out-of-pocket expenses
charged or incurred by the Bank with respect to any Letter of Credit.

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<PAGE>

(b) The commitment by the Bank to issue Letters of Credit shall,
unless earlier terminated in accordance with the terms of the Agreement,
automatically terminate on the Expiration Date and no Letter of Credit
shall expire on a date which is after the Expiration Date.

(c) Each Letter of Credit shall be in form and substance
satisfactory to the Bank and in favor of beneficiaries satisfactory to the
Bank, provided that the Bank may refuse to issue a Letter of Credit due to
the nature of the transaction or its terms or in connection with any
transaction where the Bank, due to the beneficiary or the nationality or
residence of the beneficiary, would be prohibited by any applicable law,
regulation or order from issuing such Letter of Credit.

(d) Prior to the issuance of each Letter of Credit, but in no
event later than 10:00 a.m. (California time) on the day such Letter of
Credit is to be issued (which shall be a Business Day), the Borrower shall
deliver to the Bank a duly executed form of the Bank's standard form of
application for issuance of a Letter of Credit with proper insertions.

(e) The Borrower shall, upon the Bank's request, promptly pay
to and reimburse the Bank for all costs incurred and payments made by
the Bank by reason of any future assessment, reserve, deposit or
similar requirement or any surcharge, tax or fee imposed upon the Bank
or as a result of the Bank's compliance with any directive or
requirement of any regulatory authority pertaining or relating to any
Letter of Credit.

SECTION 4

COLLATERAL

4.01 THE COLLATERAL: To secure payment and performance of all the
Borrower's Obligations under this Agreement and all other liabilities, loans,
guarantees, covenants and duties owed by the Borrower to the Bank, whether or
not evidenced by this or by any other agreement, absolute or contingent, due or
to become due, now existing or hereafter and howsoever created, the Borrower
hereby grants the Bank a security interest in and to all of the following
property (the "Collateral"):

(a) All inventory now owned or hereafter acquired by the Borrower,
including, but not limited to, all raw materials, work in process, finished
goods, merchandise, parts and supplies of every kind and description, including
inventory temporarily out of the Borrower's custody or possession, together with
all returns on accounts.

(b) All accounts, contract rights and general intangibles now
owned or hereafter created or acquired by the Borrower, including, but not
limited to, all receivables, goodwill, trademarks, trade styles, trade names,
patents, patent applications, software, customer lists and business records.

(d) All monies, deposit accounts, certificates of deposit and
securities of the Borrower now or hereafter in the Bank's or its agents'
possession.

(e) All crops now growing or hereafter to be grown, together with
all products and proceeds thereof (the "Crops"), on that certain real property
described in the attached Exhibit "B" (the "Real Property").

(f) All farm products now owned or hereafter acquired by or for
the benefit of the Borrower consisting of supplies used or produced in the
farming operations of the Borrower.

(g) All of Borrower's now existing or hereafter acquired water
rights of every kind and description, whether appurtenant, riparian or
prescriptive or arising by virtue of any contract or other agreement.

(h) All proceeds of the Collateral, including but not limited to,
all accounts, contract rights, documents, instruments and chattel paper
resulting from the sale or disposition of the Collateral.

The Bank's security interest in the Collateral shall be a continuing lien
and shall include the proceeds and products of the Collateral including, but not
limited to, the proceeds of any insurance thereon.

SECTION 5

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CONDITIONS OF LENDING

5.01 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE: The obligation of the
Bank to make the initial Advance and the first extension of credit to or on
account of the Borrower hereunder is subject to the conditions precedent that
the Bank shall have received before the date of such initial Advance and such
first extension of credit all of the following, in form and substance
satisfactory to the Bank:

(a) Evidence that the execution, delivery and performance by the
Borrower of this Agreement and any document, instrument or agreement required
hereunder have been duly authorized.

(b) Continuing guaranty in favor of the Bank executed by Golden
State Acquisition Corp., together with evidence that the execution, delivery and
performance by the guarantor has been duly authorized and a subordination
agreement subordinating indebtedness of the Borrower owed to the Grape Group,
Inc. to indebtedness of the Borrower owed to the Bank and an executed UCC-1
financing statement.

(c) The Bank shall have conducted an audit of the Borrower's
books, records and operations and the Bank shall be satisfied as to the
condition thereof.

(d) Payment of all out-of-pocket expenses of Bank in connection
with the preparation and negotiation of this Agreement.

(e) Such other evidence as the Bank may request to establish the
consummation of the transaction contemplated hereunder and compliance with the
conditions of this Agreement.

5.02 CONDITIONS PRECEDENT TO ALL ADVANCES: The obligation of the Bank
to make each Advance and each other extension of credit to or on account of the
Borrower (including the initial Advance and the first extension of credit) shall
be subject to the further conditions precedent that, on the date of each Advance
or each extension of credit and after the making of such Advance or extension of
credit:

(a) The Bank shall have received the documents set forth in
Section 7.06(c).

(b) The Bank shall have received such supplemental approvals,
opinions or documents as the Bank may reasonably request.

(c) The representations contained in Section 6 and in any other
document, instrument or certificate delivered to the Bank hereunder are correct.

(d) No event has occurred and is continuing which constitutes, or,
with the lapse of time or giving of notice or both, would constitute an Event of
Default.

(e) The security interest in the Collateral has been duly
authorized, created and perfected with first priority and is in full force and
effect.

The Borrower's acceptance of the proceeds of any Advance or the Borrower's
execution of any document or instrument evidencing or creating any Obligation
hereunder shall be deemed to constitute the Borrower's representation and
warranty that all of the above statements are true and correct.

SECTION 6

REPRESENTATIONS AND WARRANTIES

The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:

6.01 STATUS: The Borrower is a corporation duly organized and validly
existing under the laws of the State of California and is properly licensed and
is qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied with the fictitious
name statute of every jurisdiction in which the Borrower is

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<PAGE>

doing business, and where the failure to so qualify or comply would have a
material adverse effect upon the Borrower or its business.

6.02 AUTHORITY: The execution, delivery and performance by the Borrower
of this Agreement and any instrument, document or agreement required hereunder
have been duly authorized and do not and will not: (i) violate any provision of
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having application to the Borrower;
(ii) result in a breach of or constitute a default under any material indenture
or loan or credit agreement or other material agreement, lease or instrument to
which the Borrower is a party or by which it or its properties may be bound or
affected; or (iii) require any consent or approval of its stockholders or
violate any provision of its articles of incorporation or by-laws.

6.03 LEGAL EFFECT: This Agreement constitutes, and any instrument,
document or agreement required hereunder when delivered hereunder will
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.

6.04 FICTITIOUS TRADE STYLES: All fictitious trade styles used by the
Borrower in connection with its business operations and each state in which each
such fictitious trade style is used are listed below. The Borrower shall notify
the Bank not less than 30 days prior to effecting any change in the matters
described below or prior to using any other fictitious trade style at any future
date, indicating the trade style and state(s) of its use.

TRADE STYLE STATE OF USE

See attached Exhibit "C" California

6.05 FINANCIAL STATEMENTS: All financial statements, information and
other data which may have been or which may hereafter be submitted by the
Borrower to the Bank are true, accurate and correct and have been or will be
prepared in accordance with generally accepted accounting principles
consistently applied and accurately represent in accordance with such principals
the financial condition or, as applicable, the other information disclosed
therein. Since the most recent submission of such financial information or data
to the Bank, the Borrower represents and warrants that no material adverse
change in the Borrower's financial condition or operations has occurred which
has not been fully disclosed to the Bank in writing.

6.06 LITIGATION: Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower's
properties before any court or administrative agency which, if determined
adversely to the Borrower, would have a material adverse effect on the
Borrower's financial condition or operations or on the Collateral.

6.07 TITLE TO ASSETS: The Borrower has good and marketable title to all
of its assets (including, but not limited to, the Collateral) and the same are
not subject to any security interest, encumbrance, lien or claim of any third
person except for Permitted Liens.

6.08 ERISA: If the Borrower has a pension, profit sharing or retirement
plan subject to ERISA, such plan has been and will continue to be funded in
accordance with its terms and otherwise complies with and continues to comply
with the requirements of ERISA.

6.09 TAXES: The Borrower has filed all tax returns required to be filed
and paid all taxes shown thereon to be due, including interest and penalties,
other than such taxes which are currently payable without penalty or interest or
those which are being duly contested in good faith.

6.10 ACCOUNTS: Each Eligible Account represents a bona fide sale
conforming to the requirements of Section 1.01(j).

6.11 ENVIRONMENTAL COMPLIANCE: The Borrower has implemented and
complied in all material respects with all applicable federal, state and local
laws, ordinances, statutes and regulations with respect to hazardous or toxic
wastes, substances or related materials, industrial hygiene or environmental
conditions. There are no suits, proceedings, claims or disputes pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
its property claiming violations of any federal, state or local law, ordinance,
statute or regulation relating to hazardous or toxic wastes, substances or
related materials.

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6.12 INVENTORY:

(a) The value of the inventory is, as of the date of any such
schedule of inventory, as reflected in such schedule.

(b) The value of the inventory is determined on the basis of
first-in, first-out.

(c) The Borrower keeps correct and accurate records itemizing and
describing the kind, type, quality and quantity of inventory, the Borrower's
cost therefor and selling price thereof, and the daily withdrawals therefrom and
additions thereto.

(d) All inventory is of good and merchantable quality, free from
known defects.

(e) The inventory is not stored with a bailee, warehouseman or
similar party, other than up to 10% of Borrower's inventory.

(f) The Borrower is not a "retail merchant" as defined in the
California Commercial Code.

6.13 WATER: As of the date of this Agreement, sufficient water is
available and is projected to be available, from verifiable surface and ground
water sources, to conduct operations as described in the most recent Crop Budget
submitted by Borrower to the Bank or to conduct operations materially similar to
prior years' operations as evidenced by information provided by any Borrower to
the Bank. Borrower has filed with all governmental agencies, all notices and
other documents required under Federal, state and local laws and regulations in
connection with the supply of water to and use of water upon the Real Property.

SECTION 7

COVENANTS

The Borrower covenants and agrees that, during the term of this Agreement, and
so long thereafter as the Borrower is indebted to the Bank under this Agreement,
the Borrower will, unless the Bank shall otherwise consent in writing:

7.01 PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS:
Maintain and preserve its existence and all rights and privileges now enjoyed;
not liquidate or dissolve, merge or consolidate with or into, or acquire any
other business organization other than the merger of subsidiaries of the
Borrower or acquisitions which qualify as capital expenditures under Section
7.16 hereof; and conduct its business and operations in accordance with all
applicable laws, rules and regulations.

7.02 MAINTENANCE OF INSURANCE: Maintain insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower operates and maintain such other insurance and coverages as may be
required by the Bank. All such insurance shall be in form and amount and with
companies satisfactory to the Bank, including, but not limited to key-man life
insurance in the minimum amount of $8,000,000 on the life of Jeffrey B. O'Neill.
With respect to insurance covering properties in which the Bank maintains a
security interest or lien, such insurance shall name the Bank as loss payee
pursuant to a loss payable endorsement satisfactory to the Bank and shall not be
altered or canceled except upon 10 days' prior written notice to the Bank. Upon
the Bank's request, the Borrower shall furnish the Bank with the original policy
or binder of all such insurance.

7.03 MAINTENANCE OF COLLATERAL AND OTHER PROPERTIES: Except for
Permitted Liens, keep and maintain the Collateral free and clear of all levies,
liens, encumbrances and security interests (including, but not limited to, any
lien of attachment, judgment or execution) and defend the Collateral against any
such levy, lien, encumbrance or security interest; comply with all laws,
statutes and regulations pertaining to the Collateral and its use and operation;
execute, file and record such statements, notices and agreements, take such
actions and obtain such certificates and other documents as necessary to
perfect, evidence and continue the Bank's security interest in the Collateral
and the priority thereof; maintain accurate and complete records of the
Collateral which show all sales, claims and allowances; and properly care for,
house, store and maintain the Collateral in good condition, free of misuse,
abuse and deterioration, other than normal wear and tear. The Borrower shall
also maintain and preserve all its properties in good working order and
condition in accordance with the general practice of other businesses of similar
character and size, ordinary wear and tear excepted.

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7.04 PAYMENT OF OBLIGATIONS AND TAXES: Make timely payment of all
assessments and taxes and all of its liabilities and obligations including, but
not limited to, trade payables, unless the same are being contested in good
faith by appropriate proceedings with the appropriate court or regulatory
agency. For purposes hereof, the Borrower's issuance of a check, draft or
similar instrument without delivery to the intended payee shall not constitute
payment.

7.05 INSPECTION RIGHTS: At any reasonable time and from time to time,
permit the Bank or any representative thereof to examine and make copies of the
records and visit the properties of the Borrower and discuss the business and
operations of the Borrower with any employee or representative thereof. If the
Borrower shall maintain any records (including, but not limited to, computer
generated records or computer programs for the generation of such records) in
the possession of a third party, the Borrower hereby agrees to notify such third
party to permit the Bank free access to such records at all reasonable times and
to provide the Bank with copies of any records which it may request, all at the
Borrower's expense, the amount of which shall be payable immediately upon
demand. In addition, the Bank may, at any reasonable time and from time to
time, and upon notice to Borrower, conduct semi-annual inspections and annual
audits of the Collateral and the Borrower's accounts payable, the cost and
expenses of which shall be paid by the Borrower to the Bank upon demand.

7.06 REPORTING AND CERTIFICATION REQUIREMENTS: Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:

(a) Not later than 120 days after the end of each of the
Borrower's fiscal years, a copy of the annual audited financial report of the
Borrower for such year, prepared by a firm of certified public accountants
acceptable to Bank.

(b) Not later than 45 days after the end of each month, the
Borrower's financial statement as of the end of such month and a crop position
report comparing actual expenditures on growing crops to projected expenditures
in the Crop Budget.

(c) Not later than 25 days after the end of each month (i) a
borrowing base certificate in the form acceptable to Bank ("Borrowing Base
Certificate"), executed by Borrower and certifying the value of the Borrowing
Base as of the last day of the preceding month; and, (ii) an accounts receivable
aging indicating the amount of total accounts receivable which are current, 31
to 60 days past the date of invoice, 61 to 90 days past the date of invoice, and
the amount over 90 days past the date of invoice and (iii) a schedule of actual
costs incurred in connection with growing crops; and (iv) an aging of accounts
payable specifying separately trade payables and grower payables and indicating
the amount of such payables which are current, 31 to 60 days past the date of
invoice, 61 to 90 days past the date of invoice, and the amount over 90 days
past the date of invoice; and, (v) a schedule of Acceptable Inventory specifying
the Value and aging thereof, and such other matters and information relating to
the Borrower's inventory as the Bank may request.

Notwithstanding the foregoing Section 7.06 (c) and following an
Event of Default hereunder, Bank, at its sole discretion, may require Borrower
to submit daily or at such other time as required by the Bank: (i) a
transaction report and schedule of accounts receivable which indicates all sales
made and all collections received for each such day; (ii) all remittances and
collections of accounts in kind and without commingling to be applied to the
payment of the Borrower's Obligations on the next Business Day following receipt
thereof; provided, however, that if such amounts are received in a form other
than cash or bank wire, the Bank may withhold application of such amounts for
such time to the extent permitted by law as the Bank, in its sole discretion,
deems reasonable to allow for collection and provided further that any
remittances and collections received by the Bank later than 2:00 p.m.
(California time) on any day shall be deemed received on the next succeeding
Business Day; and (iii) clear and legible copies of all invoices or sales
receipts evidencing the sale of goods or services by the Borrower; and (iv) a
schedule of Acceptable Inventory specifying the Value thereof, and such other
matters and information relating to the Borrower's inventory as the Bank may
request and (v) a schedule of actual costs incurred in connection with growing
crops.

(d) Promptly upon the Bank's request, such other information
pertaining to the Borrower, the Collateral or any guarantor hereunder as the
Bank may reasonably request.

7.07 PAYMENT OF DIVIDENDS: Not declare or pay any dividends on any
common stock now or hereafter outstanding except dividends payable solely in the
Borrower's capital stock and except up to $1,300,000 on preferred stock in any
one fiscal year.

7.08 REDEMPTION OR REPURCHASE OF STOCK: Not redeem or repurchase any
class of the Borrower's stock now or hereafter outstanding except that Borrower
may redeem up to 100% of its issued and outstanding senior preferred stock.

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7.09 ADDITIONAL INDEBTEDNESS: Not, and not permit any subsidiary of the
Borrower to, after the date hereof, create, incur or assume, directly or
indirectly, any additional Indebtedness other than (i) Indebtedness owed or to
be owed to the Bank or (ii) Indebtedness to trade creditors incurred in the
ordinary course of the Borrower's business or (iii) an aggregate Indebtedness of
up to $45,000,000 owed to Gallo Winery, Prudential Life Insurance Company and
John Hancock Mutual Life Insurance Company or (iv) Indebtedness secured by a
Permitted Lien or (v) Indebtedness in respect of deferred taxes or (vi)
Indebtedness to growers representing the deferred purchase price for inventory
or (vi) Indebtedness of up to $500,000 owed to Vintners International Company,
Inc., or (vii) Indebtedness of up to $6,000,000 in connection with capital
expenditures.

7.10 LOANS: Not make any loans or advances or extend credit to any
third person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities and subsidiaries of the Borrower,
except for credit extended in the ordinary course of the Borrower's business as
presently conducted and except up to $300,000 in any one fiscal year.

7.11 LIENS AND ENCUMBRANCES: Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust, or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed any
financing statement or continuation thereof affecting any of such properties,
except for Permitted Liens or as otherwise provided in this Agreement.

7.12 TRANSFER ASSETS: Not, after the date hereof, sell, contract for
sale, convey, transfer, assign, lease or sublet, any of its assets (including,
but not limited to, the Collateral) except in the ordinary course of business as
presently conducted by the Borrower and, then, only for full, fair and
reasonable consideration, and except up to $250,000 of assets for any reason in
any one fiscal year.

7.13 CHANGE IN NATURE OF BUSINESS: Not make any material change in its
financial structure or the nature of its business as existing or conducted as of
the date hereof.

7.14 FINANCIAL CONDITION: Maintain at all times:

(a) A minimum net profit after tax at each fiscal year-end of at
least $1.00.

(b) A ratio of Debt to Effective Tangible Net Worth of not more
than 3.50 to 1 at each fiscal year-end.

(d) A ratio of the sum of net profit after tax plus depreciation,
amortization and other non-cash transactions to the current portion of long-term
Debt plus preferred stock dividends of not less than 1.25 to 1 at each fiscal
year-end.

Notwithstanding anything herein to the contrary, the consolidated financial
statements of Golden State Acquisition Corp. shall be used for purposes of
determining compliance with Section 7.14 (b) hereof.

7.15 COMPENSATION OF EMPLOYEES: Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate prescribed
by any applicable federal or state law or regulation.

7.16 CAPITAL EXPENSE: Not make any fixed capital expenditure or any
commitment therefor, including, but not limited to, incurring liability for
leases which would be, in accordance with generally accepted accounting
principles, reported as capital leases, or purchase any real or personal
property in an aggregate amount exceeding $6,000,000 in any one fiscal year,
excluding capital expenditures in connection with the Borrower's grafting and
replanting of vineyards.

7.17 RENTALS. Not incur liability (in addition to that incurred as of
the date of this Agreement) for the payment of, or pay, rentals for the renting,
leasing or use of real or personal property in an aggregate amount exceeding
$1,500,000 in any one fiscal year.

7.18 NOTICE: Give the Bank prompt written notice of any and all (i)
Events of Default; (ii) litigation, arbitration or administrative proceedings to
which the Borrower is a party and in which the claim or liability exceeds
$100,000 or which affects the Collateral; and (iii) other matters which have
resulted in, or might result in a material adverse change in the Collateral or
the financial condition or business operations of the Borrower.

7.19 ENVIRONMENTAL COMPLIANCE. The Borrower shall:

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(a) Implement and comply in all material respects with all
applicable federal, state and local laws, ordinances, statutes and regulations
with respect to hazardous or toxic wastes, substances or related materials,
industrial hygiene or to environmental conditions.

(b) Not own, use, generate, manufacture, store, handle, treat,
release or dispose of any hazardous or toxic wastes, substances or related
materials, except in accordance with applicable requirements of law.

(c) Give prompt written notice of any discovery of or suit,
proceeding, claim, dispute, threat, inquiry or filing respecting hazardous or
toxic wastes, substances or related materials.

(d) At all times indemnify and hold harmless Bank from and against
any and all liability arising out of the use, generation, manufacture, storage,
handling, treatment, disposal or presence of hazardous or toxic wastes,
substances or related materials, by Borrower.

7.20 INVENTORY:

(a) Except as provided herein below, the Borrower's inventory
shall, at all times, be in the Borrower's physical possession, shall not be held
by others on consignment, sale on approval, or sale or return and shall be kept
only at: 38558 Rd. 128, Cutler, CA 93615; 8418 South Lac Jac Ave., Parlier, CA
93648; 7409 W. Central Ave., Fresno, CA 93706; 401 S. St. Helena Hwy., St.
Helena, CA 94574; 1777 Metz Road, Soledad, CA 93960; and 1075 Golden Gate Drive,
Napa, CA 94559.

(b) The Borrower shall keep correct and accurate records itemizing
and describing the kind, type, quality and quantity of inventory, the Borrower's
cost therefor and selling price thereof, and the daily withdrawals therefrom and
additions thereto, all of which records shall be available to the Bank or any
representative thereof with prior notice and during normal business hours upon
demand for inspection and copying thereof at any reasonable time.

(d) The inventory shall not at any time or times hereafter be
stored with a bailee, warehouseman or similar party without the Bank's prior
written consent, other than up to 10% of Borrower's inventory and, in such
event, the Borrower will concurrently therewith cause any such bailee,
warehouseman or similar party to issue and deliver to the Bank, in form
acceptable to the Bank, warehouse receipts in the Bank's name evidencing the
storage of inventory.

(e) At any reasonable time and from time to time, allow Bank to
have the right, upon demand, to inspect and examine inventory and to check and
test the same as to quality, quantity, value and condition and the Borrower
agrees to reimburse the Bank for the Bank's reasonable costs and expenses in so
doing.

7.21 CARE AND PRESERVATION OF THE CROPS.

(1) Attend to and care for the Crops and do or cause to be
done any and all acts that may at any time be appropriate or necessary to grow,
farm, cultivate, irrigate, fertilize, fumigate, prune, harvest, pick, clean,
preserve and protect the Crops.

(2) Not commit or suffer to be committed any waste of or
damage to the Crops.

(3) Permit the Bank and any of its agents, employees or
representatives to enter upon the Real Property at any reasonable time and upon
prior notice and during normal business hours for the purpose of examining and
inspecting the Crops and the Real Property.

(4) Harvest and prepare the Crops for market and promptly
notify the Bank when any of the Crops are ready for market.

(5) Keep the Crops separate and always capable of
identification.

7.22 EVIDENCE OF WATER AVAILABILITY. At such times as the Bank may
request, to deliver to the Bank a certificate

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stating that the amount of water available and projected to be available is
sufficient to conduct operations as described in Borrower's Crop Budget or
operations materially similar to prior years' operations, as evidenced by
information provided by the Borrower to the Bank. Such certificate shall be
signed, at the Bank's option, either by the Borrower or by an independent third
party, such as an officer of the Borrower's water district or other supplier of
water.

SECTION 8

EVENTS OF DEFAULT

Any one or more of the following described events shall constitute an event of
default (an "Event of Default") under this Agreement:

8.01 NON-PAYMENT: The Borrower shall fail to pay any Obligations within
10 days of when due or any drawing under any Letter of Credit when due.

8.02 PERFORMANCE UNDER THIS AND OTHER AGREEMENTS: The Borrower shall
fail in any material respect to perform or observe any term, covenant or
agreement contained in this Agreement or in any document, instrument or
agreement evidencing or relating to any indebtedness of the Borrower greater
than $250,000.00 (whether such indebtedness is owed to the Bank or third persons
other than trade creditors), and any such failure (exclusive of the failure to
pay money to the Bank under this Agreement which results in an event of default
or under any other instrument, document or agreement with the Bank, which
failure shall constitute and be an immediate Event of Default if not paid when
due or when demanded to be due following the expiration of any applicable grace
period) shall continue for more than 30 days after written notice from the Bank
to the Borrower of the existence and character of such Event of Default.

8.03 REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS: Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any financial statement given by the Borrower or any guarantor
shall prove to have been incorrect in any material respect when made or given or
when deemed to have been made or given.

8.04 INSOLVENCY: The Borrower or any guarantor shall: (i) become
insolvent or be unable to pay its debts as they mature; (ii) make an assignment
for the benefit of creditors or to an agent authorized to liquidate any
substantial amount of its properties and assets; (iii) file a voluntary petition
in bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or
consent to the appointment of, or consent that an order be made, appointing any
receiver, custodian or trustee, for itself or any of its properties, assets or
businesses; or (vii) any receiver, custodian or trustee shall have been
appointed for all or substantial part of its properties, assets or businesses
and shall not be discharged within 60 days after the date of such appointment.

8.05 EXECUTION: Any writ of execution or attachment or any judgment
lien shall be issued against any property of the Borrower and shall not be
discharged or bonded against or released within 60 days after the issuance or
attachment of such writ or lien.

8.06 REVOCATION OR LIMITATION OF GUARANTY: Any guaranty shall be
revoked or limited or its enforceability or validity shall be contested by any
guarantor, by operation of law, legal proceeding or otherwise or any guarantor
who is a natural person shall die.

8.07 SUSPENSION: The Borrower shall voluntarily suspend the transaction
of business or allow to be suspended, terminated, revoked or expired any
material permit, license or approval of any governmental body necessary to
conduct the Borrower's business as now conducted.

8.08 CHANGE IN OWNERSHIP: There shall occur a sale, transfer,
disposition or encumbrance (whether voluntary or involuntary to), or an
agreement shall be entered into to do so with, any Person or group of Persons
(as such terms are defined pursuant to Federal securities laws) with respect to
more than 19% of the issued and outstanding capital stock of the Borrower and,
as a result thereof, such Person or group of Persons has the ability to direct
or cause the direction of the management and policies of the Borrower, provided
however, that any initial publice offfering of the Borrower's capital stock
shall not be deemed to be a change in ownership hereunder.

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8.10 WATER QUALITY/AMOUNT. The Borrower's water is or is projected to
be insufficient in amount or unsuitable in quality, as determined by the Bank in
either case, to conduct operations as described in Borrower's most recent Crop
Budget or projections or by information provided by Borrower to the Bank.

SECTION 9

REMEDIES ON DEFAULT

Upon the occurrence of any Event of Default, the Bank may, at its sole and
absolute election, without demand and only upon such notice as may be required
by law:

9.01 ACCELERATION: Declare any or all of the Borrower's indebtedness
owing to the Bank, whether under this Agreement or any other document,
instrument or agreement, immediately due and payable, whether or not otherwise
due and payable.

9.02 CEASE EXTENDING CREDIT: Cease making Advances or otherwise
extending credit to or for the account of the Borrower under this Agreement or
under any other agreement now existing or hereafter entered into between the
Borrower and the Bank.

9.03 TERMINATION: Terminate this Agreement as to any future obligation
of the Bank without affecting the Borrower's obligations to the Bank or the
Bank's rights and remedies under this Agreement or under any other document,
instrument or agreement.

9.04 NOTIFICATION OF ACCOUNT DEBTORS:

(a) Notify any Account Debtor, any buyers or transferee of the
Collateral or any other persons of the Bank's interest in the Collateral and the
proceeds thereof.

(b) Sign the Borrower's name (which authority the Borrower hereby
irrevocably and unconditionally grants to the Bank) on any invoice or bill of
lading relating to accounts or other drafts against the Account Debtors, notify
post office authorities to change the address for delivery of mail addressed to
the Borrower to such address as the Bank may designate and take possession of
and open mail addressed to the Borrower and remove therefrom, proceeds of and
payments on the Collateral, and demand, receive and endorse payment and give
receipts, releases and satisfactions for and sue for all money payable to the
Borrower.

(c) Require the Borrower to indicate on the face of all invoices
(or such other documentation as may be specified by the Bank relating to the
sale, delivery or shipment of goods giving rise to the account) that the account
has been assigned to the Bank and that all payments are to be made directly to
the Bank at such address as the Bank may designate.

9.05 PROTECTION OF SECURITY INTEREST: Make such payments and do such
acts as the Bank, in its sole judgment, considers necessary and reasonable to
protect its security interest or lien in the Collateral. The Borrower hereby
irrevocably authorizes the Bank to pay, purchase, contest or compromise any
encumbrance, lien or claim which the Bank, in its sole judgment, deems to be
prior or superior to its security interest. Further, the Borrower hereby agrees
to pay to the Bank, upon demand therefor, all expenses and expenditures
(including reasonable attorneys' fees) incurred in connection with the
foregoing.

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9.06 FORECLOSURE: Enforce any security interest or lien given or
provided for under this Agreement or under any security agreement, mortgage,
deed of trust or other document, in such manner and such order, as to all or any
part of the properties subject to such security interest or lien, as the Bank,
in its sole judgment, deems to be necessary or appropriate and the Borrower
hereby waives any and all rights, obligations or defenses now or hereafter
established by law relating to the foregoing. In the enforcement of its
security interest or lien, the Bank is authorized to enter upon the premises
where any Collateral is located and take possession of the Collateral or any
part thereof, together with the Borrower's records pertaining thereto, or the
Bank may require the Borrower to assemble the Collateral and records pertaining
thereto and make such Collateral and records available to the Bank at a place
designated by the Bank. The Bank may sell the Collateral or any portions
thereof, together with all additions, accessions and accessories thereto, giving
only such notices and following only such procedures as are required by law, at
either a public or private sale, or both, with or without having the Collateral
present at the time of the sale, which sale shall be on such terms and
conditions and conducted in such manner as the Bank determines in its sole
judgment to be commercially reasonable. Any deficiency which exists after the
disposition or liquidation of the Collateral shall be a continuing liability of
the Borrower to the Bank and shall be immediately paid by the Borrower to the
Bank.

9.07 LETTERS OF CREDIT: The Bank may, at its sole and absolute
discretion and in addition to any other remedies available to it hereunder or
otherwise, require the Borrower to pay immediately to the Bank, for application
against drawings under any outstanding Letters of Credit, the outstanding
principal amount of any such Letters of Credit which have not expired. Any
portion of the amount so paid to the Bank which is not applied to satisfy draws
under any such Letters of Credit or any other obligations of the Borrower to the
Bank shall be repaid to the Borrower without interest.

9.08 NON-EXCLUSIVITY OF REMEDIES: Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other remedies
as may be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.

9.09 APPLICATION OF PROCEEDS: All amounts received by the Bank as
proceeds from the disposition or liquidation of the Collateral shall be applied
to the Borrower's indebtedness to the Bank as follows: first, to the costs and
expenses of collection, enforcement, protection and preservation of the Bank's
lien in the Collateral, including court costs and reasonable attorneys' fees,
whether or not suit is commenced by the Bank; next, to those costs and expenses
incurred by the Bank in protecting, preserving, enforcing, collecting,
liquidating, selling or disposing of the Collateral; next, to the payment of
accrued and unpaid interest on all of the Obligations; next, to the payment of
the outstanding principal balance of the Obligations; and last, to the payment
of any other indebtedness owed by the Borrower to the Bank. Any excess
Collateral or excess proceeds existing after the disposition or liquidation of
the Collateral will be returned or paid by the Bank to the Borrower.

SECTION 10

MISCELLANEOUS

10.01 AMOUNTS PAYABLE ON DEMAND: If the Borrower shall fail to pay on
demand any amount so payable under this Agreement, the Bank may, at its option
and without any obligation to do so and without waiving any default occasioned
by the Borrower having so failed to pay such amount, create an Advance under the
Line of Credit in an amount equal to the amount so payable, which Advance shall
thereafter bear interest as provided under the Line of Credit.

10.02 DEFAULT INTEREST RATE: The Borrower shall pay the Bank interest on
any indebtedness or amount payable under this Agreement, if an Event of Default
has occurred or is continuing, at a rate which is 3% in excess of the rate
otherwise provided under this Agreement.

10.03 DISPOSAL OF INVOICES: All documents, schedules, invoices or other
papers received by the Bank from the Borrower may be destroyed or disposed of 6
months after receipt by the Bank, unless the Borrower requests in writing the
return thereof, which shall be done at the Borrower's expense.

10.04 RIGHTS OF THE BANK WITH OR WITHOUT DEFAULT: The Borrower agrees
that the Bank may at any time and at its option, whether or not the Borrower is
in default:

(a) Send verification requests to any Account Debtor;

(b) Make inquiries of the Borrower's trade vendors;

and, upon the occurrence of an Event of Default:

(c) Require the Borrower to direct all Account Debtors to forward
all remittances, payments and proceeds of the Collateral directly to the Bank at
such address as the Bank may designate. In connection therewith, the Borrower
hereby irrevocably constitutes and appoints the Bank as its attorney-in-fact to
endorse the Borrower's name on any notes, acceptances, checks, drafts, money
orders or other evidence of payment that may come into the Bank's possession;
and

(d) Require the Borrower to deliver to the Bank, at such times
designated by the Bank, records and schedules which show the status and
condition of the Collateral, where it is located and such contracts or other
matters which affect the Collateral.

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10.05 INDEMNIFICATION: The Borrower agrees to hold the Bank harmless
from and indemnify and defend the Bank from any liability, claim, loss or
expense (including, but not limited to, reasonable attorneys' fees) arising from
any transaction between the Borrower and any Account Debtor, other than caused
by the Bank's gross negligence or willful misconduct, including, but not limited
to, any loss, claim or liability arising from:

(a) Any violation of any federal or state consumer protection law
(including, but not limited to, the federal Truth-In-Lending Act) and
regulations promulgated thereunder.

(b) Improper collection practices or procedures of the Borrower.

(d) Any suit by any person against the Bank resulting or arising
from such person's dealings with the Borrower.

10.06 DISPUTE RESOLUTION. It is understood and agreed that upon the
request of any party to this agreement any dispute, claim, or controversy of any
kind, whether in contract or in tort, statutory or common law, legal or
equitable now existing or hereinafter arising between the parties in any way
arising out of, pertaining to or in connection with: (1) this Agreement, or
any related agreements, documents, or instruments, (2) all past and present
loans, credits, accounts, deposit accounts (whether demand deposits or time
deposits), safe deposit boxes, safekeeping agreements, guarantees, letters of
credit, goods or services, or other transactions, contracts or agreements of any
kind, (3) any incidents, omissions, acts, practices, or occurrences causing
injury to either party whereby the other party or its agents, employees or
representatives may be liable, in whole or in part, or (4) any aspect of the
past or present relationships of the parties, shall be resolved through a
two-step dispute resolution process administered by Judicial Arbitration &
Mediation Services, Inc. ("J-A-M-S") as follows:

a) STEP I - MEDIATION: At the request of any party to the
dispute, claim or controversy of the matter shall be referred to the
nearest office of J-A-M-S for mediation, that is, an informal, non-binding
conference or conferences between the parties in which a retired judge or
justice for the J-A-M-S panel will seek to guide the parties to a
resolution of the case.

b) STEP II - CONTRACTS SECURED BY REAL ESTATE - TRIAL BY COURT
REFERENCE [Section 638 (1)] CODE OF CIVIL PROCEDURE): If the dispute,
claim or controversy has not been resolved by Step I mediation, them any
remaining dispute, claim or controversy shall be submitted for
determination by a trial on Order of Reference conducted by a retired judge
or justice from the panel of J-A-M-S appointed pursuant to the provisions
of California Code of Civil Procedure Section 638(1) or any amendment,
addition or successor section thereto to hear the case and report a
statement of decision thereon. The parties intend this general reference
agreement to be specifically enforceable in accordance with said section.
If this parties are unable to agree upon a member of the J-A-M-S panel to
act as referee then one shall be appointed by the Presiding Judge of the
county wherein the hearing is to be held. The parties shall pay in
advance, to the referee, the estimated reasonable fees and costs of the
reference, as may be specified in advance by the referee. The parties
shall initially share equally, by paying their proportionate amount of the
estimated fees and costs of the reference. Failure of any party to make
such a fee deposit shall result in a forfeiture by the non-depositing party
of the right to prosecute or defend the cause(s) of action which is(are)
the subject of the reference, but shall not otherwise serve to abate, stay
or suspend the reference proceeding.

c) PROVISIONAL REMEDIES, SELF HELP AND FORECLOSURE: No provision
of, or the exercise of any right(s) under subparagraph (b), nor any other
provision of this Dispute Resolution Provision, shall limit the right of
any party to exercise self help remedies such as set off, to foreclose
against any real or personal property collateral, or obtain provisional or
ancillary remedies such as injunctive relief or the appointment of a
receiver from any court having jurisdiction before, during or after the
pendency of any mediation or trial on Order of Reference. At Bank's
option, foreclosure under a deed of trust or mortgage may be accomplished
either by exercise of power of sale under the deed of trust or mortgage, or
by judicial foreclosure. The institution and maintenance of an action for
provisional remedies pursuit of provisional or ancillary remedies or
exercise of self help remedies shall not constitute a waiver of the right
of any party, including the plaintiff, to submit the controversy or claim
to mediation or trial on Order of Reference.

10.07 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS

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<PAGE>

AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER AND THE BANK EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.

10.08 RELIANCE: Each warranty, representation, covenant, obligation and
agreement contained in this Agreement shall be conclusively presumed to have
been relied upon by the Bank regardless of any investigation made or information
possessed by the Bank and shall be cumulative and in addition to any other
warranties, representations, covenants and agreements which the Borrower now or
hereafter shall give, or cause to be given, to the Bank.

10.09 ATTORNEYS' FEES: Borrower shall pay to the Bank all costs and
expenses, including but not limited to reasonable attorneys fees, incurred by
Bank in connection with the administration, enforcement, or any refinancing or
restructuring in the nature of a "work-out", of this Agreement or any document,
instrument or agreement executed with respect to, evidencing or securing the
indebtedness hereunder.

10.10 NOTICES: All notices, payments, requests, information and demands
which either party hereto may desire, or may be required to give or make to the
other party hereto, shall be given or made to such party by hand delivery or
through deposit in the United States mail, postage prepaid, rapifax, Federal
Express or other national overnight carrier or by Western Union telegram,
addressed as set forth below or to such other address as may be specified from
time to time in writing by either party to the other.

TO THE BORROWER: TO THE BANK:

GOLDEN STATE VINTNERS SANWA BANK CALIFORNIA
8418 S. Lac Jac Ave. 2035 Fresno St., 2nd floor
Parlier, CA 93648 Fresno, CA 93721

With a copy to:

FORREST, BINKLEY & BROWN SANWA BANK CALIFORNIA
800 Newport Center Drive, Ste. 725 Asset Based Finance Department
Newport Beach, CA 92660 444 Market Street
San Francisco, CA 94111

10.11 WAIVER: Neither the failure nor delay by the Bank in exercising
any right hereunder or under any document, instrument or agreement mentioned
herein shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder or under any other document, instrument or
agreement mentioned herein preclude other or further exercise thereof or the
exercise of any other right; nor shall any waiver of any right or default
hereunder, or under any other document, instrument or agreement mentioned
herein, constitute a waiver of any other right or default or constitute a waiver
of any other default of the same or any other term or provision.

10.12 CONFLICTING PROVISIONS: To the extent the provisions contained in
this Agreement are inconsistent with those contained in any other document,
instrument or agreement executed pursuant hereto, the terms and provisions
contained herein shall control. Otherwise, such provisions shall be considered
cumulative.

10.13 BINDING EFFECT; ASSIGNMENT: This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may sell, assign or grant participation in all or
any portion of its rights and benefits hereunder, with the prior written consent
of the Borrower, which consent shall not be unreasonably withheld. The Borrower
agrees that, in connection with any such sale, grant or assignment, the Bank may
deliver to the prospective buyer, participant or assignee financial statements
and other relevant information relating to the Borrower and any guarantor.

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<PAGE>

10.14 JURISDICTION: This Agreement, any notes issued hereunder, the
rights of the parties hereunder to and concerning the Collateral, and any
documents, instruments or agreements mentioned or referred to herein shall be
governed by and construed according to the laws of the State of California, to
the jurisdiction of whose courts the parties hereby submit.

10.15 HEADINGS: The headings herein set forth are solely for the purpose
of identification and have no legal significance.

10.16 ENTIRE AGREEMENT: This Agreement and all documents, instruments
and agreements mentioned herein constitute the entire and complete understanding
of the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the parties pertaining to
the transactions contemplated hereunder not incorporated or referenced in this
Agreement or in such documents, instruments and agreements, including without
limitation, that certain Accounts Receivable Credit Agreement dated April 21,
1995 by and between Bank and Borrower, are superseded hereby.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA GOLDEN STATE VINTNERS

By: By:
------------------------------------ -----------------------------------

ROBERT J. GRIFFIN, VICE PRESIDENT --------------------------------------
(Name/Title) (Name/Title)

By:
-----------------------------------

--------------------------------------
(Name/Title)

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<PAGE>

TERM LOAN AGREEMENT

THIS TERM LOAN AGREEMENT (the "Agreement") is made and entered into
as of this 1st day of May, 1995, by and between SANWA BANK CALIFORNIA (the
"Bank") and GOLDEN STATE VINTNERS (the "Borrower").

SECTION I

AGREEMENT TO LEND

1.01 COMMITMENT TO LEND. Subject to the terms and conditions of this
Agreement and so long as no Event of Default occurs, the Bank agrees to extend
to the Borrower the credit accommodations that follow.

1.02 TERM LOAN. The Bank agrees to lend to the Borrower, upon the
Borrower's request made prior to June 30, 1995, up to the maximum amount of
$4,875,000 (the "Term Loan").

A. PURPOSE. Proceeds from the Term Loan shall be used to finance
the purchase of real estate.

B. TERM LOAN ACCOUNT. The Bank shall maintain on its books a
record of account in which the Bank shall make entries setting forth all
payments made, the application of such payments to interest and principal,
accrued and unpaid interest (if any) and the outstanding principal balance under
the Term Loan (the "Term Loan Account"). The Bank shall provide the Borrower
with a monthly statement of the Borrower's Term Loan Account, which statement
shall be considered to be correct and conclusively binding on the Borrower
unless the Borrower notifies the Bank to the contrary within 30 days after the
Borrower's receipt of any such statement which it deems to be incorrect.

C. INTEREST. The Term Loan shall bear interest at the following
rates at the Borrower's election:

(a) VARIABLE RATE BALANCES. The outstanding principal
balance of the Term Loan ("TERM BALANCE") shall bear interest at a rate equal to
Bank's reference rate, as it may change from time to time, plus 1% per annum
("Variable Rate Balances"). The rate of interest shall be adjusted concurrently
with any change in Bank's Reference Rate.

(b) FIXED RATE BALANCES. The Borrower may from time to time
elect that the entire Term Balance shall accrue interest on the amount of such
Term Balance at a fixed rate for such period of time as the Bank may quote and
offer; provided that any such period of time (i) shall be for at least 30, 60,
90, 180 or 360 days and (ii) shall not extend beyond the maturity date of the
Term Loan (the "Interest Period"); and provided further that the then
outstanding Term Balance shall not be less than $250,000. Such interest rate
shall be a percentage approximately equivalent to 2.50% per annum in excess of
the rate which the Bank determines in its sole and absolute discretion to be
equal to the Bank's cost of acquiring funds (adjusted for any and all
assessments, surcharges and reserve requirements pertaining to the Bank's
borrowing or purchase of such funds) in an amount approximately equal to the
amount of the Term Balance and for a period of time approximately equal to the
relevant Interest Period (the "Fixed Rate"). The Term Balance bearing interest
at the Fixed Rate is hereinafter referred to as "Fixed Rate Balance".

(c) EURODOLLAR RATE BALANCES. In addition to Variable Rate
Balances, the Bank hereby agrees to make the Term Balance, accrue interest at a
fixed rate quoted by the Bank for 30, 60, or 90 days or for such other period of
time that the Bank may quote and offer (provided that any such period of time
does not extend beyond the maturity date of the loan) [the "Eurodollar Interest
Period"]. Such interest rate shall be a percentage approximately equivalent to
2.50% in excess of the Bank's Eurodollar Rate which is that rate determined by
the Bank's Treasury Desk as being the approximate rate at which the Bank could
purchase offshore U.S. dollar deposits in an amount approximately equal to the
amount of the Term Loan and for a period of time approximately equal to the
relevant Eurodollar Interest Period (adjusted for any and all assessments,
surcharges and reserve requirements pertaining to the purchase by the Bank of
such U.S. dollar deposits)[the "Eurodollar Rate"]. Term Balances based upon the
Eurodollar Rate are hereinafter referred to as "Eurodollar Rate Balances".

(d) INTEREST PAYMENTS. Borrower hereby promises and agrees
to pay interest on any Fixed Rate Balances, Eurodollar Rate Balance and any
Variable Rate Balance in arrears on the fifth calendar day of each month.
Interest shall be calculated on the basis of a year of 360 days for actual days
elapsed.

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<PAGE>

(e) NOTICE OF ELECTION TO ADJUST INTEREST RATE. Upon
telephonic notice which shall be received by the Bank at or before 2:00 p.m.
(California time) on a business day, the Borrower may elect:

(1) That interest on a Variable Rate Balance shall be
adjusted to accrued at the Fixed Rate or the Eurodollar Rate; provided, however,
that such notice shall be received by the Bank no later than two business days
prior to the day (which shall be a business day) on which Borrower requests that
interest be adjusted to accrue at the Fixed Rate or Eurodollar Rate.

(2) That interest on a Fixed Rate Balance or Eurodollar
Rate Balance shall continue to accrue at a newly quoted Fixed Rate or Eurodollar
Rate or shall be adjusted to commence to accrue at the Variable Rate; provided,
however that such notice shall be received by the Bank no later than two
business days prior to the last day of the Interest Period or Eurodollar
Interest Period pertaining to such Fixed Rate Balance or Eurodollar Rate Balance
as the case may. If the Bank shall not have received notice as prescribed herein
of Borrower's election that interest on any Fixed Rate Balance or Eurodollar
Rate Balance shall continue to accrue at the Fixed Rate or Eurodollar Rate,
Borrower shall be deemed to have elected that interest thereon shall be adjusted
to accrue at the Variable Rate upon the expiration of the relevant Interest
Period or Eurodollar Interest Period pertaining to such Term Balance.

(f) PROHIBITION AGAINST PREPAYMENT OF FIXED RATE BALANCES OR
EURODOLLAR RATE BALANCES. Notwithstanding anything to the contrary in the
Agreement, no prepayment shall be made on any Fixed Rate Balance or Eurodollar
Rate Balance except on a day which is the last day of the relevant Interest
Period or Eurodollar Interest Period pertaining thereto. If the whole or any
part of any Fixed Rate Balance or Eurodollar Rate Balance is prepaid by reason
of acceleration or otherwise, the Borrower shall, upon the Bank's request,
promptly pay to and indemnify the Bank for all costs and any loss (including
interest) actually incurred by the Bank and any loss (including loss of profit
resulting from the re-employment of funds) sustained by the Bank as a
consequence of such prepayment.

(g) INDEMNIFICATION FOR FIXED RATE COSTS AND EURODOLLAR RATE
COSTS. During any period of time in which interest on any Term Balance is
accruing on the basis of the Fixed Rate or the Eurodollar Rate, the Borrower
shall, upon the Bank's request, promptly pay to and reimburse the Bank for all
costs incurred and payments made by the Bank by reason of any future assessment,
reserve, deposit or similar requirements or any surcharge, tax or fee imposed
upon the Bank or as a result of the Bank's compliance with any directive or
requirement of any regulatory authority pertaining or relating to funds used by
the Bank in quoting and determining the Fixed Rate or the Eurodollar Rate.

(h) CONVERSION FROM FIXED RATE OR EURODOLLAR RATE TO
VARIABLE RATE. In the event that the Bank shall at any time determine that the
accrual of interest on the basis of the Fixed Rate or the Eurodollar Rate (i) is
infeasible because the Bank is unable to determine the Fixed Rate or Eurodollar
Rate due to the unavailability of U.S. dollar deposits, contracts or
certificates of deposit in an amount approximately equal to the amount of the
relevant Balance and for a period of time approximately equal to the relevant
Interest Period or Eurodollar Interest Period; or (ii) is or has become unlawful
or infeasible by reason of the Bank's compliance with any new law, rule,
regulation, guideline or order, or any new interpretation of any present law,
rule, regulation, guideline or order, then the Bank shall give telephonic notice
thereof (confirmed in writing) to the Borrower, in which event any Fixed Rate
Balance or Eurodollar Rate Balance shall be deemed to be a Variable Rate Balance
and interest shall thereupon immediately accrue at the Variable Rate.

D. PRINCIPAL. The Borrower hereby promises and agrees to pay
principal in 9 equal installments of $325,000.00 per installment commencing on
March 5, 1996 and continuing on the fifth day of each March of each year
thereafter up to and including March 5, 2004. On March 5, 2005, the Borrower
hereby promises and agrees to pay to the Bank the entire unpaid principal
balance, together with accrued and unpaid interest.

E. ADDITIONAL PRINCIPAL PAYMENTS. So long as the principal
balance is greater than $3,250,000.00, within 120 days after the end of each of
Borrower's fiscal years, the Borrower promises and agrees to pay to the Bank as
a further payment of the principal of the Term Loan, an amount determined as
follows:

(I-E)*P

Where:

I = net profit plus depreciation plus amortization for the fiscal
year just ended.

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<PAGE>

E = principal payments made on long term debt made during the
fiscal year just ended plus preferred dividends plus capital
expenditures.

P = for FYE 1996, 10%; for FYE 1997, 15%; and 20% for each FYE
thereafter.

Each payment received by the Bank shall, at the Bank's option, be
applied to pay interest then due and unpaid and the remainder thereof (if
any) shall be applied to pay principal.

SECTION II

GUARANTORS/COLLATERAL/REAL PROPERTY

2.01 GUARANTORS. The indebtedness incurred under and pursuant to this
Agreement shall be guaranteed, in form and substance satisfactory to the Bank
(each a "Guaranty"), by Golden State Acquisition Corp. (each a "Guarantor").

2.02 THE COLLATERAL: To secure payment and performance of all the
Borrower's Obligations under this Agreement and all other liabilities, loans,
guarantees, covenants and duties owed by the Borrower to the Bank, whether or
not evidenced by this or by any other agreement, absolute or contingent, due
or to become due, now existing or hereafter and howsoever created, the
Borrower hereby grants the Bank a security interest in and to all of the
following property (the "Collateral"):

(a) All goods now owned or hereafter acquired by the Borrower
or in which the Borrower now has or may hereafter acquire any interest,
including, but not limited to, all machinery, equipment, furniture,
furnishings, tools, supplies and motor vehicles of every kind and
description, and all additions, accessions, improvements, replacements and
substitutions thereto and thereof.

(b) All inventory now owned or hereafter acquired by the
Borrower, including, but not limited to, all raw materials, work in process,
finished goods, merchandise, parts and supplies of every kind and description,
including inventory temporarily out of the Borrower's custody or possession,
together with all returns on accounts.

(c) All accounts, contract rights and general intangibles now
owned or hereafter created or acquired by the Borrower, including, but not
limited to, all receivables, goodwill, trademarks, trade styles, trade names,
patents, patent applications, software, customer lists and business records.

(d) All documents, instruments and chattel paper now owned or
hereafter acquired by the Borrower.

(e) All monies, deposits accounts, certificates of deposit and
securities of the Borrower now or hereafter in the Bank's or its agents'
possession.

(f) All crops now growing or hereafter to be grown, together
with all products and proceeds thereof (the "Crops"), on that certain real
property described in the attached Exhibit "A" (the "Real Property").

(g) All farm products now owned or hereafter acquired by or for
the benefit of the Borrower consisting of supplies used or produced in the
farming operations of the Borrower.

(h) All proceeds of the Collateral, including but not limited to,
all accounts, contract rights, documents, instruments and chattel paper
resulting from the sale or disposition of the Collateral.

The Bank's security interest in the Collateral shall be a
continuing lien and shall include the proceeds and products of the Collateral
including, but not limited to, the proceeds of any insurance thereon.

2.03 REAL PROPERTY. The Borrower hereby agrees that all indebtedness
referenced herein to be paid by the Borrower to the Bank and the Borrower's
performance of each and all of the terms, covenants and agreements contained
herein shall be secured by a deed of trust in form and substance satisfactory
to the Bank (the "Deed of Trust") encumbering, as a lien of first encumbrance,
certain real property described in the attached Exhibit "B" (the "Real
Property"), located in the County of Fresno, State of California, subject only
to current taxes and assessments not yet due and payable and exceptions numbered

-3-

<PAGE>

_____________________________________, all as listed on a certain Preliminary
Title Report No. 455171 SKL (the "Permitted Title Exceptions") dated April 10,
1995 and issued by Chicago Title Company.

SECTION III

CONDITIONS PRECEDENT

3.01 DELIVERY OF EXECUTED DOCUMENTATION AND OTHER INFORMATION TO
BANK. The Borrower shall, concurrent with its execution of this Agreement,
deliver or cause to be delivered to the Bank, in form and substance satisfactory
to the Bank:

A. AUTHORITY TO BORROW. Evidence relating to the duly given
approval and authorization of the execution, delivery and performance of this
Agreement, all other documents, instruments or agreements required under this
Agreement and all other actions to be taken by the Borrower hereunder or
thereunder.

B. LOAN DOCUMENTS. The documents described in Section II hereof,
as applicable, and all other documents, instruments or agreements required or
necessary to consummate the transactions contemplated under this Agreement
(collectively the "Loan Documents"), all fully executed.

C. LOAN FEES. Payment of a flat fee of $48,750 and all
out-of-pocket expenses of Bank in connection with the preparation and
negotiation of this Agreement.

D. REAL PROPERTY:

a. An appraisal of the Real Property.

b. A title insurance policy or binder in the amount of
$4,875,000.00 issued by a title insurance company satisfactory to the Bank and
in such form and substance and with such endorsements as are satisfactory to the
Bank. Such title insurance policy or binder shall indicate to the Bank's
satisfaction that the Deed of Trust shall constitute a lien of first encumbrance
on the Real Property subject only to the Permitted Title Exceptions and shall
include a _______ 111.5 endorsement.

c. Evidence that the Deed of Trust has been recorded and
constitutes a lien on the Real Property subject only to the Permitted Title
Exceptions.

E. MISCELLANEOUS DOCUMENTS. Such other documents and opinions as
the Bank may require with respect to the transactions described in this
Agreement.

SECTION IV

REPRESENTATIONS AND WARRANTIES

The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:

4.01 STATUS: The Borrower is a corporation duly organized and validly
existing under the laws of the State of California and is properly licensed and
is qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied with the fictitious
name statute of every jurisdiction in which the Borrower is doing business, and
where the failure to so qualify or comply would have a material adverse effect
upon the Borrower or its business.

4.02 AUTHORITY: The execution, delivery and performance by the
Borrower of this Agreement and any instrument, document or agreement required
hereunder have been duly authorized and do not and will not: (i) violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having application to the
Borrower; (ii) result in a breach of or constitute a default under any material
indenture or loan or credit agreement or other material agreement, lease or
instrument to which the Borrower is a party or by which it or its properties may
be bound or affected; or (iii) require any consent or approval of its
stockholders or violate any provision of its articles of incorporation or
by-laws.

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<PAGE>

4.03 LEGAL EFFECT: This Agreement constitutes, and any instrument,
document or agreement required hereunder when delivered hereunder will
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.

4.04 FICTITIOUS TRADE STYLES: All fictitious trade styles used by
the Borrower in connection with its business operations and each state in
which each such fictitious trade style is used are listed below. The Borrower
shall notify the Bank not less than 30 days prior to effecting any change in
the matters described below or prior to using any other fictitious trade
style at any future date, indicating the trade style and state(s) of its use.

TRADE STYLE STATE OF USE

See attached Exhibit "C" California

4.05 FINANCIAL STATEMENTS: All financial statements, information and
other data which may have been or which may hereafter be submitted by the
Borrower to the Bank are true, accurate and correct and have been or will be
prepared in accordance with generally accepted accounting principles
consistently applied and accurately represent in accordance with such principals
the financial condition or, as applicable, the other information disclosed
therein. Since the most recent submission of such financial information or data
to the Bank, the Borrower represents and warrants that no material adverse
change in the Borrower's financial condition or operations has occurred which
has not been fully disclosed to the Bank in writing.

4.06 LITIGATION: Except as have been disclosed to the Bank in
writing, there are no actions, suits or proceedings pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or
the Borrower's properties before any court or administrative agency which, if
determined adversely to the Borrower, would have a material adverse effect on
the Borrower's financial condition or operations or on the Collateral.

4.07 TITLE TO ASSETS: The Borrower has good and marketable title to
all of its assets (including, but not limited to, the Collateral) and the same
are not subject to any security interest, encumbrance, lien or claim of any
third person except for Permitted Liens.

4.08 ERISA: If the Borrower has a pension, profit sharing or
retirement plan subject to ERISA, such plan has been and will continue to be
funded in accordance with its terms and otherwise complies with and continues to
comply with the requirements of ERISA.

4.09 TAXES: The Borrower has filed all tax returns required to be
filed and paid all taxes shown thereon to be due, including interest and
penalties, other than such taxes which are currently payable without penalty or
interest or those which are being duly contested in good faith.

4.10 ENVIRONMENTAL COMPLIANCE: The Borrower has implemented and
complied in all material respects will all applicable federal, state and local
laws, ordinances, statutes and regulations with respect to hazardous or toxic
wastes, substances or related materials, industrial hygiene or environmental
conditions. There are no suits, proceeding, claims or disputes pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
its property claiming violations of any federal, state or local law, ordinance,
statute or regulation relating to hazardous or toxic wastes, substances or
related materials.

SECTION V

COVENANTS

The Borrower covenants and agrees that, during the term of this
Agreement, and so long thereafter as the Borrower is indebted to the Bank
under this Agreement, the Borrower shall, unless the Bank otherwise consents
in writing:

5.01 PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS.
Maintain and preserve its existence and all rights and privileges now
enjoyed; not liquidate or dissolve, merge or consolidate with or into, or
acquire any other business organization other than the merger of subsidiaries
of the Borrower or acquisitions which qualify as capital expenditures under
Section 5.14 hereof; and conduct its business in accordance with all
applicable laws, rules and regulations.

-5-
<PAGE>

maintain such other insurance and coverages as may be required by the Bank.
All such insurance shall be in form and amount and with companies
satisfactory to the Bank, including, but not limited to key-man life
insurance in the minimum amount of 58,000,000 on the life of Jeffrey B.
O'Neill.

5.03 PAYMENT OF OBLIGATIONS AND TAXES. Make timely payment of all
assessments and taxes and all of its liabilities and obligations unless the
same are being contested in good faith.

5.04 INSPECTION RIGHTS. At any reasonable time and from time to
time, permit the Bank or any representative thereof to examine and make
copies of the records and visit the properties of the Borrower and to discuss
the business and operations of the Borrower with any employee or
representative thereof. If the Borrower now or at any time hereafter
maintains any records (including, but not limited to, computer generated
records and computer programs for the generation of such records) in the
possession of a third party, the Borrower hereby agrees to notify such third
party to permit the Bank free access to such records at all reasonable times
and to provide the Bank with copies of any records it may request, all at the
Borrower's expense, the amount of which shall be payable immediately upon
demand.

5.05 REPORTING REQUIREMENTS. Deliver or cause to be delivered to the
Bank in form and detail satisfactory to the Bank:

A. Not later than 90 days after the end of each of the
Borrower's fiscal years, a copy of the annual audited financial report of the
Borrower for such year, prepared by a firm of certified public accountants
acceptable to Bank.

B. Not later than 30 days after the end of each month, the
Borrower's financial statement as of the end of such month.

C. Promptly upon the Bank's request, such other information
pertaining to the Borrower or any Guarantor as the Bank may reasonable request.

5.06 PAYMENT OF DIVIDENDS: Not declare or pay any dividends on any
class of common stock now or hereafter outstanding except dividends payable
solely in the Borrower's capital stock.

5.07 REDEMPTION OR REPURCHASE OF STOCK: Not redeem or repurchase any
class of the Borrower's stock now or hereafter outstanding.

5.08 ADDITIONAL INDEBTEDNESS. Not, and not permit any subsidiary
of the Borrower to, after the date hereof, create, incur or assume, directly
or indirectly, any additional Indebtedness other than (i) Indebtedness owed
or to be owed to the Bank or (ii) Indebtedness to trade creditors incurred in
the ordinary course of the Borrower's business or (iii) Indebtedness of up to
$39,500,000 owed to Gallo Winery, Prudential Life Insurance Company and John
Hancock Mutual Life Insurance Company or (iv) Indebtedness secured by a
Permitted Lien or (v) Indebtedness in respect of deferrred taxes or (vi)
Indebtedness to growers representing the deferred purchase price for
inventory or (vi) Indebtedness subordinated to Indebtedness owed to the Bank
of up to $1,700,000.

5.09 LOANS. Not make any loans or advances or extend credit to any
third person, including, but not limited to, directors, officers, shareholders,
partners, employees, affiliated entities or subsidiaries of the Borrower, except
for credit extended in the ordinary course of the Borrower's business as
presently conducted and except up to an aggregate amount of $3,000,000 may be
loaned to the Borrower's subsidiaries in any one fiscal year.

5.10 LIENS AND ENCUMBRANCES. Not create, assume or permit to
exist any security interest, encumbrance, mortgage, deed of trust or other
lien (including, but not limited to, a lien of attachment, judgment or
execution) affecting any of the Borrower's properties, or execute or allow to
be filed any financing statement or continuation thereof affecting any of
such properties, except for Permitted Liens and as otherwise provided in this
Agreement.

5.11 TRANSFER ASSETS. Not sell, contract for sale, transfer, convey,
assign, lease or sublet any of its assets except in the ordinary course of
business as presently conducted by the Borrower, and then, only for full, fair
and reasonable consideration, and except up to $250,000 of assets for any reason
in any one fiscal year.

5.12 CHANGE IN NATURE OF BUSINESS. Not make any material change in
its financial structure or in the nature of its business as existing or
conducted as of the date of this Agreement.

5.13 FINANCIAL CONDITION. Maintain at all times:

-6-
<PAGE>

(a) A minimum net profit after tax at each fiscal year-end of
at least $1.00.

(b) A ratio of Debt to Effective Tangible Net Worth of not
more than 2.3 to 1 at each fiscal year-end.

(d) A ratio of the sum of net profit after tax plus
depreciation and amortization and other non-cash transaction to the current
portion of long-term Debt plus preferred stock dividends of not less than
1.25 to 1 at each fiscal year-end.

(e) A minimum effective tangible net worth of not less than
$21,050,000.00.

For purposes of the foregoing, the term "effective tangible net
worth" shall mean the Borrower's stated net worth less all its intangible
assets (i.e., goodwill, trademarks, patents, copyrights, organization expense
and similar intangible items) but including leaseholds and leasehold
improvements and plus indebtedness subordinated (by its terms or by written
agreement) to indebtedness owed by the Borrower to the Bank and the term
"debt" shall mean all of the Borrower's liabilities excluding indebtedness
subordinated (by its terms or by written agreement) to indebtedness owed by
the Borrower to the Bank.

Notwithstanding anything herein to the contrary, the consolidated
financial statements of Golden State Acquisition Corporation shall be used
for purposes of determining compliance with Section 7.14 (b) and (e) hereof.

5.14 CAPITAL EXPENSES. Not make any fixed capital expenditure or
any commitment therefor, including, but not limited to, incurring liability
for leases which would be, in accordance with generally accepted accounting
principles, reported as capital leases, or purchase any real or personal
property in an aggregate amount exceeding $1,000,000 in any one fiscal year,
other than capital expenditures in connection with the Borrower's grafting
program.

5.15 RENTALS. Not incur liability (in addition to that incurred
as of the date of this Agreement) for the payment of, or pay, rentals for the
renting, leasing or use of real or personal property in an aggregate amount
exceeding $1,000,000 in any one fiscal year.

5.16 NOTICES. Give prompt written notice to the Bank of any and
all Events of Default and litigation, arbitration or administrative
proceedings to which the Borrower is a party and in which the claim or
liability exceeds $100,000.

5.17 ENVIRONMENTAL COMPLIANCE. The Borrower shall:

(a) Implement and comply in all material respects with all
applicable federal, state and local laws, ordinances, statutes and
regulations with respect to hazardous or toxic wastes, substances or related
materials, industrial hygiene or to environmental conditions.

(b) Not own, use, generate, manufacture, store, handle,
treat, release or dispose of any hazardous or toxic wastes, substances or
related materials, except in accordance with applicable requirements of law.

(c) Give prompt written notice of any discovery of or suit,
proceeding, claim, dispute, threat, inquiry or filing respecting hazardous or
toxic wastes, substances or related materials.

(d) At all times indemnify and hold harmless Bank from and
against any and all liability arising out of the use, generation,
manufacture, storage, handling, treatment, disposal or presence of hazardous
or toxic wastes, substances or related materials by Borrower.

SECTION VI

EVENTS OF DEFAULT

Any one or more of the following described events shall constitute
an event of default (an "Event of Default") under this Agreement:

6.01 NON-PAYMENT. The Borrower shall fail to pay any payment of
principal or interest or any other sum referred to in this Agreement within
10 days of when due.

-7-
<PAGE>

6.02 PERFORMANCE UNDER THIS AND OTHER AGREEMENTS. The Borrower
shall fail in any material respect to perform or observe any term, covenant
or agreement contained in this Agreement or in any document, instrument or
agreement evidencing or relating to any indebtedness of the Borrower (whether
owed to the Bank or third persons other than trade creditors), and any such
failure (exclusive of the failure to pay money to the Bank under this
Agreement which results in an event of default or under any other instrument,
document or agreement with the Bank, which failure shall constitute and be an
immediate Event of Default if not paid when due or when demanded to be due
following the expiration of any applicable grace period) shall continue for
more than 30 days after written notice from the Bank to the Borrower of the
existence and character of such Event of Default.

6.03 REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS. Any
representation or warranty made by the Borrower under or in connection with
this Agreement or any financial statement given by the Borrower or any
Guarantor shall prove to have been incorrect in any material respect when
made or given or when deemed to have been made or given.

6.04 INSOLVENCY. The Borrower or any Guarantor shall: (i) become
insolvent or be unable to pay its debts as they mature; (ii) make an
assignment for the benefit of creditors or to an agent authorized to
liquidate any substantial amount of its properties or assets; (iii) file a
voluntary petition in bankruptcy or seeking reorganization or to effect a
plan or other arrangement with creditors; (iv) file an answer admitting the
material allegations of an involuntary petition relating to bankruptcy or
reorganization or join in any such petition; (v) become or be adjudicated a
bankrupt; (vi) apply for or consent to the appointment of, or consent that an
order be made appointing, any receiver, custodian or trustee, for itself or
any of its properties, assets or businesses; or (vii) any receiver, custodian
or trustee shall have been appointed for all or a substantial part of its
properties, assets or business and shall not be discharged within 60 days
after the date of such appointment.

6.05 EXECUTION. Any writ of execution or attachment or any
judgment lien shall be issued against any property of the Borrower and shall
not be discharged or bonded against or released within 60 days after the
issuance or attachment of such writ or lien.

6.06 REVOCATION OR LIMITATION OF GUARANTY. Any Guaranty shall be
revoked or limited or its enforceability or validity shall be contested by
any Guarantor, by operation of law, legal proceeding or otherwise or any
Guarantor who is a natural person shall die.

6.07 SUSPENSION. The Borrower shall voluntarily suspend the
transaction of business or allow to be suspended, terminated, revoked or
expired any material permit, license or approval of any governmental body
necessary to conduct the Borrower's business as now conducted.

6.08 CHANGE IN OWNERSHIP. There shall occur a sale, transfer,
disposition or encumbrance (whether voluntary or involuntary), or an
agreement shall be entered into to do so, with respect to more than 20% of
the issued and outstanding capital stock of the Borrower, other than warrants
held by John Hancock Mutual Life Insurance Company and/or certain of its
respective affiliates.

SECTION VII

REMEDIES ON DEFAULT

Upon the occurrence of any Event of Default, the Bank may, in its
sole and absolute election, without demand and upon only such notice as may
be required by law:

7.01 ACCELERATION. Declare any or all of the Borrower's
indebtedness owing to the Bank, whether under this Agreement or under any
other document, instrument or agreement, immediately due and payable, whether
or not otherwise due and payable.

7.02 CEASE EXTENDING CREDIT. Cease extending credit to or for the
account of the Borrower under this Agreement or under any other agreement now
existing or hereafter entered into between the Borrower and the Bank.

7.03 TERMINATION. Terminate this Agreement as to any future
obligation of the Bank without affecting the Borrower's obligations to the
Bank or the Bank's rights and remedies under this Agreement or under any
other document, instrument or agreement.

7.04 NON-EXCLUSIVITY OF REMEDIES. Exercise one or more of the
Bank's rights set forth herein or seek such other rights or pursue such other
remedies as may be provided by law, in equity or in any other agreement now
existing or hereafter entered into between the Borrower and the Bank, or
otherwise.

-8-
<PAGE>

SECTION VIII

MISCELLANEOUS PROVISIONS

8.01 ACCOUNTING AND OTHER TERMS. All references to financial
statements, assets, liabilities and similar accounting terms not
specifically defined in this Agreement shall mean such financial statements
prepared and such terms determined in accordance with generally accepted
accounting principles consistently applied. Except where otherwise specified
in this Agreement, all financial data submitted or to be submitted to the
Bank pursuant to this Agreement shall be prepared in accordance with
generally accepted accounting principles consistently applied. Terms not
otherwise defined in this Agreement shall have the meanings attributed to
such terms in the California Uniform Commercial Code.

8.02 DEFAULT INTEREST RATE. The Borrower shall pay the Bank
interest on any indebtedness or amount payable under this Agreement, if an
Event of Default has occurred or is continuing, at a rate which is 3% in
excess of the rate otherwise provided under this Agreement.

8.03 APPLICATION OF PAYMENTS: All amounts received by the Bank
whether as payments or as proceeds from the disposition or liquidation of
collateral, if any, shall be applied to the Borrower's indebtedness to the
Bank as follows: first, to the costs and expenses of collection, enforcement,
protection and preservation, including but not limited to the Bank's lien in
the collateral and including court costs and reasonable attorneys' fees,
whether or not suit is commenced by the Bank; next, to those costs and
expenses incurred by the Bank in enforcing and collecting this Agreement
including protecting, preserving, liquidating, selling or disposing of the
collateral, if any; next, to the payment of accrued and unpaid interest on
all of the Obligations; next, to the payment of the outstanding principal
balance of the Obligations; and last, to the payment of any other
indebtedness owed by the Borrower to the Bank. Any excess existing after the
payment of the foregoing will be returned or paid by the Bank to the Borrower.

8.04 DISPUTE RESOLUTION. It is understood and agreed that upon the
request of any party to this agreement any dispute, claim, or controversy of
any kind, whether in contract or in tort, statutory or common law, legal or
equitable now existing or hereinafter arising between the parties in any
way arising out of, pertaining to or in connection with: (1) this Agreement,
or any related agreements, documents, or instruments, (2) all past and
present loans, credits, accounts, deposit accounts (whether demand deposits or
time deposits), safe deposit boxes, safekeeping agreements, guarantees,
letters of credit, goods or services, or other transactions, contracts or
agreements of any kind, (3) any incidents, omissions, acts, practices, or
occurrences causing injury to either party whereby the other party or its
agents, employees or representatives may be liable, in whole or in part, or
(4) any aspect of the past or present relationships of the parties, shall be
resolved through a two-step dispute resolution process administered by
Judicial Arbitration & Mediation Services, Inc. ("J*A*M*S") as follows:

a) STEP I - MEDIATION: At the request of any party to the
dispute, claim or controversy of the matter shall be referred to
the nearest office of J*A*M*S for mediation, that is, an informal,
non-binding conference or conferences between the parties in which
a retired judge or justice for the J*A*M*S panel will seek to guide
the parties to a resolution of the case.

b) STEP II - CONTRACTS SECURED BY REAL ESTATE - TRIAL BY COURT
REFERENCE [SECTION 638(1)] CODE OF CIVIL PROCEDURE): If the
dispute, claim or controversy is not one required or agreed to be
submitted to arbitration as provided by subparagraph (b) and has
not been resolved by Step I mediation, them any remaining dispute,
claim or controversy shall be submitted for determination by a
trial on Order of Reference conducted by a retired judge or justice
from the panel of J*A*M*S appointed pursuant to the provisions of
California Code of Civil Procedure Section 638(1) or any amendment,
addition or successor section thereto to hear the case and report a
statement of decision thereon. The parties intend this general
reference agreement to be specifically enforceable in accordance
with said section. If this parties are unable to agree upon a
member of the J*A*M*S panel to act as referee then one shall be
appointed by the Presiding Judge of the county wherein the hearing
is to be held. The parties shall pay in advance, to the referee, the
estimated reasonable fees and costs of the reference, as may be
specified in advance by the referee. The parties shall initially
share equally, by paying their proportionate amount of the
estimated fees and costs of the reference. Failure of any party to
make such a fee deposit shall result in a forfeiture by the
non-depositing party of the right to prosecute or defend the
cause(s) of action which is(are) the subject of the reference, but
shall not otherwise serve to abate, stay or suspend the reference
proceeding.

c) PROVISIONAL REMEDIES. SELF HELP AND FORECLOSURE: No
provision of, or the exercise of any right(s) under subparagraph
(b), nor any other provision of this Dispute Resolution Provision,
shall limit the right of any party to exercise self help remedies
such as set off, to foreclose against any real or personal property
collateral, or obtain provisional or ancillary remedies such as
injunctive relief or the appointment of a receiver from any court
having jurisdiction before, during or after the pendency of any
MEDIATION OR TRIAL ON ORDER OF REFERENCE. At Bank's option,
foreclosure under a deed of trust

-9-

<PAGE>

or mortgage may be accomplished either by exercise of power of sale
under the deed of trust or mortgage, or by judicial foreclosure.
The institution and maintenance of an action for provisional
remedies pursuit of provisional or ancillary remedies or exercise
of self help remedies shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or
claim to MEDIATION OR TRIAL ON ORDER OF REFERENCE.

8.05 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK EACH WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. THE BORROWER AND THE BANK EACH AGREE THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS
TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

8.06 RELIANCE. Each warranty, representation, covenant and agreement
contained in this Agreement shall be conclusively presumed to have been
relied upon by the Bank regardless of any investigation made or information
possessed by the Bank and shall be cumulative and in addition to any other
warranties, representations, covenants or agreements which the Borrower shall
now or hereafter give, or cause to be given, to the Bank.

8.07 ATTORNEY'S FEES. In the event of any action in relation to
this Agreement or any document, instrument or agreement executed with respect
to, evidencing or securing the indebtedness hereunder, the prevailing party,
in addition to all other sums to which it may be entitled, shall be entitled
to reasonable attorneys' fees.

8.08 NOTICES. All notices, payments, requests, information and
demands which either party hereto may desire, or may be required to give or
make to the other party, shall be given or made to such party by hand
delivery or through deposit in the United States mail, postage prepaid,
rapifax, Federal Express or by Western Union telegram, addressed to the
address set forth below such party's signature to this Agreement or to such
other address as may be specified from time to time in writing by either
party to the other.

8.09 WAIVER. Neither the failure nor delay by the Bank in
exercising any right hereunder or under any document, instrument or agreement
mentioned herein shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder or under any other document,
instrument or agreement mentioned herein preclude other or further exercise
thereof or the exercise of any other right; nor shall any waiver of any right
or default hereunder or under any other document, instrument or agreement
mentioned herein constitute a waiver of any other right or default or
constitute a waiver of any other default of the same or any other term or
provision.

8.10 CONFLICTING PROVISIONS. To the extent that any of the terms or
provisions contained in this Agreement are inconsistent with those contained
in any other document, instrument or agreement executed pursuant hereto, the
terms and provisions contained herein shall control. Otherwise, such
provisions shall be considered cumulative.

8.11 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Borrower and the Bank and their
respective successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
Bank's prior written consent. The Bank may sell, assign or grant
participations in all or any portion of its rights and benefits hereunder,
with the prior written consent of the Borrower, which consent shall not be
unreasonably withheld. The Borrower agrees that, in connection with any such
sale, grant or assignment, the Bank may deliver to the prospective buyer,
participant or assignee financial statements and other relevant information
relating to the Borrower.

8.12 JURISDICTION. This Agreement, any notes issued hereunder, and
any documents, instruments or agreements mentioned or referred to herein
shall be governed by and construed according to the laws of the State of
California, to the jurisdiction of whose courts the parties hereby submit.

8.13 HEADINGS. The headings set forth herein are solely for the
purpose of identification and have no legal significance.

-10-

<PAGE>

8.14 ENTIRE AGREEMENT. This Agreement and the Loan Documents shall
constitute the entire and complete understanding of the parties with respect to
the transactions contemplated hereunder. All previous conversations, memoranda
and writings between the parties or pertaining to the transactions contemplated
hereunder that are not incorporated or referenced in this Agreement or the Loan
Documents are superseded hereby.

IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA GOLDEN STATE VINTNERS

By: By:
-------------------------------- ----------------------------------

- ----------------------------------- --------------------------------------
(Name/Title) (Name/Title)

By: By:
-------------------------------- ----------------------------------

- ----------------------------------- --------------------------------------
(Name/Title) (Name/Title)

Address: Address:
--------------------------- --------------------------------

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

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<PAGE>

RECORDING REQUESTED BY,
AND WHEN RECORDED, MAIL TO:

SANWA BANK CALIFORNIA
2035 Fresno Street
Fresno, California 93721

ATTN: Stacey Thompson
Fresno Commercial Banking Center #080-1
- --------------------------------------------------------------------------------
AMENDMENT TO TERM LOAN AGREEMENT

This First Amendment to Term Loan Agreement (the "Amendment") is made and
entered into this 18th day of October, 1996, by and between SANWA BANK
CALIFORNIA (the "Bank") and GOLDEN STATE VINTNERS (the "Borrower") with respect
to the following:

This Amendment shall be deemed to be a part of and subject to that
certain Term Loan Agreement dated as of May 1, 1995, as it may be amended
from time to time, and any and all addenda and riders thereto (collectively
the "Agreement"). Unless otherwise defined herein, all terms used in this
Amendment shall have the same meanings as in the Agreement. To the extent
that any of the terms or provisions of this Amendment conflict with those
contained in the Agreement, the terms and provisions contained herein shall
control.

WHEREAS, the Agreement is secured by a certain deed of trust dated May 1, 1995,
and recorded on May 5, 1995, as Instrument No. 95054740, of the Official Records
of the County of Fresno, State of California (the "Deed of Trust") encumbering
certain real property described in the attached Exhibit A and which Deed of
Trust provides that it secures indebtedness evidenced by the Agreement as the
Agreement may be modified or extended; and

WHEREAS, the Borrower and the Bank mutually desire to extend and/or modify the
Agreement.

NOW THEREFORE, for value received and hereby acknowledged, the Borrower and the
Bank agree as follows:

1. CHANGE IN ADDITIONAL INDEBTEDNESS. Section 5.08 of the Agreement is
deleted in its entirety and the following is substituted in lieu thereof:

"5.08 ADDITIONAL INDEBTEDNESS. Not, and not permit any subsidiary
of the Borrower to, after the date hereof, create, incur or assume,
directly or indirectly, any additional Indebtedness other than
(i) Indebtedness owed or to be owed to the Bank or (ii) Indebtedness
to trade creditors incurred in the ordinary course of the Borrower's
business or (iii) Indebtedness of up to $45,000,000 owed to Gallo
Winery, Prudential Life Insurance Company and John Hancock Mutual Life
Insurance Company or (iv) Indebtedness secured by a Permitted Lien or
(v) Indebtedness in respect of deferred taxes or (vi) Indebtedness to
growers representing the deferred purchase price for inventory or (vi)
Indebtedness subordinated to Indebtedness owed to the Bank of up to
$1,700,000."

2. CHANGE IN FINANCIAL CONDITION. Section 5.13(b) and (c) of the Agreement
is deleted in its entirety and the following is substituted in lieu thereof and
Section 5.13 (e) is deleted in its entirety:

"(b) A ratio of Debt to Effective Tangible Net Worth of not more
than 3.5 to 1 are each fiscal year-end.

3. CHANGE IN CAPITAL EXPENSES. Section 5.14 of the Agreement is deleted in
its entirety and the following is substituted in lieu thereof:

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<PAGE>

$1,500,000 in any one fiscal year, other than capital expenditures
in connection with the Borrower's grafting program."

4. CONFIRMATION OF OTHER TERMS AND CONDITIONS OF THE AGREEMENT. Except
as specifically provided in this Amendment, all other terms, conditions and
covenants of the Agreement unaffected by this Amendment shall remain unchanged
and shall continue in full force and effect and the Borrower hereby covenants
and agrees to perform and observe all terms, covenants and agreements provided
for in the Agreement, as hereby amended.

IN WITNESS WHEREOF, this Amendment has been executed by the parties
hereto as of the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA GOLDEN STATE VINTNERS

By: By:
----------------------------- ---------------------------

- ---------------------------------- --------------------------------
(Name/Title) (Name/Title)

By:
---------------------------

--------------------------------
(Name/Title)

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<PAGE>

RECORDING REQUESTED BY,
AND WHEN RECORDED, MAIL TO:

SANWA BANK CALIFORNIA
2035 Fresno Street
Fresno, California 93721

ATTN: Stacey Thompson
Fresno Commercial Banking Center #DBD-1
- -------------------------------------------------------------------------------

AMENDMENT TO TERM LOAN AGREEMENT

This Second Amendment to Term Loan Agreement (the "Amendment") is made and
entered into this 18th day of December, 1996, by and between SANWA BANK
CALIFORNIA (the "Bank") and GOLDEN STATE VINTNERS (the "Borrower") with respect
to the following:

This Amendment shall be deemed to be a part of and subject to that certain
Term Loan Agreement dated as of May 1, 1995, as it may be amended from time to
time, and any and all addenda and riders thereto (collectively the "Agreement").
Unless otherwise defined herein, all terms used in this Amendment shall have the
same meanings as in the Agreement. To the extent that any of the terms or
provisions of this Amendment conflict with those contained in the Agreement, the
terms and provisions contained herein shall control.

WHEREAS, the Agreement is secured by a certain deed of trust dated May 1,
1995, and recorded on May 5, 1995, as Instrument No. 95054740, of the Official
Records of the County of Fresno, State of California (the "Deed of Trust")
encumbering certain real property described in the attached Exhibit A and which
Deed of Trust provides that it secures indebtedness evidenced by the Agreement
as the Agreement may be modified or extended; and

WHEREAS, the Borrower and the Bank mutually desire to extend and/or modify
the Agreement.

NOW THEREFORE, for value received and hereby acknowledged, the Borrower and
the Bank agree as follows:

1. CHANGE IN TERM LOAN. The first paragraph of Section 1.02 of the
Agreement is deleted in its entirety and the following is substituted in lieu
thereof:

"1.02 TERM LOAN. The Bank agrees to lend to the Borrower, upon the
Borrower's request therefore, up to the maximum amount of $6,200,000
(the "Term Loan")".

2. CHANGE IN INTEREST RATES. All references to 30 and 60 days in Section
1.02 C. (b) and (c) of the Agreement is deleted in their entirety.

3. CHANGE TO PRINCIPAL. Section 1.02 D. of the Agreement is deleted in its
entirety and the following is substituted in lieu thereof:

"D. PRINCIPAL. The Borrower hereby promises and agrees to pay
principal in 2 equal installments of $325,000.00 per installment on
March 5, 1996 and March 5, 1997 and 7 equal installments of $413,000
commencing on March 5, 1998 and continuing on the fifth day of each
March of each year thereafter up to and including March 5, 2004. On
March 5, 2005, the Borrower hereby promises and agrees to pay to the
Bank the entire unpaid principal balance, together with accrued and
unpaid interest".

4. MODIFICATION OF PAYMENTS. Section 1.02 B. of the Agreement is deleted
in its entirety.

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<PAGE>

5. CHANGE IN INDEBTEDNESS. Section 5.08 of the Agreement is deleted in
its entirety and the following is substituted in lieu thereof:

"5.08 ADDITIONAL INDEBTEDNESS. Not, and not permit any
subsidiary of the Borrower to, after the date hereof, create,
incur or assume, directly or indirectly, any additional
Indebtedness other than (i) Indebtedness owed or to be owed to
the Bank or (ii) Indebtedness to trade creditors incurred in the
ordinary course of the Borrower's business or (iii) Indebtedness
of up to $45,000,000 owed to Gallo Winery, Prudential Life
Insurance Company and John Hancock Mutual Life Insurance Company
or (iv) Indebtedness secured by a Permitted Lien or
(v) Indebtedness in respect of deferred taxes or
(vi) Indebtedness to growers representing the deferred purchase
price for inventory or (vi) Indebtedness subordinated to
Indebtedness owed to the Bank of up to $1,700,000 or (vii)
Indebtedness of up to $500,000 owed to Vintners International,
Inc.".

6. MODIFICATION OF COVENANTS. Section 5.13 (b), (c) and (e) of the
Agreement are deleted in their entirety.

7. CHANGE IN CAPITAL EXPENDITURES. Section 5.14 of the Agreement is
deleted in its entirety and the following is substituted in lieu thereof:

"5.14 CAPITAL EXPENSES. Not make any fixed capital expenditure
or any commitment therefor, including, but not limited to,
incurring liability for leases which would be, in accordance with
generally accepted accounting principles, reported as capital
leases, or purchase any real or personal property in an aggregate
amount exceeding $2,500,000 in any one fiscal year, other than
capital expenditures in connection with the Borrower's
acquisition of or capital improvements to a winery in Soledad,
California provided that such capital expenditures may not exceed
$8,600,000.00".

8. FEES. As a condition precedent to the effectiveness of this Agreement,
Borrower agrees to pay to Bank a fee of $17,000.00.

9. CONFIRMATION OF OTHER TERMS AND CONDITIONS OF THE AGREEMENT. Except as
specifically provided in this Amendment, all other terms, conditions and
covenants of the Agreement unaffected by this Amendment shall remain unchanged
and shall continue in full force and effect and the Borrower hereby covenants
and agrees to perform and observe all terms, covenants and agreements provided
for in the Agreement, as hereby amended.

IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto
as of the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA GOLDEN STATE VINTNERS

By: /s/ William D. Bertrand By: /s/ Jeffrey B. O'Neill
-------------------------------- ----------------------------------------
William D. Bertrand, Vice President Jeffrey B. O'Neill, President, Treasurer
- ----------------------------------- -------------------------------------------
(Name/Title) (Name/Title)

By:
----------------------------------------

-------------------------------------------
(Name/Title)

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<PAGE>

RECORDING REQUESTED BY,
AND WHEN RECORDED, MAIL TO:

SANWA BANK CALIFORNIA
2035 Fresno St.
Fresno, CA 93721

ATTN: Dwayne Bertrand

- --------------------------------------------------------------------------------
APN# ________

THIRD AMENDMENT TO TERM LOAN AGREEMENT

This Third Amendment to Term Loan Agreement (the "Amendment") is made
and entered into this 18th day of April, 1997 by and between SANWA BANK
CALIFORNIA (the "Bank") and GOLDEN STATE VINTNERS (the "Borrower") with
respect to the following:

WHEREAS, the Agreement is secured by a certain deed of trust dated May
1, 1995, and recorded on May 5, 1995, as Instrument No. 95054740, of the
Official Records of the County of Fresno, State of California (the "Deed of
Trust") encumbering certain real property described in the attached Exhibit A
and which Deed of Trust provides that it secures indebtedness evidenced by
the Agreement as the Agreement may be modified or extended; and

WHEREAS, the Borrower and the Bank mutually desire to extend and/or
modify the Agreement.

NOW THEREFORE, for value received and hereby acknowledged, the Borrower
and the Bank agree as follows:

1. MODIFICATION OF INTEREST RATE. The Variable Rate provided for in
Section 1.02 C of the Agreement is reduced by .50% and the Fixed Rate and
Eurodollar Rate are reduced by .30%.

2. CONDITIONS PRECEDENT. As a condition precedent to the effectiveness
of this Agreement,

(a) Borrower agrees to pay Bank all of Bank's out-of-pocket
expenses in connection with the preparation and negotiation of this Amendment.

(b) Recordation of this Amendment in the official records of the
County of Fresno.

3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby reaffirms the
representations and warranties contained in the Agreement and represents that
no event, which with notice or lapse of time, could become an Event of
Default, has occurred or is continuing.

4. CONFIRMATION OF OTHER TERMS AND CONDITIONS OF THE AGREEMENT. Except
as specifically provided in this Amendment, all other terms, conditions and
covenants of the Agreement [and the Deed of Trust] unaffected by this
Amendment shall remain unchanged and shall continue in full force and effect
and the Borrower hereby covenants and agrees to perform and observe all
terms, covenants and agreements provided for in the Agreement, as hereby
amended.

5. GOVERNING LAW. This Amendment shall be governed and construed in
accordance with the laws of the State of California to which jurisdiction the
parties hereto hereby consent and submit.

5. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.

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<PAGE>

IN WITNESS WHEREOF, this Amendment has been executed by the parties
hereto as of the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA GOLDEN STATE VINTNERS

By: /s/ William D. Bertrand By: /s/ Brian Thompson
------------------------------- ---------------------------------
William D. Bertrand, VP CFO
- ---------------------------------- ------------------------------------
Name/Title Name/Title

ATTACH NOTARY ACKNOWLEDGMENT(S)

-2-

<PAGE>
EXHIBIT 10.16

TERM LOAN AGREEMENT

THIS TERM LOAN AGREEMENT (the "Agreement") is made and entered into
as of this 18th day of December, 1996, by and between SANWA BANK CALIFORNIA
(the "Bank") and GOLDEN STATE VINTNERS (the "Borrower").

SECTION I

AGREEMENT TO LEND

1.01 COMMITMENT TO LEND. Subject to the terms and conditions of
this Agreement and so long as no Event of Default occurs, the Bank agrees to
extend to the Borrower the credit accommodations that follow.

1.02 TERM LOAN. The Bank agrees to lend to the Borrower, upon the
Borrower's request made prior to March 5, 1999, up to the maximum amount of
$5,600,000 (the "Term Loan"), provided, however, that the initial drawing
hereunder may not exceed $3,640,000.

A. PURPOSE. Proceeds from the Term Loan shall be used to
finance the purchase of a winery located in Soledad, California.

B. TERM LOAN ACCOUNT. The Bank shall maintain on its books a
record of account in which the Bank shall make entries setting forth all
payments made, the application of such payments to interest and principal,
accrued and unpaid interest (if any) and the outstanding principal balance
under the Term Loan (the "Term Loan Account). The Bank shall provide the
Borrower with a monthly statement of the Borrower's Term Loan Account, which
statement shall be considered to be correct and conclusively binding on the
Borrower unless the Borrower notifies the Bank to the contrary within 30 days
after the Borrower's receipt of any such statement which it deems to be
incorrect.

C. INTEREST. The Term Loan shall bear interest at the
following rates at the Borrower's election:

(a) VARIABLE RATE BALANCES. The outstanding principal
balance of the Term Loan ("Term Balance") shall bear interest at a rate equal
to Bank's reference rate, as it may change from time to time, plus 1% per
annum ("Variable Rate Balances"). The rate of interest shall be adjusted
concurrently with any change in Bank's Reference Rate.

(b) FIXED RATE BALANCES. The Borrower may from time to
time elect that the entire Term Balance shall accrue interest on the amount
of such Term Balance at a fixed rate for such period of time as the Bank may
quote and offer; provided that any such period of time (i) shall be for at
least 90, 180 or 360 days and (ii) shall not extend beyond the maturity date
of the Term Loan (the "Interest Period"); and provided further that the then
outstanding Term Balance shall not be less than $250,000. Such interest rate
shall be a percentage approximately equivalent to 2.50% per annum in excess
of the rate which the Bank determines in its sole and absolute discretion to
be equal to the Bank's cost of acquiring funds (adjusted for any and all
assessments, surcharges and reserve requirements pertaining to the Bank's
borrowing or purchase of such funds) in an amount approximately equal to the
amount of the Term Balance and for a period of time approximately equal to
the relevant Interest Period (the "Fixed Rate"). The Term Balance bearing
interest at the Fixed Rate is hereinafter referred to as "Fixed Rate Balance".

(c) EURODOLLAR RATE BALANCES. In addition to Variable
Rate Balances, the Bank hereby agrees to make the Term Balance, accrue
interest at a fixed rate quoted by the Bank for 90 days or for such other
period of time that the Bank may quote and offer (provided that any such
period of time does not extend beyond the maturity date of the loan)
[the "Eurodollar Interest Period"]. Such interest rate shall be a percentage
approximately equivalent to 2.50% in excess of the Bank's Eurodollar Rate
which is that rate determined by the Bank's Treasury Desk as being the
approximate rate at which the Bank could purchase offshore U.S. dollar
deposits in an amount approximately equal to the amount of the Term Loan and
for a period of time approximately equal to the relevant Eurodollar Interest
Period (adjusted for any and all assessments, surcharges and reserve
requirements pertaining to the purchase by the Bank of such U.S. dollar
deposits [the "Eurodollar Rate"]. Term Balances based upon the Eurodollar
Rate are hereinafter referred to as "Eurodollar Rate Balances".

(d) INTEREST PAYMENTS. Borrower hereby promises and
agrees to pay interest on any Fixed Rate

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<PAGE>

Balances, Eurodollar Rate Balance and any Variable Rate Balance in arrears on
the fifth calendar day of each month. Interest shall be calculated on the
basis of a year of 360 days for actual days elapsed.

(e) NOTICE OF ELECTION TO ADJUST INTEREST RATE. Upon
telephonic notice which shall be received by the Bank at or before 2:00 p.m.
(California time) on a business day, the Borrower may elect:

(1) That interest on a Variable Rate Balance shall
be adjusted to accrued at the Fixed Rate or the Eurodollar Rate; provided,
however, that such notice shall be received by the Bank no later than two
business days prior to the day (which shall be a business day) on which
Borrower requests that interest be adjusted to accrue at the Fixed Rate or
Eurodollar Rate.

(2) That interest on a Fixed Rate Balance or
Eurodollar Rate Balance shall continue to accrue at a newly quoted Fixed Rate
or Eurodollar Rate or shall be adjusted to commence to accrue at the Variable
Rate; provided, however that such notice shall be received by the Bank no
later than two business days prior to the last day of the Interest Period or
Eurodollar Interest Period pertaining to such Fixed Rate Balance or
Eurodollar Rate Balance as the case may. If the Bank shall not have received
notice as prescribed herein of Borrower's election that interest on any Fixed
Rate Balance or Eurodollar Rate Balance shall continue to accrue at the Fixed
Rate or Eurodollar Rate, Borrower shall be deemed to have elected that
interest thereon shall be adjusted to accrue at the Variable Rate upon the
expiration of the relevant Interest Period or Eurodollar Interest Period
pertaining to such Term Balance.

(f) PROHIBITION AGAINST PREPAYMENT OF FIXED RATE BALANCES
OR EURODOLLAR RATE BALANCES. Notwithstanding anything to the contrary in the
Agreement, no prepayment shall be made on any Fixed Rate Balance or
Eurodollar Rate Balance except on a day which is the last day of the relevant
Interest Period or Eurodollar Interest Period pertaining thereto. If the
whole or any part of any Fixed Rate Balance or Eurodollar Rate Balance is
prepaid by reason of acceleration or otherwise, the Borrower shall, upon the
Bank's request, promptly pay to and indemnify the Bank for all costs and any
loss (including interest) actually incurred by the Bank and any loss
(including loss of profit resulting from the re-employment of funds)
sustained by the Bank as a consequence of such prepayment.

(g) INDEMNIFICATION FOR FIXED RATE COSTS AND EURODOLLAR
RATE COSTS. During any period of time in which interest on any Term Balance
is accruing on the basis of the Fixed Rate or the Eurodollar Rate, the
Borrower shall, upon the Bank's request, promptly pay to and reimburse the
Bank for all costs incurred and payments made by the Bank by reason of any
future assessment, reserve, deposit or similar requirements or any surcharge,
tax or fee imposed upon the Bank or as a result of the Bank's compliance with
any directive or requirement of any regulatory authority pertaining or
relating to funds used by the Bank in quoting and determining the Fixed Rate
or the Eurodollar Rate.

(h) CONVERSION FROM FIXED RATE OR EURODOLLAR RATE TO
VARIABLE RATE. In the event that the Bank shall at any time determine that
the accrual of interest on the basis of the Fixed Rate or the Eurodollar Rate
(i) is infeasible because the Bank is unable to determine the Fixed Rate or
Eurodollar Rate due to the unavailability of U.S. dollar deposits, contracts
or certificates of deposit in an amount approximately equal to the amount of
the relevant Balance and for a period of time approximately equal to the
relevant Interest Period or Eurodollar Interest Period; or (ii) is or has
become unlawful or infeasible by reason of the Bank's compliance with any new
law, rule, regulation, guideline or order, or any new interpretation of any
present law, rule, regulation, guideline or order, then the Bank shall give
telephonic notice thereof (confirmed in writing) to the Borrower, in which
event any Fixed Rate Balance or Eurodollar Rate Balance shall be deemed to be
a Variable Rate Balance and interest shall thereupon immediately accrue at
the Variable Rate.

D. PRINCIPAL. The Borrower hereby promises and agrees to pay
principal in 7 equal installments of $560,000.00 per installment commencing
on March 5, 1998 and continuing on the fifth day of each March of each year
thereafter up to and including March 5, 2004. On March 5, 2005, the Borrower
hereby promises and agrees to pay to the Bank the entire unpaid principal
balance, together with accrued and unpaid interest.

Each payment received by the Bank shall, at the Bank's option, be
applied to pay interest then due and unpaid and the remainder thereof (if
any) shall be applied to pay principal.

E. LATE PAYMENT: If any payment of principal or interest, or
any portion thereof, under this Agreement is not paid within ten (10)
calendar days after it is due, a late payment charge equal to five percent
(5%) of such past due payment may be assessed and shall be immediately
payable.

SECTION II

GUARANTORS/COLLATERAL/REAL PROPERTY

-2-
<PAGE>

2.01 GUARANTORS. The indebtedness incurred under and pursuant to
this Agreement shall be guaranteed, in form and substance satisfactory to the
Bank (each a "Guaranty"), by Golden State Acquisition Corp. (each a
"Guarantor").

(b) All inventory now owned or hereafter acquired by the
Borrower, including, but not limited to, all raw materials, work in process,
finished goods, merchandise, parts and supplies of every kind and
description, including inventory temporarily out of the Borrower's custody or
possession, together with all returns on accounts.

(d) All documents, instruments and chattel paper now owned or
hereafter acquired by the Borrower.

(e) All monies, deposit accounts, certificates of deposit and
securities of the Borrower now or hereafter in the Bank's or its agents'
possession.

(g) All farm products now owned or hereafter acquired by or
for the benefit of the Borrower consisting of supplies used or produced in
the farming operations of the Borrower.

(h) All proceeds of the Collateral, including but not limited
to, all accounts, contract rights, documents, instruments and chattel paper
resulting from the sale or disposition of the Collateral.

The Bank's security interest in the Collateral shall be a
continuing lien and shall include the proceeds and products of the Collateral
including, but not limited to, the proceeds of any insurance thereon.

2.03 REAL PROPERTY. The Borrower hereby agrees that all
indebtedness referenced herein to be paid by the Borrower to the Bank and the
Borrower's performance of each and all of the terms, covenants and agreements
contained herein shall be secured by a deed of trust in form and substance
satisfactory to the Bank (the "Deed of Trust") encumbering, as a lien of
first encumbrance, certain real property described in the attached Exhibit
"B" (the "Real Property"), located in the County of Monterey, State of
California, subject only to current taxes and assessments not yet due and
payable and exceptions numbered 1 - 14, all as listed on a certain Commitment
for Title Report No. 1703677 (the "Permitted Title Exceptions") dated June
20, 1996 and issued by Chicago Title Company.

SECTION III

CONDITIONS PRECEDENT

3.01 DELIVERY OF EXECUTED DOCUMENTATION AND OTHER INFORMATION TO
BANK. The Borrower shall, concurrent with its

-3-
<PAGE>

execution of this Agreement, deliver or cause to be delivered to the Bank, in
form and substance satisfactory to the Bank:

B. LOAN DOCUMENTS. The documents described in Section II
hereof, as applicable, and all other documents, instruments or agreements
required or necessary to consummate the transactions contemplated under this
Agreement (collectively the "Loan Documents"), all fully executed.

C. LOAN FEES. Payment of a flat fee of $56,000 and all
out-of-pocket expenses of Bank in connection with the preparation and
negotiation of this Agreement.

D. REAL PROPERTY:

a. An appraisal of the Real Property.

b. A title insurance policy or binder in the amount of
$5,600,000 issued by a title insurance company satisfactory to the Bank and
in such form and substance and with such endorsements as are satisfactory to
the Bank. Such title insurance policy or binder shall indicate to the Bank's
satisfaction that the Deed of Trust shall constitute a lien of first
encumbrance on the Real Property subject only to the Permitted Title
Exceptions.

c. Evidence that the Deed of Trust has been recorded and
constitutes a lien on the Real Property subject only to the Permitted Title
Exceptions.

E. MISCELLANEOUS DOCUMENTS. Such other documents and
opinions as the Bank may require with respect to the transactions described
in this Agreement.

SECTION IV

REPRESENTATIONS AND WARRANTIES

The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:

4.01 STATUS: The Borrower is a corporation duly organized and
validly existing under the laws of the State of California and is properly
licensed and is qualified to do business and in good standing in, and, where
necessary to maintain the Borrower's rights and privileges, has complied with
the fictitious name statute of every jurisdiction in which the Borrower is
doing business, and where the failure to so qualify or comply would have a
material adverse effect upon the Borrower or its business.

4.02 AUTHORITY: The execution, delivery and performance by the
Borrower of this Agreement and any instrument, document or agreement required
hereunder have been duly authorized and do not and will not: (i) violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having application to the
Borrower; (ii) result in a breach of or constitute a default under any
material indenture or loan or credit agreement or other material agreement,
lease or instrument to which the Borrower is a party or by which it or its
properties may be bound or affected; or (iii) require any consent or approval
of its stockholders or violate any provision of its articles of incorporation
or by-laws.

4.03 LEGAL EFFECT. This Agreement constitutes, and any
instrument, document or agreement required hereunder when delivered hereunder
will constitute, legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms.

<TABLE>
<CAPTION>
TRADE STYLE STATE OF USE
<S> <C>

</TABLE>

-4-
<PAGE>

See attached Exhibit "C" California

4.05 FINANCIAL STATEMENTS: All financial statements, information
and other data which may have been or which may hereafter be submitted by the
Borrower to the Bank are true, accurate and correct and have been or will be
prepared in accordance with generally accepted accounting principles
consistently applied and accurately represent in accordance with such
principles the financial condition or, as applicable, the other information
disclosed therein. Since the most recent submission of such financial
information or data to the Bank, the Borrower represents and warrants that no
material adverse change in the Borrower's financial condition or operations
has occurred which has not been fully disclosed to the Bank in writing.

4.07 TITLE TO ASSETS: The Borrower has good and marketable title
to all of its assets (including, but not limited to, the Collateral) and the
same are not subject to any security interest, encumbrance, lien or claim of
any third person except for Permitted Liens.

4.09 TAXES: The Borrower has filed all tax returns required to be
filed and paid all taxes shown thereon to be due, including interest and
penalties, other than such taxes which are currently payable without penalty
or interest or those which are being duly contested in good faith.

4.10 ENVIRONMENTAL COMPLIANCE: The Borrower has implemented and
complied in all material respects with all applicable federal, state and
local laws, ordinances, statutes and regulations with respect to hazardous or
toxic wastes, substances or related materials, industrial hygiene or
environmental conditions. There are no suits, proceedings, claims or disputes
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or its property claiming violations of any federal, state or
local law, ordinance, statute or regulation relating to hazardous or toxic
wastes, substances or related materials.

SECTION V

COVENANTS

5.02 MAINTENANCE OF INSURANCE. Maintain insurance in such amounts
and covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which
the Borrower operates and maintain such other insurance and coverages as may
be required by the Bank. All such insurance shall be in form and amount and
with companies satisfactory to the Bank, including, but not limited to
key-man life insurance in the minimum amount of $8,000,000 on the life of
Jeffrey B. O'Neill.

5.03 PAYMENT OF OBLIGATIONS AND TAXES. Make timely payment of all
assessments and taxes and all of its liabilities and obligations unless the
same are being contested in good faith.

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<PAGE>

provide the Bank with copies of any records it may request, all at the
Borrower's expense, the amount of which shall be payable immediately upon
demand.

5.05 REPORTING REQUIREMENTS. Deliver or cause to be delivered to
the Bank in form and detail satisfactory to the Bank:

B. Not later than 45 days after the end of each month, the
Borrower's financial statement as of the end of such month.

C. Promptly upon the Bank's request, such other information
pertaining to the Borrower or any Guarantor as the Bank may reasonably
request.

5.06 PAYMENT OF DIVIDENDS: Not declare or pay any dividends on
any class of common stock now or hereafter outstanding except dividends
payable solely in the Borrower's capital stock.

5.07 REDEMPTION OR REPURCHASE OF STOCK: Not redeem or repurchase
any class of the Borrower's stock now or hereafter outstanding.

5.08 ADDITIONAL INDEBTEDNESS. Not, and not permit any subsidiary
of the Borrower to, after the date hereof, create, incur or assume, directly
or indirectly, any additional Indebtedness other than (i) Indebtedness owed
or to be owed to the Bank or (ii) Indebtedness to trade creditors incurred in
the ordinary course of the Borrower's business or (iii) Indebtedness of up to
$45,000,000 owed to Gallo Winery, Prudential Life Insurance Company and John
Hancock Mutual Life Insurance Company or (iv) Indebtedness secured by a
Permitted Lien or (v) Indebtedness in respect of deferred taxes or (vi)
Indebtedness to growers representing the deferred purchase price for
inventory or (vi) Indebtedness subordinated to Indebtedness owed to the Bank
of up to $1,700,000 or (vii) Indebtedness of up to $500,000 owed to Vintners
International, Inc.

5.09 LOANS. Not make any loans or advances or extend credit to
any third person, including, but not limited to, directors, officers,
shareholders, partners, employees, affiliated entities or subsidiaries of the
Borrower, except for credit extended in the ordinary course of the Borrower's
business as presently conducted and except up to an aggregate amount of
$3,000,000 may be loaned to the Borrower's subsidiaries in any one fiscal
year.

5.10 LIENS AND ENCUMBRANCES. Not create, assume or permit to exist
any security interest, encumbrance, mortgage, deed of trust or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's properties, or execute or allow to be filed
any financing statement or continuation thereof affecting any of such
properties, except for Permitted Liens and as otherwise provided in this
Agreement.

5.11 TRANSFER ASSETS. Not sell, contract for sale, transfer,
convey, assign, lease or sublet any of its assets except in the ordinary
course of business as presently conducted by the Borrower, and then, only for
full, fair and reasonable consideration, and except up to $250,000 of assets
for any reason in any one fiscal year.

5.12 CHANGE IN NATURE OF BUSINESS. Not make any material change
in its financial structure or in the nature of its business as existing or
conducted as of the date of this Agreement.

5.13 FINANCIAL CONDITION. Maintain at all times:

(a) A minimum net profit after tax at each fiscal year-end of
at least $1.00.

(b) A ratio of the sum of net profit after tax plus
depreciation and amortization and other non-cash transaction to the current
portion of long-term Debt plus preferred stock dividends of not less than
1.25 to 1 at each fiscal year-end.

-6-

<PAGE>

5.14 CAPITAL EXPENSES. Not make any fixed capital expenditure or
any commitment therefor, including, but not limited to, incurring liability
for leases which would be, in accordance with generally accepted accounting
principles, reported as capital leases, or purchase any real or personal
property in an aggregate amount exceeding $2,500,000 in any one fiscal year,
other than capital expenditures in connection with the Borrower's acquisition
of, or capital improvements to, a winery in Soledad, California, provided
that such capital expenditures may not exceed $8,600,000.

5.17 ENVIRONMENTAL COMPLIANCE. The Borrower shall:

(a) Implement and comply in all material respects with all
applicable federal, state and local laws, ordinances, statutes and
regulations with respect to hazardous or toxic wastes, substances or related
materials, industrial hygiene or to environmental conditions.

(c) Give prompt written notice of any discovery of or suit,
proceeding, claim, dispute, threat, inquiry or filing respecting hazardous or
toxic wastes, substances or related materials.

(d) At all times indemnify and hold harmless Bank from and
against any and all liability arising out of the use, generation,
manufacture, storage, handling, treatment, disposal or presence of hazardous
or toxic wastes, substances or related materials by Borrower.

SECTION VI

EVENTS OF DEFAULT

Any one or more of the following described events shall constitute
an event of default (an "Event of Default") under this Agreement:

6.01 NON-PAYMENT. The Borrower shall fail to pay any payment of
principal or interest or any other sum referred to in this Agreement within
10 days of when due.

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<PAGE>

any receiver, custodian or trustee, for itself or any of its properties,
assets or businesses; or (vii) any receiver, custodian or trustee shall have
been appointed for all or a substantial part of its properties, assets or
business and shall not be discharged within 60 days after the date of such
appointment.

SECTION VII

REMEDIES ON DEFAULT

Upon the occurrence of any Event of Default, the Bank may, in its
sole and absolute election, without demand and upon only such notice as may
be required by law:

SECTION VIII

MISCELLANEOUS PROVISIONS

8.01 ACCOUNTING AND OTHER TERMS. All references to financial
statements, assets, liabilities and similar accounting terms not specifically
defined in this Agreement shall mean such financial statements prepared and
such terms determined in accordance with generally accepted accounting
principles consistently applied. Except where otherwise specified in this
Agreement, all financial data submitted or to be submitted to the Bank
pursuant to this Agreement shall be prepared in accordance with generally
accepted accounting principles consistently applied. Terms not otherwise
defined in this Agreement shall have the meanings attributed to such terms in
the California Uniform Commercial Code.

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<PAGE>

including court costs and reasonable attorneys' fees, whether or not suit is
commenced by the Bank; next, to those costs and expenses incurred by the Bank
in enforcing and collecting this Agreement including protecting, preserving,
liquidating, selling or disposing of the collateral, if any; next, to the
payment of accrued and unpaid interest on all of the Obligations; next, to
the payment of the outstanding principal balance of the Obligations; and
last, to the payment of any other indebtedness owed by the Borrower to the
Bank. Any excess existing after the payment of the foregoing will be returned
or paid by the Bank to the Borrower.

8.04 DISPUTE RESOLUTION. It is understood and agreed that upon
the request of any party to this agreement any dispute, claim, or controversy
of any kind, whether in contract or in tort, statutory or common law, legal
or equitable now existing or hereinafter arising between the parties in any
way arising out of, pertaining to or in connection with: (1) this Agreement,
or any related agreements, documents, or instruments, (2) all past and
present loans, credits, accounts, deposit accounts (whether demand deposits
or time deposits), safe deposit boxes, safekeeping agreements, guarantees,
letters of credit, goods or services, or other transactions, contracts or
agreements of any kind, (3) any incidents, omissions, acts, practices, or
occurrences causing injury to either party whereby the other party or its
agents, employees or representatives may be liable, in whole or in part, or
(4) any aspect of the past or present relationships of the parties, shall be
resolved through a two-step dispute resolution process administered by
Judicial Arbitration & Mediation Services, Inc. ("J*A*M*S") as follows:

a) STEP I - MEDIATION: At the request of any party to the
dispute, claim or controversy of the matter shall be referred to the
nearest office of J*A*M*S for mediation, that is, an informal,
non-binding conference or conferences between the parties in which a
retired judge or justice for the J*A*M*S panel will seek to guide the
parties to a resolution of the case.

b) STEP II - CONTRACTS SECURED BY REAL ESTATE - TRIAL BY COURT
REFERENCE [SECTION 638(1)] CODE OF CIVIL PROCEDURE): If the dispute,
claim or controversy is not one required or agreed to be submitted to
arbitration as provided by subparagraph (b) and has not been resolved by
Step I mediation, them any remaining dispute, claim or controversy shall
be submitted for determination by a trial on Order of Reference
conducted by a retired judge or justice from the panel of J*A*M*S
appointed pursuant to the provisions of California Code of Civil
Procedure Section 638(1) or any amendment, addition or successor section
thereto to hear the case and report a statement of decision thereon. The
parties intend this general reference agreement to be specifically
enforceable in accordance with said section. If this parties are unable
to agree upon a member of the J*A*M*S panel to act as referee then one
shall be appointed by the Presiding Judge of the county wherein the
hearing is to be held. The parties shall pay in advance, to the referee,
the estimated reasonable fees and costs of the reference, as may be
specified in advance by the referee. The parties shall initially share
equally, by paying their proportionate amount of the estimated fees and
costs of the reference. Failure of any party to make such a fee deposit
shall result in a forfeiture by the non-depositing party of the right to
prosecute or defend the cause(s) of action which is(are) the subject of
the reference, but shall not otherwise serve to abate, stay or suspend
the reference proceeding.

c) PROVISIONAL REMEDIES, SELF HELP AND FORECLOSURE: No
provision of, or the exercise of any right(s) under subparagraph (b),
nor any other provision of this Dispute Resolution Provision, shall
limit the right of any party to exercise self help remedies such as set
off, to foreclose against any real or personal property collateral, or
obtain provisional or ancillary remedies such as injunctive relief or
the appointment of a receiver from any court having jurisdiction before,
during or after the pendency of any MEDIATION OR TRIAL ON ORDER OF
REFERENCE. At Bank's option, foreclosure under a deed of trust or
mortgage may be accomplished either by exercise of power of sale under
the deed of trust or mortgage, or by judicial foreclosure. The
institution and maintenance of an action for provisional remedies pursuit
of provisional or ancillary remedies or exercise of self help remedies
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to MEDIATION OR TRIAL ON
ORDER OF REFERENCE.

8.06 RELIANCE. Each warranty, representation, covenant and
agreement contained in this Agreement shall be conclusively

-9-

<PAGE>

presumed to have been relied upon by the Bank regardless of any investigation
made or information possessed by the Bank and shall be cumulative and in
addition to any other warranties, representations, covenants or agreements
which the Borrower shall now or hereafter give, or cause to be given, to the
Bank.

8.07 ATTORNEY'S FEES. Borrower shall pay to the Bank all costs
and expenses, including but not limited to reasonable attorneys fees,
incurred by Bank in connection with the administration, enforcement, or any
refinancing or restructuring in the nature of a "work-out", of this Agreement
or any document, instrument or agreement executed with respect to, evidencing
or securing the indebtedness hereunder.

8.10 CONFLICTING PROVISIONS. To the extent that any of the terms
or provisions contained in this Agreement are inconsistent with those
contained in any other document, instrument or agreement executed pursuant
hereto, the terms and provisions contained herein shall control. Otherwise,
such provisions shall be considered cumulative.

8.12 JURISDICTION. This Agreement, any notes issued hereunder,
and any documents, instruments or agreements mentioned or referred to herein
shall be governed by and construed according to the laws of the State of
California, to the jurisdiction of whose courts the parties hereby submit.

8.13 HEADINGS. The headings set forth herein are solely for the
purpose of identification and have no legal significance.

8.14 ENTIRE AGREEMENT. This Agreement and the Loan Documents
shall constitute the entire and complete understanding of the parties with
respect to the transactions contemplated hereunder. All previous
conversations, memoranda and writings between the parties or pertaining to
the transactions contemplated hereunder that are not incorporated or
referenced in this Agreement or the Loan Documents are superseded hereby.

IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA GOLDEN STATE VINTNERS

By: /s/ William D. Bertrand By: /s/ Jeffrey B. O'Neill
----------------------------------- --------------------------------
William D. Bertrand, Vice President Jeffrey B. O'Neill, C.E.O.
----------------------------------- --------------------------------
(Name/Title)

By: N/A
--------------------------------
N/A
--------------------------------
(Name/Title)

-10-

<PAGE>

By:
------------------------------------

- ---------------------------------------
(Name/Title)

By:
------------------------------------

- ---------------------------------------
(Name/Title)

Address:
-------------------------------

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

-11-
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED, MAIL TO:

SANWA BANK CALIFORNIA
2035 Fresno St.
Fresno, CA 93721

ATTN:Dwayne Bertrand

- --------------------------------------------------------------------------------
APN#
--------------

FIRST AMENDMENT TO TERM LOAN AGREEMENT

This First Amendment to Term Loan Agreement [and Deed of Trust] (the
"Amendment") is made and entered into this 18th day of April, 1997 by and
between SANWA BANK CALIFORNIA (the "Bank") and GOLDEN STATE VINTNERS (the
"Borrower") with respect to the following:

This Amendment shall be deemed to be a part of and subject to that
certain Term Loan Agreement dated as of December 18, 1996, as it may be
amended from time to time, and any and all addenda and riders thereto
(collectively the "Agreement"). Unless otherwise defined herein, all terms
used in this Amendment shall have the same meanings as in the Agreement. To
the extent that any of the terms or provisions of this Amendment conflict
with those contained in the Agreement, the terms and provisions contained
herein shall control.

WHEREAS, the Agreement is secured by a certain deed of trust dated
December 18, 1996, and recorded on December 20, 1996, as Instrument No.
76122, Reel 3459, Page 1226 of the Official Records of the County of
Monterey, State of California (the "Deed of Trust") encumbering certain real
property described in the attached Exhibit A and which Deed of Trust provides
that it secures indebtedness evidenced by the Agreement as the Agreement may
be modified or extended; and

WHEREAS, the Borrower and the Bank mutually desire to extend and/or
modify the Agreement.

NOW THEREFORE, for value received and hereby acknowledged, the Borrower
and the Bank agree as follows:

1. MODIFICATION OF INTEREST RATE. The Variable Rate provided for in
Section 1.02 C of the Agreement is reduced by .50% and the Fixed Rate and
Eurodollar Rate are reduced by .30%.

2. CONDITIONS PRECEDENT. As a condition precedent to the
effectiveness of this Agreement,

(a) Borrower agrees to pay to Bank all of Bank's out-of-pocket
expenses in connection with the preparation and negotiation of this Amendment.

(b) Recordation of this Amendment in the official records of
the County of Monterey

3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby reaffirms
the representations and warranties contained in the Agreement and represents
that no event, which with notice or lapse of time, could become an Event of
Default, has occurred or is continuing.

4. CONFIRMATION OF OTHER TERMS AND CONDITIONS OF THE AGREEMENT.
Except as specifically provided in this Amendment, all other terms,
conditions and covenants of the Agreement [and the Deed of Trust] unaffected
by this Amendment shall remain unchanged and shall continue in full force and
effect and the Borrower hereby covenants and agrees to perform and observe
all terms, covenants and agreements provided for in the Agreement, as hereby
amended.

5. GOVERNING LAW. This Amendment shall be governed and construed in
accordance with the laws of the State of California to which jurisdiction the
parties hereto hereby consent and submit.

-1-
<PAGE>

5. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.

IN WITNESS WHEREOF, this Amendment has been executed by the parties
hereto as of the date first hereinabove written.

BANK: BORROWER:

SANWA BANK CALIFORNIA GOLDEN STATE VINTNERS

By: /s/ William D. Bertrand By: /s/ Brian R. Thompson
--------------------------- ---------------------------

William D. Bertrand, VP CFO
- ------------------------------- -------------------------------
Name/Title Name/Title

ATTACH NOTARY ACKNOWLEDGEMENT(S)

-2-

<PAGE>
SUBLEASE AND CONSENT

SUBLEASE AND CONSENT

THIS SUBLEASE AND CONSENT ("Sublease") is made as of ______________,
19____, by and between Richard C. McKenzie, Jr., an individual ("Tenant"),
having an address at 500 Drakes Landing Road, Greenbrae, CA 94904
("Sublessee"), having an address at Golden State Vintners, A California
Corporation, 60 E. Sir Francis Drake Blvd., Larkspur, CA 94939 and 100 Sir
Francis Drake Boulevard, Inc., a Florida not-for-profit corporation
("Landlord"), having an address at 100 Drakes Landing Road, Suite 115,
Greenbrae, CA 94904.

A. Landlord or its predecessor in interest, and Tenant or its predecessor
in interest, have heretofore entered into that certain lease dated January 30,
1997, for premises (the "Premises") described as Suite(s), or Room(s)
_______________ initially containing approximately 5,131 square feet in the
property (the "Building") known as Drakes Landing Office Center, located at
500 Drakes Landing Road, Greenbrae, CA 94904 which lease has heretofore been
amended or assigned by instruments dated __________________ (collectively, the
"Master Lease").

B. Sublessee desires to obtain space in the Building, Tenant desires to
sublease space to Sublessee, and Landlord is willing to approve the same, all on
the terms and conditions hereinafter set forth.

NOW, THEREFORE, for good and valuable consideration, the parties hereto
agree as follows:

1. Tenant shall sublease to Sublessee and Sublessee shall sublease from
Tenant approximately SEE EXHIBIT A rentable square feet of the Premises, as more
fully described in Exhibit "A" attached hereto (the "Sublease Premises").

2. The term of this Sublease shall commence on January 1, 1998, (the
"Commencement Date") and terminate on May 31, 2000, (the "Expiration Date"),
unless sooner terminated, subject to Section 9, below.

3. Sublessee shall pay Tenant as basic rent Eight Thousand Two Hundred
Dollars ($8,200.00), per month, in advance on the first day of each month,
commencing on January 1, 1998, and continuing each month thereafter during the
term of this Sublease, and Sublessee shall pay all other sums due as additional
rental under the provisions of the Master Lease on the basic rental payment due
date first occurring after the additional rental payment arises. Any such
additional rental obligations shall be prorated based on the ratio of the
rentable square footage of the Sublease Premises to the rentable square footage
of the Premises.

4. Tenant hereby acknowledges receipt of the sum of Eight Thousand
Dollars ($82,000) as a security deposit for the full and faithful performance of
each and every provision of this Sublease to be performed by Sublessee. If
Sublessee shall fully and faithfully perform every provision of this Sublease to
be performed by Sublessee, said Security Deposit shall be reassigned to
Sublessee at the expiration of the term of this Sublease. It is understood by
the parties hereto that Tenant shall not be required to keep said Security
Deposit separate from its funds and Sublessee shall not be entitled to any
interest on the Security Deposit.

5. Sublessee shall perform and observe the terms and conditions to be
performed on the part of Tenant under the provisions of the Master Lease, except
for the payment of rent, and shall indemnify Tenant and Landlord against all
claims, damages, costs and expenses arising out of Sublessee's failure to
perform or observe any such terms or conditions, subject however to all the
express terms and conditions of this Sublease. If Sublessee shall default

<PAGE>

hereunder and not cure within the times permitted for cure of such default under
the Master Lease, Tenant shall have all remedies against Sublessee provided for
Landlord under the Master Lease, and if such default shall constitute a default
under the Master Lease, Landlord shall have all remedies available to Landlord
thereunder.

6. This Sublease shall be of no force or effect unless and until executed
and delivered by all parties hereto. No provision of this Sublease may be
amended except in writing signed by all parties hereto or their successors. By
execution hereof, Tenant ratifies the Master Lease and Sublessee acknowledges
that it has received a complete and correct copy of the Master Lease and is
familiar with the terms thereof.

7. Neither the Master Lease, nor this Sublease shall be deemed to grant
Sublessee any rights whatsoever against Landlord. Sublessee hereby acknowledges
and agrees that its sole remedy for any alleged or actual breach of its rights
in connection with the Sublease Premises (as defined in the Sublease) shall be
solely against Tenant.

8. This Sublease shall not release Tenant from any existing or future
duty, obligation or liability to Landlord pursuant to the Master Lease, nor
shall this Sublease change, modify or amend the Master Lease in any manner. In
particular, without prejudice to the generality of the foregoing, this Sublease
shall not absolve Tenant from the requirement set forth in the Master Lease that
Tenant obtain Landlord's prior written approval for any further subleases.

9. (a) In the event of Master Lease Termination (as hereinafter defined)
prior to the termination of this Sublease, at Landlord's option, Sublessee
agrees to attorn to Landlord and to recognize Landlord as Sublessee's landlord
under this Sublease, upon the terms and conditions and at the rental rate
specified in this Sublease, and for the then remaining term of this Sublease,
except that Landlord shall not be bound by any provision of this Sublease which
in any way increases Landlord's duties, obligations or liabilities to Sublessee
beyond those owed to Tenant under the Master Lease. Sublessee agrees to execute
and deliver at any time and from time to time, upon the request of Landlord, any
instruments which may be necessary or appropriate to evidence such attornment.
Landlord shall not (i) be liable to Sublessee for any act, omission or breach of
this Sublease by Tenant, (ii) be subject to any offsets or defenses which
Sublessee might have against Tenant, (iii) be bound by any rent or additional
rent which Sublessee might have paid in advance to Tenant, or (iv) be bound to
honor any rights of Sublessee in any security deposit made with Tenant except to
the extent Tenant has turned over such security deposit to Landlord. Tenant
hereby agrees that in the event of Master Lease Termination, Tenant shall
immediately pay or transfer to Landlord any security deposits, rent or other
sums then held by Tenant.

(b) "Master Lease Termination" means any event, which by voluntary or
involuntary act or by operation of law, might cause or permit the Master Lease
to be terminated, expire, be canceled, be foreclosed against, or otherwise come
to an end, including but not limited to (1) a default by Tenant under the Master
Lease of any of the terms or provisions thereof; (2) foreclosure proceedings
brought by the holder of any mortgage or trust deed to which the Master Lease is
subject; or (3) the termination of Tenant's leasehold estate by dispossession
proceeding or otherwise.

(c) In the event of attornment hereunder, landlord's liability shall
be limited to matters arising during Landlord's ownership of the Building, and
in the event that Landlord (or any successor owner) shall convey or dispose of
the Building to another party, such party shall thereupon be and become landlord
hereunder and shall be deemed to have fully assumed and be liable for all
obligations under this Sublease to be performed by Landlord which first arise
after the date of conveyance, including the return of any security deposit, and
Tenant shall attorn to such other party, and Landlord (or such successor owner)
shall, from and after the date of conveyance, be free of all liabilities and
obligations hereunder not then incurred. The liability of Landlord to Sublessee
for any default by Landlord under this Sublease after such attornment, or
arising in connection with Landlord's operation, management, leasing,

2
<PAGE>

repair, renovation, alteration, or any other matter relating to the Building or
the Sublease Premises, shall be limited to the interest of the Landlord in the
Building (and proceeds thereof). Under no circumstances shall any present or
future general partner of Landlord (if Landlord is a partnership), or individual
trustee or beneficiary (if Landlord or any partner of Landlord is a trust) have
any liability for the performance of Landlord's obligations under this Sublease.

10. In addition to Landlord's rights under Section 9 hereof, in the event
Tenant is in default under any of the terms and provisions of the Master Lease,
Landlord may elect to receive directly from Sublessee all sums due or payable to
Tenant by Sublessee pursuant to this Sublease, and upon receipt of Landlord's
notice, Sublessee shall thereafter pay Landlord any sums becoming due or payable
under this Sublease, and Tenant shall receive from Landlord a corresponding
credit for such sums against any and all payments then due or thereafter
becoming due from Tenant. Neither the service of such written notice nor the
receipt of such direct payments shall cause Landlord to assume any of Tenant's
duties, obligations and/or liabilities under this Sublease, nor shall such event
impose upon Landlord the duty or obligation to honor this Sublease, nor
subsequently to accept Sublessee's attornment pursuant to Section 9(a) hereof.

11. Sublessee hereby acknowledges that it has read and has knowledge of
all of the terms, provisions, rules and regulations of the Master Lease and
agrees not to do or omit to do anything which would cause Tenant to be in breach
of the Master Lease. Any such act or omission shall also constitute a breach of
this Sublease entitling Landlord to recover any damage, loss, cost or expense
which it thereby suffers, from Sublessee, whether or not Landlord proceeds
against Tenant. If the Master Lease requires the payment of percentage rent,
based on a percentage of gross sales or other sales in or from the Premises,
Sublessee shall comply with all provisions of the Master Lease respecting the
same, including without limitation, all requirements concerning the keeping of
books, records, and other items, and reporting of gross sales to Landlord. In
such case, Sublessee's sale shall be included in Tenant's gross sales for
purposes of computing Tenant's percentage rent obligations under the Master
Lease.

12. In the event of any litigation between the parties hereto with respect
to the subject matter hereof, the unsuccessful party agrees to pay to the
successful party all costs, expenses and reasonable attorneys' fee incurred
therein by the successful party, which shall be included as a part of a judgment
rendered therein.

13. This Sublease shall be binding upon and inure to the benefit of the
parties' respective successors and assigns, subject at all times, to all
agreements and restrictions contained in the Master Lease, and herein, with
respect to subleasing, assignment, or other transfer. The agreements contained
herein constitute the entire understanding between the parties with respect to
the subject matter hereof, and supersede all prior agreements written or oral,
inconsistent herewith. This Sublease may be amended only in writing, signed by
all parties hereto.

14. Notices required or desired to be given hereunder shall be effective
either upon personal delivery on three (3) days after deposit in the United
States mail, by certified mail, return receipt requested, addressed to the
parties at the addresses set forth above. Any party may change its address for
notice by giving notice in the manner hereinabove provided.

15. In order to help reimburse Landlord's legal and administrative
expenses in reviewing this Sublease Tenant shall have paid before or
contemporaneously with its submission hereof for Landlord's review the
non-refundable amount of Three Hundred and no/100 Dollars ($300.00) (the
"Submission Fee"). Landlord's acceptance of such Submission Fee shall impose no
duty or obligation upon Landlord to consent to the transaction contemplated
herein nor to execute this Sublease. In the event that the foregoing Submission
Fee has not been submitted before or contemporaneously with this Sublease, it
shall become due as an additional rental obligation under the Master Lease,
payable upon demand by

3
<PAGE>

Landlord, and shall become the joint and several obligation of the Tenant, and
in the event this Sublease is executed by Landlord, of Sublessee. Tenant shall
also promptly pay Landlord any share of subleasing premiums or profits, or other
items, required under the Master Lease in connection with sublease approvals.

16. Notwithstanding anything to the contrary set forth herein or
elsewhere, if the Master Lease was guaranteed at the time of execution or at any
time prior hereto by any guarantor, then Landlord may at any time hereafter
declare all of its agreements in this Sublease to be null and void and of no
force and effect unless and until Landlord receives a counterpart of this
Sublease indicating the approval thereof by any and all such guarantor(s) and
their spouses.

17. Tenant and Sublessee agree to indemnify and hold Landlord harmless
from and against any loss, cost, expense, damage or liability, including
reasonable attorneys' fees, incurred as a result of a claim by any person or
entity (i) that it is entitled to a commission, finder's fee or like payment in
connection with this Sublease or (ii) relating to or arising out of this
Sublease or any related agreement or dealings.

18. Tenant agrees to hold any and all payments due under this Sublease as
a trust fund to be applied first to the satisfaction of all of Tenant's
obligations under the Master Lease and hereunder, before using any part thereof
for any other purpose.

19. Sublessee has inspected the Sublease Premises and agrees to accept the
same "as is" without any agreements, representations, understandings or
obligations on the part of Tenant to perform any alterations repairs or
improvements except as expressly provided in any separate agreement that may be
signed by their parties in connection herewith. Any construction, alterations
or improvements made to the Sublease Premises by Sublessee shall be subject to
Tenant's and Landlord's prior written approval including without limitation
approval of the plans, specifications, contractors and subcontractors therefor,
and all applicable terms and conditions of the Lease relating to construction,
alterations or improvements of the Premises, and such other reasonable
requirements or conditions as Tenant or Landlord may impose. During any period
that Sublessee shall be permitted to enter the Sublease Premises prior to the
Commencement Date other than to occupy the same (e.g., to perform alterations or
improvements), Sublessee shall comply with all terms and provisions of this
Sublease, except those provisions requiring payment of rentals. If Sublessee
shall be permitted to enter the Sublease Premises prior to the Commencement Date
for the purpose of occupying the same, rentals shall commence on such date; if
Sublessee shall commence occupying only a portion of the Sublease Premises prior
to the Commencement Date, rentals shall be prorated based on the number of
rentable square feet occupied by Sublessee.

The Commencement Date shall be delayed and rentals from Sublessee to Tenant
hereunder shall be abated to the extent that Tenant fails: (i) to substantially
complete any improvements to the Sublease Premises required to be performed by
Tenant under any separate agreement signed by both parties and approved by
Landlord in connection herewith, or (ii) to deliver possession of the Sublease
Premises for any other reason, including but not limited to holding over by
prior occupants, except to the extent that Sublessee, its contractors, agents or
employees in any way contribute to either such failures. If Tenant so fails for
a ninety (90) day initial grace period, or such additional time as may be
necessary due to strikes, acts of God, shortages of labor or materials,
governmental requirements, acts or omissions of Sublessee, its contractors,
agents or employees, or other causes beyond Tenant's reasonable control,
Sublessee shall have the right to terminate this Sublease by written notice to
Tenant any time thereafter up until Tenant substantially completes any such
improvements and delivers the Sublease Premises to Sublessee. Any such delay in
the Commencement Date shall not subject Tenant (or Landlord) to any liability
for any loss or damage resulting therefrom, and Sublessee's sole remedy with
respect thereto shall be the abatement of rentals and right to terminate this
Sublease described above. Upon any such termination, Tenant and Sublessee shall
be entirely relieved of their obligations hereunder, and any Security Deposit
and rentals

4
<PAGE>

shall be returned to Sublessee. If the Commencement Date is delayed, the
Expiration Date shall not be similarly extended, unless the parties expressly
agree in writing.

IN WITNESS WHEREOF, the following parties have executed this Sublease as of
the date first written above:

WITNESSES; ATTESTATION
(Two for each signatory
required if Property is in
Florida or Ohio):
TENANT: Richard C. McKenzie, Jr.,
an individual

By:
- --------------------------------- ----------------------------------

- --------------------------------- Name Typed: Richard C. McKenzie, Jr.

Title:
-------------------------------

SUBLESSEE: Golden State Vintners,
A California Corporation

By: /s/ Jeffrey B. O'Neill
- --------------------------------- ---------------------------------

- --------------------------------- Name Typed: Jeffrey B. O'Neill

Title: President

5
<PAGE>

LANDLORD:

- --------------------------------- 100 Sir Francis Drake Boulevard, Inc.,
a Florida corporation
- ---------------------------------
By: Heitman Capital Management
- --------------------------------- Corporation, an Illinois
corporation, agent

By:
----------------------------------
Its:
----------------------------------
Date:
----------------------------------

GUARANTOR(S) (and spouses)

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

THIS FORM HAS BEEN PROVIDED BY LANDLORD ONLY AS AN EXAMPLE OF A SUBLEASE. THIS
FORM HAS IMPORTANT LEGAL CONSEQUENCES, AND EACH PARTY SHOULD CONSULT ITS
ATTORNEY BEFORE SIGNING. LANDLORD DOES NOT PRACTICE LAW, AND IS PROVIDING NO
ASSURANCES AS TO THE ADEQUACY OR ENFORCEABILITY OF THIS FORM, OR WHETHER IT IS
FREE OF ERRORS OR OMISSIONS.

6
<PAGE>

ADDENDUM TO SUBLEASE
BY AND BETWEEN
RICHARD C. McKENZIE, JR., TENANT
GOLDEN STATE VINTNERS, SUBLESSEE
AND 100 SIR FRANCIS DRAKE BOULEVARD, INC., LANDLORD
DATED: December 1, 1997

1. As consideration for this Sublease, effective upon the commencement of
the Sublease, Sublessee will become the owner of the Lucent Merlin Legend
telephone system in Premises. Sublessee will allow Tenant to use said telephone
system during the term hereof.

2. Sublessee will have the option, but not the obligation to sublease the
office marked "presently rented" on Exhibit A if that tenant vacates that office
at a rental of $1,000.00 per month.

3. Tenant will consent to an Assignment of Lease to Sublessee at the
request of Sublessee. Assignment will be subject to approval by Landlord
pursuant to the provisions of the Lease.

4. Tenant will be afforded the use of the present storage room (northeast
corner of building) for the existing wire storage unit.

5. Prior to any Master Lease termination caused by any action or inaction
of Tenant, including any default under the Master Lease, Sublessee shall be
afforded the right to cure Tenant's default and to assume Tenant's rights and
obligations under the Master Lease, subject to Landlord's approval.

Tenant: Richard C. McKenzie, Jr., an individual

By:
----------------------------
Its:
---------------------------
Date:
--------------------------

Sublessee: Golden State Vintners, a California Corporation

By: /s/ Jeffrey B. O'Neill
--------------------------
Its: President
--------------------------
Date:
--------------------------

7
<PAGE>

Landlord: 100 Sir Francis Drake Boulevard, Inc., a Florida corporation
By: Heitman Capital Management Corporation, an Illinois corporation,
agent

By:
----------------------------
Its:
---------------------------
Date:
--------------------------

<PAGE>

PROMISSORY NOTE

$500,000.00 May 5, 1995
San Francisco, California

For Value Received, GOLDEN STATE VINTNERS, a California corporation
("Maker"), promises to pay, in lawful money of the United States of America
and in immediately available funds, without deduction or offset, to the order
of HEUBLEIN, INC., a Connecticut corporation ("Holder"), the sum of FIVE
HUNDRED THOUSAND DOLLARS ($500,000.00), with interest on the unpaid balance
at the rate of interest specified herein.

The unpaid balance of principal and all accrued and unpaid interest are
all due and payable on May 5, 2000 (the "Maturity Date").

INTEREST

Interest shall accrue on the outstanding principal balance at the rate
of ten percent (10%) per annum (the "Note Rate").

PAYMENTS

Interest only at the Note Rate shall be payable in equal semi-annual
installments due each May 1 and November 1 during the term of this Note,
beginning November 1, 1995. If the period from the date of this Note through
October 31, 1995 is less than a full six months, the interest due shall be
appropriately adjusted based on the actual number of days in such period.

The entire principal amount shall be due and payable on the Maturity
Date.

All payments on this Note are payable at Holder's offices located at 16
Munson Road, P.O. Box 388, Farmington, Connecticut 06034-0388, Attention:
Senior Vice President-Finance, or at such other place as Holder or any other
holder hereof shall notify Maker in writing.

All payments received by Holder on this Note shall be applied by Holder
as follows: first, to the payment of late charges, if any; second, to
accrued and unpaid interest then due and owing; and then to reduction of
principal.

-1-

<PAGE>

PREPAYMENT

Maker shall have the privilege of prepaying all or any part of the
unpaid principal balance of this Note at any time and from time to time.

DEED OF TRUST

This Note is secured by that certain Deed of Trust with Assignment of
Rents of even date herewith (the "Deed of Trust"), encumbering certain real
property located in Fresno County, California, as more particularly described
in the Deed of Trust (the "Property").

LATE CHARGE

If Maker fails to pay any amount of interest or principal on this Note
when due and such failure continues for a period of five (5) days, Holder
may, at its option, impose a late charge equal to five percent (5%) of the
amount of such past due payment. This late charge may be charged by Holder
for the purpose of defraying the expenses incidental to the handling of the
delinquent payment. Such late charge represents a reasonable sum considering
all of the circumstances existing on the date of this Note and represents a
fair and reasonable estimate of the costs that will be sustained by Holder
due to the failure of Maker to make timely payments. The parties further
agree that proof of actual damages would be costly and inconvenient. Such
late charge shall be paid without prejudice to the right of Holder to collect
any other amounts provided to be paid or to declare a default under this Note
or the Deed of Trust, or from exercising any other rights and remedies of
Holder.

DEFAULT

If (a) Maker (i) fails to pay any sum when due under this Note and such
failure continues for five (5) days after the due date, or (ii) breaches or
defaults in the performance of any other term, covenant, condition or
agreement set forth in this Note and/or in the Deed of Trust and fails to
cure such breach or default within thirty (30) days after written notice
thereof from Holder; (b) a receiver is appointed to take possession of all or
substantially all of Maker's assets, a general assignment is made by Maker
for the benefit of creditors, or any action is taken or suffered by Maker
under any insolvency or bankruptcy act; (c) Maker shall cause or institute or
there shall be instituted against Maker any proceeding for the dissolution or
termination of Maker; or (d) a default occurs under any senior encumbrance on
the Property (each, an "Event of Default"), then the amount, if any, in
default shall bear

-2-

<PAGE>

interest from the date due not at the Note Rate but rather at the Default
Rate. As used herein, the term "Default Rate" shall mean eighteen percent
(18%) per annum but in no event more than the maximum rate permitted by
California law.

Upon an Event of Default, Holder may at its option declare the entire
unpaid principal balance of this Note, together with interest accrued
thereon, to be immediately due and payable and Holder may proceed to exercise
any rights or remedies that it may have under the Deed of Trust or under this
Note or such other rights and remedies which Holder may have at law, in
equity or otherwise.

After an Event of Default, in addition to principal, interest and late
charges, Holder shall be entitled to collect all costs of collection,
including but not limited to reasonable attorneys' fees and costs, incurred
in connection with the protection or realization of collateral or in
connection with any of Holder's collection efforts, whether or not suit on
this Note or any foreclosure proceeding is filed, and all such costs and
expenses shall be payable on demand and until paid shall also be secured by
the Deed of Trust and by all other collateral held by Holder as security for
Maker's obligations to Holder.

No failure on the part of Holder or any other holder hereof to exercise
any right or remedy hereunder, whether before or after the occurrence of an
Event of Default, shall constitute a waiver thereof, and no waiver of any
past Event of Default shall constitute waiver of any future Event of Default
or of any other Event of Default. No failure to accelerate the debt evidenced
hereby by reason of an Event of Default, or acceptance of a past due
installment of principal or interest, or indulgence granted from time to time
shall be construed to be a waiver of the right thereafter to insist upon
prompt payment or to impose late charges, or shall be deemed to be a waiver
of such right of acceleration or any other right, or be construed so as to
preclude the exercise of any right which Holder may have, whether by the laws
of the State of California, by agreement or otherwise; and Maker hereby
expressly waives the benefit of any statute or rule of law or equity which
would produce a result contrary to or in conflict with the foregoing. This
Note may not be changed orally, but only by an agreement in writing signed by
the party against whom such agreement is sought to be enforced.

Except as expressly set forth herein, Maker hereby waives presentment,
protest, demand, diligence, notice of dishonor and of nonpayment, and waives
and renounces all rights to the benefits of any statute of limitations and
any moratorium, appraisement, exemption and homestead now provided or which
may

-3-

<PAGE>

hereafter be provided by any federal or state statute, including but not
limited to exemptions provided by or allowed under Title 11 of the United
States Code, as at any time amended, both as to itself personally and as to
all of its property, whether real or personal, against the enforcement and
collection of the obligations evidenced by this Note and any and all
extensions, renewals and modifications hereof.

TRANSFERS

Holder and any subsequent holder of this Note shall have the right to
sell, assign, or otherwise transfer, either in part or in its entirety, this
Note, the Deed of Trust, and any other instrument evidencing or securing the
indebtedness of this Note to one or more subsequent holders without Maker's
consent.

MISCELLANEOUS

The terms, covenants, conditions, provisions, stipulations and
agreements of the Deed of Trust are hereby made part of this Note, to the
same extent as if they were fully set forth herein, and Maker does hereby
covenant to agree to abide by and comply with each and every term, covenant,
provision, stipulation, promise, agreement and condition set forth in this
Note and in the Deed of Trust. This Note shall evidence and the Deed of Trust
shall secure the indebtedness described herein.

The maximum rate of interest to be charged under this Note shall in no
event exceed the maximum rate permitted to be charged under applicable laws,
rules and regulations.

This Note shall be governed by and construed under the laws of the State
of California.

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

"Maker"

GOLDEN STATE VINTNERS,
a California corporation

By: /s/ Jeffrey B. O'Neill
-----------------------------
Jeffrey B. O'Neill

Its: President and
Chief Executive Officer

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<PAGE>

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is entered into as of
August 22, 1996, by and among Golden State Acquisition Corp., a Delaware
corporation (the "Company"), Smith McDonnell & Co., Inc., a Delaware corporation
("SMC"), F.A.C., Ltd., a Cayman Islands corporation ("F.A.C."), Exeter Venture
Management Corporation, a Delaware corporation ("EVMC"), Exeter Equity Partners,
L.P., a Delaware limited partnership ("Equity Partners"), and Exeter Venture
Lenders, L.P., a Delaware limited partnership ("Venture Lenders" and,
collectively with Equity Partners, "Exeter"). F.A.C. and Exeter are sometimes
referred to herein individually as a "Seller" and, collectively, as the
"Sellers" and, together with SMC and EVMC are sometimes collectively referred
to herein, the "Selling Group."

R E C I T A L S

A. Pursuant to a Common Stock Subscription Agreement dated April 27, 1995
among the Company, Sellers and certain other parties thereto (the "Subscription
Agreement"), Sellers acquired certain shares of the capital stock of the Company
(the "Company Shares"). Recently, Sellers began to explore the possible sale of
all (in the case of F.A.C.) or a significant portion (in the case of Exeter) of
the Company Shares to third party buyers.

B. As further set forth in that certain Term Sheet dated July 8, 1996
(the "Term Sheet") among the Company, Sellers and certain other parties, the
Company and Sellers negotiated in good faith the terms and conditions relating
to the sale of all or a portion of the Company Shares held thereby, as the case
may be, including without limitation, the aggregate consideration payable by the
Company for such Company Shares to each Seller and its respective affiliates.

C. Pursuant to the Term Sheet, Sellers wish to sell to the Company, and
the Company wishes to purchase from Sellers, the number of Company Shares set
forth opposite each Seller's name on Schedule A hereto, on the terms on the
terms and subject to the conditions set forth below.

D. Members of the Selling Group have provided, and will continue to
provide assistance to the Company and Buyers with respect to certain financing
issues and related credit matters, including without limitation, (a) the
increase in the line of credit available to Golden State Vintners ("GSV") from
Sanwa Bank of California ("Sanwa"), (b) the increase in credit available to the
Company and GSV from John Hancock Mutual Life Insurance Company ("Hancock") and,
in each such instance (c) the renegotiation of the terms and conditions of all
documents and instruments related thereto.

<PAGE>

E. The Company and each member of the Selling Group wish to facilitate
the transactions contemplated hereby and by the Term Sheet by agreeing to the
terms and conditions set forth below.

A G R E E M E N T

Section 1
PURCHASE AND SALE OF THE SHARES

1.1 PURCHASE AND SALE OF THE SHARES. Upon the terms and subject to the
conditions contained herein and in reliance on the representations and
warranties set forth below, at the Closing, as defined below, the Company agrees
to purchase (a) from F.A.C. and F.A.C. agrees to sell to the Company Six Hundred
and Fifty Thousand (650,000) shares (the "F.A.C. Shares") of the Company's
Class A Common Stock and (b) from Exeter and Exeter agrees to sell to the
Company Three Hundred Thirty Nine Thousand Seven Hundred Nine (339,709) shares
(the "Exeter Shares") of the Company's Class B Common Stock (the "Class B
Stock"), in each instance, for a purchase price of $7.26 per share.

1.2 COMPENSATION TO SMC AND EVMC. As compensation for services rendered
in connection with the facilitation of the transactions contemplated hereby,
including without limitation, transactions to be entered into by the Company and
GSV with Sanwa and Hancock prior to or after the date hereof, on or before the
Closing, the Company will enter into a letter of compensation with each of SMC
(the "SMC Compensation Letter") and EVMC (the "EVMC Compensation Letter"), each
such letter to be substantially in the form of Exhibit A attached hereto.

1.3 CLOSING. Following satisfaction of the conditions set forth in
Section 4, the closing of the sale of the Shares (the "Closing") shall occur at
the offices of Riordan & McKinzie, 300 South Grand Avenue, Suite 2900,
Los Angeles, California 90071, at 10:00 a.m. Pacific time on October 10, 1996
or at such other place or on such other date as the Company may designate, but
in no event later than October 31, 1996 (the "Closing Date"). At the Closing,
(a) F.A.C. shall deliver share certificate No. A-1 representing the F.A.C.
Shares (duly endorsed in blank) in exchange for the payment from the Company of
Four Million Seven Hundred Nineteen Thousand Dollars ($4,719,000), which payment
shall be subject to any and all tax withholdings relating to F.A.C. that may be
attributable to the transactions contemplated by this Agreement, including
without limitation, any withholdings mandated by the Foreign Investment in Real
Property Tax Act, (b) Exeter shall deliver share

<PAGE>

certificate Nos. B-2 and B-3 representing the Exeter Shares (in each case, duly
endorsed in blank) in exchange for (i) the payment from the Company of Two
Million Four Hundred Sixty-Six Thousand Two Hundred Eighty-Seven Dollars
($2,466,287) and (ii) a share certificate in the name of (A) Equity Partners and
representing Two Hundred Fifty-Seven Thousand Seven Hundred Eighty (257,780)
shares of the Class B Stock and (B) Venture Lenders and representing Fifty-Two
Thousand Five Hundred Eleven (52,511) shares of the Class B Stock, (c) the
Company shall pay to SMC the amount called for by the SMC Compensation Letter,
and (d) the Company shall pay to EVMC the amount called for by the EVMC
Compensation Letter. All payments to be made by the Company shall be by wire
transfer of immediately available funds to an account designated by SMC and
EVMC, as the case may be, no less than two (2) business days prior to the
Closing Date.

Section 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Sellers that, except as set forth on
the Schedule of Exceptions hereto:

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

2.2 AUTHORITY. The Company has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated on its part hereby. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby,
including without limitation, the transactions contemplated by the SMC
Compensation Letter and the EVMC Compensation Letter and the payments to be made
thereunder (collectively, the "Compensation Payments"), have been duly
authorized by all necessary corporate action on the part of the Company. No
other action on the part of the Company or its stockholders is necessary to
authorize the execution and delivery of this Agreement or the performance of its
obligations hereunder. This Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid and binding agreement thereof,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting creditors' rights generally and subject to general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).

2.3 NO VIOLATIONS. The execution and delivery by the Company of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby, will not (a) violate any provision of law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to the Company, (b) require the consent, waiver, approval,
license or authorization of or any filing by the

<PAGE>

Company with any person or governmental authority or (c) violate, result (with
or without notice or the passage of time, or both) in a breach of or give rise
to the right to accelerate, terminate or cancel any obligation under or
constitute (with or without notice or the passage of time, or both) a default
under, any of the terms or provisions of any charter or bylaw, agreement,
indenture, mortgage, encumbrance, contract, order, license, permit, judgment,
ordinance, regulation, authorization or decree to which the Company is subject
or by which it or any of its properties is bound.

2.4 BROKERS. The Company has not paid or become obligated to pay any fee
or commission to any broker, finder, investment banker or other intermediary in
connection with the transactions contemplated by this Agreement.

2.5 NO LITIGATION. There is no action, suit, claim or proceeding pending
or, to the best knowledge of the Company, threatened at law or in equity or
before or by any federal, state or other governmental board, bureau, agency or
instrumentality against the Company or any of the Company's assets or properties
that challenges the terms or conditions of this Agreement or that seeks to
restrain, restrict or prevent the transactions contemplated by this Agreement.

2.6 COMPLIANCE WITH LAW. The Company has complied with all federal, state
and local laws, statutes, ordinances, rules, regulations and orders applicable
to the Company, its business or operations except where the failure to so comply
would not, individually or in the aggregate, have a material adverse effect on
the Company, its business or operations or would not materially and adversely
restrict the Company in the performance of its obligations under this Agreement.

2.7 SOLVENCY. After giving effort to the transactions contemplated by
this Agreement, (a) the assets of the Company and its subsidiaries (at a fair
valuation thereof) exceed the total liabilities of the Company and such
subsidiaries, on a consolidated basis, (b) the Company has sufficient working
capital to pay its debt when and as such debts come due and (c) the Company does
not have an unreasonably small amount of capital with which to engage in its
business.

2.8 ACQUISITION OF SHARES. It is the Company's intention to retire the
F.A.C. Shares and the Exeter Shares immediately following the consummation of
the transactions contemplated by this Agreement. In that regard, the Company is
not acquiring the F.A.C. Shares or the Exeter Shares with a view to the resale
or distribution of all or any portion of such shares.

2.9 NO ALTERNATIVE PROPOSAL. The Company is not presently discussing,
participating in or in negotiations with respect to any Alternative Proposal, as
defined in Section 6.4 below.

<PAGE>

Section 3
REPRESENTATIONS AND WARRANTIES OF THE SELLING GROUP

Each member of the Selling Group, on its own behalf only, represents and
warrants to the Company as follows:

3.1 ORGANIZATION AND GOOD STANDING. Each of F.A.C. and SMC is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Each of Equity Partners and Venture
Lenders is a limited partnership duly organized validly existing and in good
standing under the laws of the jurisdiction of its formation.

3.2 AUTHORITY. Each member of the Selling Group has full corporate or
partnership power and authority, as the case may be, to execute and deliver this
Agreement and to consummate the transactions contemplated on its part hereby.
The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, including without limitation, the
transactions contemplated by the SMC Compensation Letter and the Exeter
Compensation Letter and the Compensation Payments to be made thereunder, have
been duly authorized by all necessary corporate or partnership action, as the
case may be, on the part of each Selling Group. No other action on the part of
any member of the Selling Group or its respective stockholders or partners, as
the case may be, is necessary to authorize the execution and delivery of this
Agreement, the performance by such Selling Group member of its respective
obligations hereunder or, as applicable, the receipt by such Selling Group
member of the Compensation Payment due thereto. This Agreement has been duly
executed and delivered by each member of the Selling Group and constitutes a
legal, valid and binding agreement thereof, enforceable against such party in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting creditors' rights generally
and subject to general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

3.3 NO VIOLATION; NO COMMITMENTS. The execution and delivery by each
member of the Selling Group of this Agreement, the performance by such member of
its respective obligations hereunder and the consummation by such members of the
transactions contemplated hereby, including without limitation, the receipt of
the Compensation Payments, will not (a) violate any provision of law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
applicable to such member, (b) require the consent, waiver, approval, license or
authorization of or any filing by any member of the Selling Group with any
person or governmental authority or (c) violate, result (with or without notice
or the passage of time, or both) in a breach of or give rise to the right to
accelerate, terminate or cancel any obligation under or constitute (with or
without notice or the passage of time, or both) a default under, any of the
terms or provisions of any charter or bylaw, partnership agreement, agreement,
contract, order, judgment, ordinance, regulation or decree to which

<PAGE>

such member is subject or by which it is bound. No member of the Selling Group
nor any affiliate thereof, including without limitation, Mr. Paul Smith,
Mr. Mark McDonnell or Mr. Keith Fox, has agreed to or entered into any oral or
written commitment, contract, agreement or obligation of any kind by or on
behalf the Company which binds the Company in any manner whatsoever.

3.4 BROKERS. No member of the Selling Group has paid or become obligated
to pay, nor has such member obligated the Company to pay, any fee or commission
to any broker, finder, investment banker or other intermediary in connection
with the transactions contemplated by this Agreement.

3.5 TITLE TO SHARES. F.A.C. has good and marketable title to the F.A.C.
Shares and Exeter has good and marketable title to the Exeter Shares. All of
the F.A.C. Shares and the Exeter Shares are, and on the Closing Date will be,
free and clear of all liens, claims, security interests, pledges, encumbrances,
rights of first refusal, options or other preemptive rights of any kind
(collectively, "Encumbrances"). On the Closing, upon delivery of and payment
for that the Shares to be purchased pursuant to the terms of this Agreement, the
Company will acquire good and marketable title to such shares, free and clear of
any and all Encumbrances.

3.6 DISCLOSURE OF INFORMATION; GOOD FAITH NEGOTIATIONS. Each member of
the Selling Group has received from the Company all information that it
considers necessary and appropriate with respect to its decision to sell all or
any portion of the Company Shares held thereby, as the case may be, including
without limitation, all financial and other material information and data
concerning the Company, its business and prospects (collectively, the "Company
Information") that would allow such member, among other things, to value the
Company Shares held thereby. Each member of the Selling Group has had the
opportunity to ask questions of the management of the Company regarding all or
any portion of the Company Information, other expressions of interest made by
third parties with request to the purchase of any shares of the Company's
capital stock and all other matters relevant to such member's decision to enter
into this Agreement, to sell the Company Shares held thereby and to accept the
consideration to be paid by the Company hereunder, and all such questions have
been answered to the satisfaction of such Selling Group member. The terms and
conditions of the Term Sheet and of the transactions contemplated by this
Agreement have been negotiated in good faith between the Company and its
affiliates, on the one hand, and the Selling Group, on the other hand, and,
assuming that the Company Information delivered to the Selling Group is true and
correct in all material respects, the terms and conditions hereof, including
without limitation, the aggregate consideration to be paid to the Selling Group
hereunder, are fair to each member of the Selling Group.

<PAGE>

Section 4
CONDITIONS TO CLOSING

4.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each party to effect the transactions contemplated by the Agreement shall be
subject to the conditions that no governmental authority or other agency or
commission or court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction or
other order (whether temporary, preliminary, or permanent) which is in effect
and has the effect of prohibiting consummation of the transactions contemplated
by this Agreement.

4.2 CONDITIONS TO THE OBLIGATIONS OF EACH MEMBER OF THE SELLING GROUP.
The obligations of each member of the Selling Group to effect the transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date of the following additional conditions:

(a) The Company shall have performed in all material respects the
obligations under this Agreement required to be performed by it on or prior to
the Closing Date pursuant to the terms hereof.

(b) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date as if made at and as of such date.

(c) The Company shall have delivered to each member of the Selling
Group a certificate to the effect set forth in paragraphs (a) and (b) above in
this Section 4.2.

(d) The SMC Compensation Letter shall have been executed and
delivered by the Company and SMC shall have received payment of the amount
called for by the SMC Compensation Letter.

(e) The EVMC Compensation Letter shall have been executed and
delivered by the Company and EVMC shall have received payment of the amount
called for by the EVMC Compensation Letter.

4.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:

(a) Each member of the Selling Group shall have performed in all
material respects its obligations under this Agreement required to be performed
by it on or prior to the Closing Date pursuant to the terms hereof.

<PAGE>

(b) The representations and warranties of each member of the Selling
Group contained in this Agreement shall be true and correct in all material
respects at and as of the Closing Date as if made at and as of such date.

(c) Each member of the Selling Group shall have executed and
delivered to the Company a certificate to the effect set forth in paragraphs
(a) and (b) above in this Section 4.3.

(d) The Company shall have received the favorable opinion of Anderson
Kill & Olick, P.C., in form and substance reasonably acceptable to the Company.

(e) The Company shall have issued and sold to certain investors (the
"New Investors") additional shares of the Company's Common Stock (the "New
Investment") in an amount and on terms and conditions acceptable to the Company,
in its sole discretion.

(f) All necessary waivers, consents and approvals to or of the
transactions contemplated by this Agreement of any equity holders, third parties
or governmental entities with respect to the Company shall have been obtained,
including without limitation, (i) the consent of Hancock in accordance with the
terms of that certain Securities Purchase Agreement dated as of April 21, 1995,
as amended to date (the "Hancock SPA"), by and among the Company, Hancock and
GSV, including without limitation, the waiver of the delivery of an Exchange
Note Notice and Offer to Repay (as defined in the Hancock SPA), (ii) the waiver
of the holders of the Company's 12% Senior Redeemable Exchangeable Preferred
Stock (the "Senior Preferred Stock"), of a Mandatory Offer to Redeem Upon Change
in Control (as defined in the Certificate of Designations of the Senior
Preferred Stock as filed with the Delaware Secretary of State on April 25,
1995), (iii) the waiver by the holders of the Company's 6% Junior Exchangeable
Preferred Stock (the "Junior Preferred Stock") of Redemption following a Put
Event (as defined in the Certificate of Designation of the Junior Preferred
Stock, as filed with the Delaware Secretary of State on April 25, 1995), and
(iv) the waiver by the holders of the Class E Common Stock of a Redemption
following a Put Event and a Class E Put Event (as defined in the Company's
Certificate of Incorporation as filed with the Delaware Secretary of State on
April 18, 1995).

(g) the Company shall have received any and all permits,
authorizations and consents from any federal, state or local governmental or
regulatory authority that, in the reasonable judgment of the Company, are
necessary for the consummation of the transactions contemplated hereby and by
the New Investment, including without limitation, all permits, authorizations
and consents required by the United States Bureau of Alcohol, Tobacco & Firearms
and the California Alcohol Beverage Control Board.

<PAGE>

(h) GSV shall have entered into a Line of Credit with Sanwa
substantially in accordance with the terms of the commitment letter dated
July 8, 1996 between Sanwa and GSV.

(i) The Company and the New Investors and certain other relevant
parties shall have entered into (i) a Securities Purchase Agreement, (ii) a
Stockholders Agreement, (iii) a Registration Rights Agreement and (iv) such
other agreements as may be appropriate in connection with the New Investment,
such agreements to be on terms and conditions reasonably acceptable to the
Company, and the transactions contemplated by such New Investment and the
agreements relating thereto shall have been consummated in accordance with the
terms thereof.

(j) Each of Messrs. Smith and McDonnell shall have delivered to the
Company written resignations from the Board of Directors of the Company and GSV,
effective as of the Closing Date, each such resignation to be in a form
reasonably acceptable to the Company.

(k) The Management Letter between the Company and SMC dated April 27,
1995 (the "SMC Management Letter") shall be terminated in writing by SMC and
shall have no further force or effect.

(l) The Company shall have received such other duly and validly
executed documents and instruments from the members of the Selling Group in
connection with the Closing as have been reasonably requested thereby.

Section 5
INDEMNIFICATION

5.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify each
member of the Selling Group against and hold such parties harmless from any and
all claims, causes of action, losses, liabilities, damages, obligations, costs
and expenses, including without limitation, reasonable attorneys' fees and
expenses, arising out of or in any related, directly or indirectly, to any
breach of any representation, warranty, covenant or agreement of the Company
contained in this Agreement.

5.2 INDEMNIFICATION BY THE SELLING GROUP. Each member of the Selling
Group agrees, severally and not jointly, to indemnify the Company against and
hold the Company harmless from any and all claims, causes of action, losses,
liabilities, damages, obligations, costs and expenses, including without
limitation, reasonable attorneys' fees and expenses, arising out of or in any
related, directly or indirectly, to any breach of any representation, warranty,
covenant or agreement of such party contained in this Agreement.

<PAGE>

Section 6
MISCELLANEOUS

6.1 NOTICES. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be hand-delivered,
telecopied, deposited prepaid for next day delivery by Federal Express or other
similar overnight courier, or mailed first class postage prepaid, registered or
certified mail addressed as follows:

If to the Company, to:

Golden State Vintners
60 East Sir Francis Drake Blvd., Ste. 302
Larkspur, California 94939
Attention: Mr. Jeffrey O'Neill, Chief Executive Officer
Fax No.: (415) 461-4497

If to F.A.C. or SMC, to:

Smith McDonnell Stone & Co., Inc.
450 Park Avenue, Suite 2102
New York, New York 10022
Attention: Mark D. McDonnell
Fax No.: (212) 754-3362

If to Exeter or EVMC, to:

Exeter Venture Lenders, L.P.
10 East 53rd Street
New York, New York 10022
Attention: Keith R. Fox
Fax No.: (212) 872-1198

Such notices, requests, consents and other communications shall for all
purposes of this Agreement be treated as being effective or having been given,
if delivered personally, upon delivery, if telecopied, on three (3) hours after
confirmation of transmission during regular business hours, if delivered by
overnight courier, upon twenty-four (24) hours after deposit, or, if sent by
mail, upon the earlier of actual receipt or the third day after the same has
been deposited in a regularly maintained receptacle for the deposit of United
States mail, and postage prepaid and addressed as set forth above.

10.

<PAGE>

6.2 ATTORNEYS' FEES. The prevailing party in any action brought with
respect to this Agreement, or the interpretation hereof, shall be entitled to
collect from the other party all reasonable attorneys' fees and expenses
incurred by such prevailing party.

6.3 WAIVER AND AMENDMENT. No amendment, modification, termination or
waiver of any provision of this Agreement shall be effective unless the same
shall be in writing and signed by each party hereto, and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.

6.4 NONSOLICITATION. Prior to the Closing Date, no member of the Selling
Group will, directly or indirectly, communicate, solicit, initiate, encourage or
participate in (including furnishing any non-public information concerning the
Company's or GSV's business, properties or assets) any discussions or
negotiations with regard to any Alternative Proposal. As used herein,
"Alternative Proposal" means any proposal (other than as contemplated by this
Agreement) for the acquisition of all or any portion of the capital stock of the
Company held by any member of the Selling Group, the sale of all or a material
portion of the assets or the capital stock of the Company or the merger,
consolidation, recapitalization or other similar transaction with respect to the
Company and/or GSV.

6.5 PARTIES IN INTEREST. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto.

6.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.

6.7 SPECIFIC PERFORMANCE. The parties hereto agree that monetary damages
may be insufficient to compensate the Company following a breach by any member
of the Selling Group of its obligations hereunder, and that the Company may be
irreparably harmed as a result of such breach. In that regard, the parties
hereto agree that the Company shall be entitled to seek and obtain injunctive
relief to prevent and/or remedy any such breach, which relief shall be in
addition to all other rights and remedies available to the Company at law or in
equity.

6.8 ENTIRE AGREEMENT. This Agreement embody the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein and supersede all prior negotiations, agreements and
understandings among the parties with respect to such subject matter.

6.9 COUNTERPARTS. This Agreement may be executed in two counterparts with
the same effect as if all parties hereto had signed the same document. All
counterparts so

11.

<PAGE>

executed shall be deemed to be an original, shall be construed together and
shall constitute one agreement.

12.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

COMPANY: GOLDEN STATE ACQUISITION CORP.,
a Delaware corporation

By:/s/ Jeffrey B. O'Neill
-------------------------------------------------
Jeffrey B. O'Neill
Executive Vice President

F.A.C.: F.A.C., LTD.

By:/s/ Mark D. McDonnell
-------------------------------------------------

Name: Mark D. McDonnell
------------------------------------------
Title: President
------------------------------------------

SMC: Smith McDonnell & Co., Inc.

By:/s/ Mark D. McDonnell
-------------------------------------------------
Name: Mark D. McDonnell
------------------------------------------
Title: President
------------------------------------------

EQUITY PARTNERS: EXETER EQUITY PARTNERS, L.P.

By: Exeter Equity Advisors, L.P.
General Partner

By: Exeter Equity Advisors, Inc.
General Partner

By:/s/ Keith R. Fox
---------------------------------------
Name: Keith R. Fox
--------------------------------
Title: President
-------------------------------

13.

<PAGE>

VENTURE LENDERS: EXETER VENTURE LENDERS, L.P.

By: Exeter Venture Advisors, Inc., General Partner

By: /s/ Keith R. Fox
----------------------------------------------
Name: Keith R. Fox
---------------------------------------
Title: President
---------------------------------------

EVMC EXETER VENTURE MANAGEMENT CORPORATION

By: /s/ Keith R. Fox
----------------------------------------------
Name: Keith R. Fox
---------------------------------------
Title: President
--------------------------------------

14.

<PAGE>

SCHEDULE A

PURCHASE SHARES

Number and Class of Shares
Stockholder To Be Purchased
- ----------- --------------------------

F.A.C., Ltd. 650,000 shares of Class A Common Stock

Exeter Equity Partners, L.P. 282,220 shares of Class B Common Stock

Exeter Venture Lenders, L.P. 57,489 shares of Class B Common Stock

15.

<PAGE>

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

STOCK PURCHASE AGREEMENT

among

GOLDEN STATE ACQUISITION CORP.,

SBIC PARTNERS, L.P.

and

JEFFREY B. O'NEILL

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

Dated as of October 10, 1996

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

<PAGE>

TABLE OF CONTENTS

Page
----

ARTICLE I THE TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . 1

1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Closing Matters . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Time and Place of Closing . . . . . . . . . . . . . . . . . . 2
1.5 Subsequent Closing. . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE BUYERS. . . . . . . . . 3

2.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Securities Act Representation . . . . . . . . . . . . . . . . 4

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . 4

3.1 Corporate Organization. . . . . . . . . . . . . . . . . . . . 4
3.2 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Newly Issued Shares . . . . . . . . . . . . . . . . . . . . . 5
3.5 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 No Violation. . . . . . . . . . . . . . . . . . . . . . . . . 6
3.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Financial Statements. . . . . . . . . . . . . . . . . . . . . 7
3.9 Absence of Certain Changes or Events. . . . . . . . . . . . . 8
3.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.11 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . 10
3.12 Material Contracts and Other Agreements . . . . . . . . . . . 13
3.13 Suppliers and Customers . . . . . . . . . . . . . . . . . . . 14
3.14 Leased Property . . . . . . . . . . . . . . . . . . . . . . . 14
3.15 Real Property . . . . . . . . . . . . . . . . . . . . . . . . 14
3.16 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 15
3.17 Licenses and Permits. . . . . . . . . . . . . . . . . . . . . 15
3.18 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 15
3.19 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.20 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 16

<PAGE>

3.21 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Table of Contents (Continued)

Page
----

3.22 Environmental Laws and Regulations. . . . . . . . . . . . . . 17
3.23 Brokers; Certain Expenses . . . . . . . . . . . . . . . . . . 19

3.24 No Agreements to Sell the Company . . . . . . . . . . . . . . 19
3.25 Related-Party Transactions. . . . . . . . . . . . . . . . . . 19
3.26 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 20
3.27 Compliance with the Immigration Reform and Control A20. . . . 19
3.28 Proprietary Rights. . . . . . . . . . . . . . . . . . . . . . 21
3.29 Small Business Administration Matters . . . . . . . . . . . . 21
3.30 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE IV COVENANTS AND AGREEMENTS. . . . . . . . . . . . . . . . . . . 22

4.1 Access to Properties and Records. . . . . . . . . . . . . . . 22
4.2 Indemnification by the Company. . . . . . . . . . . . . . . . 22
4.3 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . 23
4.4 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.5 Delivery of Financial Statements and Other Documents. . . . . 24
4.6 Access to Records . . . . . . . . . . . . . . . . . . . . . . 24
4.7 No Transactions with Affiliates . . . . . . . . . . . . . . . 24
4.8 Qualification as a Qualified Small Business . . . . . . . . . 25
4.9 Use of Proceeds; Access to Records. . . . . . . . . . . . . . 25
4.10 Buyer's Right of First Refusal. . . . . . . . . . . . . . . . 25

ARTICLE V CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . 26

5.1 Conditions to Each Party's Obligations. . . . . . . . . . . . 26
5.2 Conditions to the Obligations of the Company. . . . . . . . . 27
5.3 Conditions to the Obligations of the Buyers. . . . . . . . . 27

ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 28

6.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.5 Headings; Agreement . . . . . . . . . . . . . . . . . . . . . 29
6.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . 29

ii
<PAGE>

6.7 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 29
6.8 Conveyance Taxes. . . . . . . . . . . . . . . . . . . . . . . 29
6.9 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 30

Table of Contents (Continued)

Page
----

6.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 30
6.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 30
6.12 Third Party Beneficiaries . . . . . . . . . . . . . . . . . . 30
6.13 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . 30

iii
<PAGE>

DISCLOSURE SCHEDULES

Schedule 3.1 Corporate Organization
Schedule 3.2 Subsidiaries
Schedule 3.3 Capital Stock
Schedule 3.4 Newly Issued Shares
Schedule 3.5 Authority
Schedule 3.6 No Violation
Schedule 3.7 Litigation
Schedule 3.8 Financial Statements
Schedule 3.9 Absence of Certain Changes or Events
Schedule 3.10 Insurance
Schedule 3.11 Employee Benefits
Schedule 3.12 Material Contracts and Other Agreements
Schedule 3.13 Suppliers and Customers
Schedule 3.14 Leased Property
Schedule 3.15 Real Property
Schedule 3.16 Compliance With Laws
Schedule 3.17 Licenses and Permits
Schedule 3.18 Title to Assets
Schedule 3.19 Inventory
Schedule 3.20 Accounts Receivable
Schedule 3.21 Taxes
Schedule 3.22 Environmental Laws and Regulations
Schedule 3.23 Brokers; Certain Expenses
Schedule 3.24 No Agreements to Sell the Company
Schedule 3.25 Related-Party Transactions
Schedule 3.26 Labor Matters
Schedule 3.27 Compliance with the Immigration Reform and Control Act
Schedule 3.28 Proprietary Rights
Schedule 3.29 Small Business Administration Matters
Schedule 3.30 Disclosure

<PAGE>

EXHIBITS

Exhibit A List of Shares
Exhibit B Amended and Restated Stockholders Agreement
Exhibit C Amended and Restated Registration Rights Agreement
Exhibit D Certificate of Amendment to Certificate of Incorporation
Exhibit E Forms of Resignation
Exhibit F-1 Opinion of Counsel to the Company
Exhibit F-2 Opinion of Counsel to Buyers

<PAGE>

STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT ("Agreement") dated as of October 10, 1996 by
and among Golden State Acquisition Corp., a Delaware corporation (the
"Company"), SBIC Partners, L.P., a Texas limited partnership ("SBIC Partners"),
and Jeffrey B. O'Neill ("O'Neill," and, sometimes collectively with SBIC
Partners, the "Buyers").

R E C I T A L S:

WHEREAS, the Buyers wish to purchase from the Company, and the Company
wishes to sell to the Buyers, the number of shares of the Company's capital
stock as is set forth in Section 1.1 below, on the terms and subject to the
conditions set forth below;

WHEREAS, the Company, the Buyers, FAC, Ltd., a Cayman Islands
corporation ("FAC"), Exeter Equity Partners, L.P., a Delaware limited
partnership, Exeter Venture Lenders, L.P., a Delaware limited partnership
(collectively, "Exeter") and certain other parties have entered into that
certain Securities Purchase Agreement dated August 22, 1996 (the "FAC/Exeter
Securities Purchase Agreement"); and

WHEREAS, the Board of Directors of the Company (the "Board") has
approved this Agreement and the transactions contemplated hereby, upon the terms
and subject to the conditions set forth herein.

A G R E E M E N T:

ARTICLE I

THE TRANSACTIONS

1.1 PURCHASE AND SALE. Subject to the terms and conditions of
this Agreement, the Buyers agree to purchase from the Company and the Company
agrees to sell to the Buyers (the "Purchase") at the Closing, an aggregate of
Nine Hundred Fifty-Seven Thousand Three Hundred (957,300) shares (the "Shares")
of Class B Common Stock, $0.01 par value, of the Company (the "Class B Stock"),
in the respective amounts set forth opposite each Buyer's name on Exhibit A
hereto.

<PAGE>

1.2 PURCHASE PRICE. The purchase price to be paid for each Share
shall be Seven Dollars and Twenty-Six Cents ($7.26), constituting an aggregate
purchase price for the Shares of Six Million Nine Hundred Forty-Nine Thousand
Nine Hundred Ninety-Eight Dollars Cents ($6,949,998) (the "Purchase Price").

1.3 CLOSING MATTERS. At the Closing (a) each Buyer will wire
transfer or otherwise make available in same day funds to the Company its or
his, as the case may be, portion of the Purchase Price, (b) the Company shall
deliver certificates to SBIC Partners and O'Neill representing Seven Hundred
Fifty Thousand Six Hundred Eighty-Nine (750,689) shares of Class B Stock and
Two Hundred Six Thousand Six Hundred Eleven (206,611) shares of Class B
Stock, respectively, (c) the transactions contemplated by the FAC/Exeter
Securities Purchase Agreement shall be consummated in accordance with the
terms thereof, (d) each of the Company, Exeter, Buyers and all other parties
relevant thereto shall execute and deliver an amended and restated
Stockholders Agreement in the form attached hereto as Exhibit B (the "Amended
and Restated Stockholders Agreement"), (e) each of the Company, Exeter, the
Buyers and all other parties relevant thereto shall execute and deliver an
amended and restated Registration Rights Agreement, in the form attached
hereto as Exhibit C (the "Amended and Restated Registration Rights
Agreement"), (f) the Certificate of Amendment to Certificate of Incorporation
of the Company shall be amended, in the form of the certificate of amendment
attached hereto as Exhibit D, to provide, among other things, for the
immediate right of the Class B Stock to vote on all corporate matters and (g)
each representative of FAC and/or SMS who is presently serving as an officer
and/or director of the Company, Golden State Vintners, a California
corporation ("GSV"), or any other subsidiary of either entity shall execute
and deliver the forms of resignation attached hereto as Exhibit E. All
agreements referenced in this Section 1.3 shall sometimes be collectively
referred to herein as the "Ancillary Agreements."

1.4 TIME AND PLACE OF CLOSING. The consummation of the
transactions contemplated in this Agreement (the "Closing") shall take place at
10:00 a.m., October 10, 1996, at the offices of Riordan & McKinzie, 300 South
Grand Avenue, Suite 2900, Los Angeles, CA 90071, on the first business day
following the satisfaction or waiver of all of the conditions required to be
satisfied at or prior to the Closing (but in no event later than December 31,
1996 or at such other time, place or date as the parties hereto shall agree upon
in writing (the "Closing Date").

1.5 SUBSEQUENT CLOSING. Prior to November 27, 1996, the Company
may raise up to an additional Two Hundred Fifty Thousand Dollars ($250,000)
through the issuance of Thirty-Four Thousand Four Hundred Thirty-Five (34,435)
shares of non-voting Class K Common Stock (the "Class K Shares"). At the
closing of such issuance, this Agreement will be supplemented to reflect the
purchase and sale of the Class K Shares.

2
<PAGE>

ARTICLE II

REPRESENTATIONS AND WARRANTIES
OF THE BUYERS

Each of the Buyers severally but not jointly represents and warrants
to the Company, as to all matters relevant thereto, as follows:

2.1 ORGANIZATION. SBIC Partners, Forrest Binkley & Brown L.P. and
SL-SBIC Partners, L.P. are each limited partnerships duly organized, validly
existing and in good standing under the laws of the State of Texas. Forrest
Binkley & Brown Venture Co. and FW-SBIC Partners, Inc. are each corporations
duly organized, validly existing and in good standing under the laws of the
State of Texas.

2.2 AUTHORITY. SBIC Partners has full partnership power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated on its part hereby. The execution, delivery and
performance by SBIC Partners of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
partnership action on the part of SBIC Partners. No other action on the part of
either SBIC Partners or its respective partners is necessary to authorize the
execution and delivery of this Agreement by SBIC Partners or the performance by
such Buyer of its obligations hereunder. This Agreement has been duly executed
and delivered by each Buyer and constitutes a legal, valid and binding agreement
of such Buyer, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting creditors' rights generally and subject to general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). Each other agreement to be executed by each
Buyer in connection with this Agreement, including, without limitation, each of
the Ancillary Agreements, on or prior to the Closing Date will be duly executed
and delivered by such Buyer, and (assuming due execution and delivery by the
other party or parties thereto) will constitute a legal, valid and binding
obligation of such Buyer, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting creditors' rights generally and subject to general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except to the extent that indemnification
with respect to securities laws violations may be held void as against public
policy.

2.3 NO VIOLATION. The execution and delivery of this Agreement,
the Ancillary Agreements and each other agreement contemplated hereby and
thereby by each Buyer, the performance by each Buyer of its obligations
hereunder and thereunder, and the consummation by it of the transactions
contemplated hereby and thereby, will not (a) violate any provision of law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to such Buyer, (b) require the consent, waiver, approval,
license or authorization of or any filing by such Buyer with any person or
governmental authority or (c) violate, result (with or without

3
<PAGE>

notice or the passage of time, or both) in a breach of or give rise to the right
to accelerate, terminate or cancel any obligation under or constitute (with or
without notice or the passage of time, or both) a default under, any of the
terms or provisions of any charter or bylaw, partnership agreement, indenture,
mortgage, agreement, contract, order, judgment, ordinance, regulation or decree
to which such Buyer is subject or by which such Buyer is bound.

2.4 BROKERS. Neither Buyer has paid or become obligated to pay
any fee or commission to any broker, finder, investment banker or other
intermediary in connection with this Agreement.

2.5 SECURITIES ACT REPRESENTATION. Each Buyer is an "accredited
investor" as defined in Rule 501 promulgated as part of Regulation D under the
Securities Act of 1933, as amended. Neither Buyer is purchasing the Shares with
a view to a distribution or resale of any of such securities in violation of any
applicable securities laws.

ARTICLE III

REPRESENTATIONS AND WARRANTIES
OF THE COMPANY

The Company represents and warrants, except as disclosed on the
schedules (the "Disclosure Schedules") attached hereto, each of which
disclosures shall reference the applicable Section hereof to which it applies,
to the Buyers as follows:

3.1 CORPORATE ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with all requisite corporate power and authority to carry on its
business as it is now being conducted, and is qualified or licensed to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified or licensed could reasonably be expected, individually or in the
aggregate, to have a material and adverse effect upon the financial condition,
prospects or results of operations of the Company (a "Material Adverse Effect").
True and complete copies of the Certificate of Incorporation and the Bylaws of
the Company, each as amended to date, have been delivered to the Buyers.

3.2 SUBSIDIARIES. A true and complete list of all direct and
indirect subsidiaries of the Company (the "Subsidiaries") is set forth on the
Disclosure Schedules. Each Subsidiary is a corporation or partnership duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with all requisite corporate power and authority
to own, operate and lease its properties and to carry on its business as it is
now being conducted, and is qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified or
licensed could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect; and all of the issued shares of capital stock or
other equity interest of

4
<PAGE>

each Subsidiary have been duly and validly authorized and issued, are fully paid
and non-assessable, and are owned directly or indirectly by the Company, free
and clear of any and all liens, encumbrances, security interests, preemptive
rights, adverse claims or equities or rights in favor of another
("Encumbrances"). Neither the Company, except with respect to the Subsidiaries,
nor any of the Subsidiaries owns, directly or indirectly, any stock, partnership
interest, joint venture interest or other security, investment or interest in
any other corporation, organization or entity.

3.3 CAPITAL STOCK. As of the date hereof, the authorized capital
stock of the Company consists of: (i) One Million (1,000,000) shares of Class A
Stock, Six Hundred Fifty Thousand (650,000) shares of which are issued and
outstanding; (ii) Two Million (2,000,000) shares of Class B Stock, One Million
Three Hundred Thousand (1,300,000) shares of which are issued and outstanding,
and One Hundred Thirty-Six Thousand Two Hundred Ten (136,210) shares of which
are reserved for exchange pursuant to that certain Preferred Stock Exchange
Agreement entered into as of April 27, 1995 by and among the Company and certain
shareholders of GSV; (iii) Three Million Five Hundred Thousand (3,500,000)
shares of Class D Common Stock, par value $0.01 per share, none of which are
issued and outstanding, but Two Million Eighty-Six Thousand Two Hundred Ten
(2,086,210) shares of which are reserved for issuance upon conversion of the
Class A Stock and Class B Stock pursuant to the Company's Certificate of
Incorporation; (iv) Two Hundred Thousand (200,000) shares of 12% cumulative
convertible preferred stock, One Hundred Thousand (100,000) of which are issued
and outstanding; (v) Seven Hundred Fifty Thousand (750,000) shares of 6% junior
exchangeable preferred stock, Five Hundred Twenty-Three Thousand Nine Hundred
Eighty (523,980) shares of which are issued and outstanding; and (vi) One
Million (1,000,000) shares of Class E Common Stock, par value $0.01 per share,
Four Hundred Fourteen Thousand Seventy-Nine (414,079) shares of which are issued
and outstanding. All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable and free of preemptive rights with respect thereto and were
issued in compliance with all applicable securities laws and regulations.
Except as set forth in the Disclosure Schedules, there are no voting trusts or
other agreements, arrangements or understandings with respect to the voting of
the capital stock of the Company (i) to which the Company is a party or (ii) to
the best of the Company's knowledge, to which any other person, including
without limitation any holder of shares of the Company's capital stock, is a
party. Except as set forth in the Disclosure Schedules, there are no preemptive
rights, registration rights, subscriptions, options, warrants, rights,
convertible securities or other agreements or commitments of any character
relating to the issued or unissued capital stock or other securities of the
Company and there are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire or sell, issue or otherwise transfer any
shares of capital stock. The Disclosure Schedules set forth the record
ownership of the Company's capital stock after consummation of the transactions
contemplated hereby.

3.4 NEWLY ISSUED SHARES. The Shares sold and issued by the
Company to the Buyers in accordance with the terms of this Agreement have been
duly authorized and, when issued as contemplated hereby at the Closing, will be
validly issued, fully paid and non-assessable

5
<PAGE>

and no person has any preemptive right, option, warrant, subscription agreement
or other right with respect to such Shares. At the Closing, the Buyers will
acquire good and marketable title to the Shares free and clear of any and all
Encumbrances except such Encumbrances as may be created by each Buyer pursuant
to the Stockholders Agreement.

3.5 AUTHORITY. The Company has full corporate power and authority
to execute and deliver this Agreement, the Ancillary Agreements and each other
agreement contemplated hereby and thereby, to carry out its obligations
hereunder and thereunder and to consummate the transactions contemplated on its
part hereby and thereby. The execution, delivery and performance by the Company
of this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated on its part hereby and thereby have been duly
authorized by the Board, and no other corporate proceedings on the part of the
Company or its stockholders are necessary to authorize the execution and
delivery of this Agreement, the Ancillary Agreements, each other agreement
contemplated hereby and thereby or to consummate the transactions contemplated
on its part hereby and thereby. This Agreement has been duly executed and
delivered by the Company and constitutes legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting creditors' rights generally and subject to general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law). Each other agreement to be executed by the
Company in connection with this Agreement on or prior to the Closing Date,
including without limitation, the Ancillary Agreements, will be duly executed
and delivered by the Company, and (assuming due execution and delivery by the
other party or parties thereto) will constitute a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization, or similar laws affecting creditors' rights
generally and subject to general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law) and
except to the extent that indemnification with respect to securities laws
violations may be held void as against public policy.

3.6 NO VIOLATION. The execution, delivery and performance of
this Agreement, the Ancillary Agreements and each other agreement
contemplated hereby and thereby by the Company and the consummation by it of
the transactions contemplated hereby and thereby will not (a) violate any
provision of law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award applicable to the Company or any Subsidiary,
(b) require the consent, waiver, approval or authorization of or any filing
by the Company or any Subsidiary with any person or governmental authority,
(c) violate, result (with or without notice or the passage of time, or both)
in a breach of, or give rise to the right to terminate, accelerate or cancel
any obligation under, or require the payment of any fee, or constitute (with
or without notice or the passage of time, or both) a default under, any of
the terms or provisions of the charter documents of the Company or any
Subsidiary, or any indenture, mortgage, lien, order, judgment, ordinance,
regulation, decree or other agreement or instrument to which the Company or
any Subsidiary is subject or bound which could reasonably be expected to
have, individually or in the aggregate, a

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Material Adverse Effect or interfere in any way with the Company's ability to
consummate the transactions contemplated by this Agreement, the Ancillary
Agreements and each other agreement contemplated hereby and thereby, (d) result
in the creation of any Encumbrance upon any property of the Company or any
Subsidiary which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or (e) result in a loss or adverse
modification of any license, permit, certificate, franchise or contract granted
to or otherwise held by the Company or any Subsidiary which could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
Except as set forth in the Disclosure Schedules, neither the Company nor, to the
best of the Company's knowledge, any other party, has, in connection with this
Agreement, (x) obtained any waiver, supplement, modification or amendment of the
terms or provisions of any indenture, mortgage, lien, lease, agreement,
contract, instrument, order, judgment, ordinance, regulation or decree to which
the Company is subject or bound or (y) entered into any understanding or
agreement, oral or written, whether or not legally enforceable, with respect
thereto.

3.7 LITIGATION. There are no actions, proceedings, complaints,
grievances, investigations or unfair labor practice complaints or grievances or
investigations pending or, to the best of the Company's knowledge, threatened,
against the Company or any Subsidiary or the Company's or such Subsidiary's
assets or properties before any court or governmental or regulatory authority or
body or arbitrator, which could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, nor is there any basis for any of
the foregoing. There are no such actions, proceedings or investigations pending
or, to the best knowledge of the Company, threatened against the Company or, to
the best knowledge of the Company, pending or threatened against any other party
challenging the validity or propriety of the transactions contemplated by this
Agreement and the Ancillary Agreements. None of the Company, any Subsidiary,
nor any of the Company's or such Subsidiary's assets or properties is subject to
any order, judgment, injunction or decree, which could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.

3.8 FINANCIAL STATEMENTS. The Disclosure Schedules set forth (i)
the unaudited consolidated financial statements of the Company for the nine
months ended March 31, 1996 and (ii) the audited consolidated financial
statements of the Company for the fiscal years ended June 30, 1995 and June 30,
1994 (the "Financials"). As of their respective dates, the Financials did not
and will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Financials were prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis (except as
may be indicated therein or in the notes thereto) and present fairly the
consolidated financial position, results of operations and cash flows of the
Company and the Subsidiaries as of the dates and for the periods indicated
(subject, in the case of unaudited quarterly financial statements, to normal
year-end adjustments).

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3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1996 the
Company and the Subsidiaries have conducted their respective businesses in the
ordinary course and there has not been any:

(a) material adverse change in the financial
condition, assets, liabilities, business, operations or results of
operations of the Company and the Subsidiaries, taken as a whole;

(b) addition to or modification of employee benefits
plans, arrangements or practices;

(c) sale, assignment or transfer of any of the
material assets of the Company or any Subsidiary, other than in the
ordinary course of business, consistent with past practice;

(d) cancellation of any indebtedness owed to the
Company or any Subsidiary in an aggregate amount greater than Fifty
Thousand Dollars ($50,000), or waiver of any rights of similar value
to the Company or such Subsidiary relating to any of its business
activities or properties, other than in the ordinary course of
business;

(e) amendment, cancellation or termination of any
Contract (as defined in Section 3.12), license or other instrument
material to the Company or any Subsidiary, except in the ordinary
course of business;

(f) failure to repay any material obligation of the
Company or any Subsidiary;

(g) change in accounting methods, principles or
practices by the Company or any Subsidiary materially affecting any of
their respective assets, liabilities, results of operations or
business;

(h) material revaluation by the Company or any
Subsidiary of any of their assets, including without limitation, any
material write-offs, material increases in any reserves except in the
ordinary course of business consistent with past practice or any
write-up of the value of inventory, property, plant, equipment or any
other asset;

(i) material damage, destruction or loss (whether or
not covered by insurance) affecting any office, warehouse, vineyard or
winery owned or maintained by the Company or any Subsidiary or any
other material asset of the Company or any Subsidiary and resulting in
a loss in excess of One Hundred Thousand Dollars ($100,000);

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<PAGE>

(j) mortgage, pledge or other encumbrance of any
assets of the Company or any Subsidiary, material singly or in the
aggregate, except purchase money mortgages, equipment leases or other
encumbrances arising in the ordinary course of business;

(k) declaration, setting aside or payment of any
dividend or other distribution or payment (whether in cash, stock or
property) with respect to the capital stock or other equity securities
of the Company or any Subsidiary, or any redemption, purchase or other
acquisition of any of the securities of the Company or any Subsidiary,
or any other payment to any stockholder of the Company in its capacity
as a stockholder and except as contemplated by this Agreement and the
FAC/Exeter Securities Purchase Agreement;

(l) issuance by the Company or any Subsidiary of, or
commitment by any of them to issue, any capital stock or other equity
securities or obligations or any securities convertible into or
exchangeable or exercisable for capital stock or other equity
interests, except as contemplated by this Agreement;

(m) indebtedness for borrowed money incurred by the
Company or any Subsidiary or any commitment to incur indebtedness for
borrowed money entered into by the Company or any Subsidiary, or any
loans made or agreed to be made by the Company or any Subsidiary other
than pursuant to commitments or credit facilities existing on the date
hereof and set forth on the Disclosure Schedules;

(n) incurrence of other liabilities involving One
Hundred Thousand Dollars ($100,000) or more, except in the ordinary
course of business, or any increase or change in any assumptions
underlying, or methods of calculating, any bad debt, contingency or
other reserves;

(o) payment, discharge or satisfaction of any
liabilities other than the payment, discharge or satisfaction (i) in
the ordinary course, consistent with past practice, of liabilities
reserved against in the Financial Statements for the year ended June
30, 1995 or of liabilities incurred in the ordinary course, consistent
with past practice, since July 1, 1995 or (ii) of other liabilities
involving One Hundred Thousand Dollars ($100,000) or less individually
and Two Hundred Fifty Thousand Dollars ($250,000) or less in the
aggregate;

(p) increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension,
profit sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any officer or employee
or any severance or termination pay,

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<PAGE>

except for increases in the ordinary course of business, consistent
with past practice or as required by law or any existing agreement;

(q) granting of any bonus, incentive compensation,
service, award or other like benefit to any officer or employee except
in accordance with plans or arrangements disclosed on the Disclosure
Schedules; or

(r) other event or condition of any character which in
any one case or in the aggregate has had a Material Adverse Effect, or
any event or condition which, it is reasonable to expect will,
individually or in the aggregate, have a Material Adverse Effect.

3.10 INSURANCE. The Disclosure Schedules contain a list of all
policies of insurance, surety bonds and letters of credit maintained by the
Company and the Subsidiaries (showing as to each policy or binder, the carrier,
coverage limits, expiration dates, annual premiums and a general description of
the type of coverage provided), which list is true, complete and accurate in all
material respects as of the date hereof. None of the Company or any of the
Subsidiaries is in default with respect to its obligations under any such
policies. All of such policies are sufficient for compliance with all
requirements of law and all contracts, leases and other agreements to which the
Company or any Subsidiary is a party except where any such insufficiencies would
not have, individually or in the aggregate, a Material Adverse Effect. None of
the Company or the Subsidiaries has failed to give any notice or to present any
material claim under any such policy or binder in a due and timely fashion
except for such failure as would not have, individually or in the aggregate, a
Material Adverse Effect. Such policies and binders are in full force and effect
on the date hereof and will continue to be kept in full force and effect on
substantially equivalent terms through the consummation of the transactions
contemplated hereby except to the extent policies expire and are replaced in the
ordinary course of business with policies and binders on substantially
equivalent terms or such expirations as would not have, individually or in the
aggregate, a Material Adverse Effect.

3.11 EMPLOYEE BENEFITS.

(a) The term "Benefit Plans" means:

(i) all employee benefit plans, as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and

(ii) all other deferred compensation, profit-sharing,
bonus, stock option, stock purchase, stock bonus, excess benefit,
vacation pay, holiday pay, dependent care assistance, severance,
incentive or other compensation arrangements, maintained or
contributed to by the Company for the benefit of one or more of its
employees (or former employees) and/or their beneficiaries. For
purposes of this Section 3.11, the term "Company" shall include the
Subsidiaries.

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<PAGE>

(b) The term "Pension Plan" means an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA maintained by the
Company.

(c) Except with respect to any "Multiemployer Plan," as
defined in Section 4001(a)(3) of ERISA, the Company has furnished, or made
available at the due diligence room of the Company, to the Buyers:

(i) true and correct copies of the current version
of all Benefit Plans and any summary plan descriptions thereof; and

(ii) a copy of the most recent actuarial report, if
any, available to the Company with respect to each Pension Plan.

(d) With respect to each Pension Plan that is subject to
Title IV of ERISA, other than a Multiemployer Plan:

(i) the Disclosure Schedules provide a break-down of
the aggregate liability of such Pension Plans stated in the Company's
financial statements into separate statements as to the liability (or
net asset balance) of each such Pension Plan; and

(ii) no event has occurred, and no condition or set
of circumstances exists as of the date hereof, which presents a
material risk of the termination of any Pension Plan by the Pension
Benefit Guaranty Corporation and no reportable event (within the
meaning of section 4043 of ERISA) which, in and of itself, could have
an adverse effect exceeding Fifty Thousand Dollars ($50,000) has
occurred.

(e) Except as set forth in the Disclosure Schedules, all
unpaid liabilities of the Company with respect to, and all unfunded benefits
(whether vested or not) under each Benefit Plan have been calculated and are
reflected in the Company's financial statements in accordance with GAAP, and any
such liabilities incurred after the date of such financial statements will be
incurred in the ordinary course of business, determined in a manner
substantially similar to that used in such financial statements.

(f) In the case of each Pension Plan that is subject to
Section 412 of the Internal Revenue Code of 1986, as amended (the "Code"), there
is no accumulated funding deficiency (within the meaning of Section 4971 of the
Code), whether or not such deficiency has been waived.

(g) Each Benefit Plan complies currently, and has complied
in the past, both in form and in operation, in all material respects, with all
applicable law, such as ERISA and the Code (including Section 4980B thereof).
Furthermore, the Internal Revenue Service has

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<PAGE>

issued a favorable determination letter with respect to each Pension Plan that
is intended to qualify under Section 401(a) of the Code, and no event has
occurred before or after the date of the letter that would disqualify the plan.

(h) No nonexempt "prohibited transaction" (as defined in
Section 4975 of the Code and Section 406 of ERISA) has occurred with respect to
any Benefit Plan.

(i) Except as set forth in the Disclosure Schedules, there
is no contract, agreement or benefit arrangement with the Company which,
individually or collectively, could give rise to the payment of any amount which
would constitute an "excess parachute payment" (within the meaning of
Section 280G of the Code).

(j) Except as related liabilities are reflected in the
Company's financial statement prepared in accordance with GAAP, and except as
set forth in the Disclosure Schedules, the Company does not maintain, or
contribute to, any plan that provides or will provide medical or death benefits
to one or more former employees (including retirees), other than benefits that
are required to be provided pursuant to Section 4980B of the Code or state law
continuation coverage or conversion rights.

(k) There are no lawsuits or other claims, pending or, to
the best knowledge of the Company, threatened (other than routine claims for
benefits under the plan) against (i) any Benefit Plan or (ii) any fiduciary of
such plan brought on behalf of any participant, beneficiary, or fiduciary
thereunder, nor is there any reasonable cause for any such claim.

(l) The Company has no intention or commitment, whether
legally binding or not, to create any additional Benefit Plan or to modify or
change any existing Benefit Plan, except as required to conform to changes in
the law. The benefits under all Benefit Plans are as represented, and have not
been, and, prior to the Closing will not be, increased subsequent to the date
Benefit Plan documents are provided to the Buyers, except as required to conform
to changes in the law.

(m) The Company has complied (to the extent applicable) in
all material respects with the provisions of the Worker Adjustment and
Retraining Notification Act and the Americans with Disabilities Act.

(n) The Company has complied in all material respects with
all reporting and disclosure obligations imposed upon it under all applicable
federal and state securities laws by reason of the operation of the Benefit
Plans.

(o) No event or circumstances have occurred with respect to
employee benefit plans (as defined in section 3(3) of ERISA) of former
Subsidiaries of the Company which might give rise to liability in excess of the
amount already reflected in the Company's financial statements in accordance
with GAAP.

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<PAGE>

(p) Any trust that is intended to be tax-exempt as a
voluntary Employees' Beneficiary Association under Section 501(c)(9) of the Code
has received a favorable determination letter from the Internal Revenue Service
regarding its tax-exempt status that reflects the provisions of the Deficit
Reduction Act of 1984, all contributions to it were properly and fully deducted
in the year when paid, and it has not incurred any tax on unrelated business
taxable income under Code Sections 511 through 514.

3.12 MATERIAL CONTRACTS AND OTHER AGREEMENTS. The Disclosure
Schedules disclose, as of the date hereof, whether written or oral (a) all
contracts, agreements and commitments whether or not fully performed pursuant
to which the Company or any of the Subsidiaries has since July 1, 1992
acquired or disposed (the "Disposed Businesses") of a portion of its business
or assets which provided for an aggregate purchase price in excess of One
Hundred Thousand Dollars ($100,000); (b) all agreements containing covenants
not to compete on the part of the Company or any of the Subsidiaries or
otherwise restricting the ability of the Company or any of the Subsidiaries
in any material way to engage in its business; (c) all material notes,
mortgages, credit agreements, lines of credit, indentures, letters of credit,
guarantees, performance bonds and other obligations and agreements and other
instruments for or relating to any lending or borrowing (including assumed
debt) entered into by the Company or any of the Subsidiaries or pursuant to
which any properties or assets of the Company or any of the Subsidiaries are
pledged or mortgaged as collateral; (d) any employment or consulting
agreement with any present or former director, officer or employee of the
Company or any of the Subsidiaries which calls for annual compensation in
excess of Fifty Thousand Dollars ($50,000); (e) contracts, supply orders,
purchase orders or other agreements whereby the Company or any of the
Subsidiaries have purchased or agreed to sell a material quantity of
inventory, supplies, bottled wine, wine in bulk or grapes; (f) contracts,
supply orders, purchase orders or other agreements whereby the Company or any
of the Subsidiaries have purchased or agreed to purchase a material quantity
of inventory, supplies, bottled wine, wine in bulk or grapes and (g) any
other contracts and agreements which are material to the Company or any of
the Subsidiaries. The foregoing are hereinafter referred to as the
"Contracts." With respect to each Contract, (1) such Contract is valid,
binding and enforceable against the Company and, to the best of the Company's
knowledge, each other party thereto in accordance with its terms; (2) neither
the Company or any of the Subsidiaries nor, to the best of Company's
knowledge, any other party to such Contract is in material breach thereof or
material default thereunder; and (3) there does not exist any event that,
with the giving of notice or the lapse of time or both, would constitute a
material breach of or a material default under such Contract, and neither the
Company nor any of the Subsidiaries has received or given notice of any such
breach, default or event. To the best knowledge of the Company, the Company
and the Subsidiaries could not reasonably be expected to have any continuing
liabilities or obligations in connection with or arising in respect of the
Disposed Businesses, individually or in the aggregate, in excess of One
Hundred Thousand Dollars ($100,000).

3.13 SUPPLIERS AND CUSTOMERS. The Disclosure Schedules set forth
(a) the ten (10) largest suppliers of the Company and GSV in terms of purchases
by the Company and

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<PAGE>

GSV for the 1995 calendar year (the "Large Suppliers"), showing the total
purchases by the Company and GSV from each such supplier during such calendar
year and (b) the ten (10) largest customers of the Company and GSV in terms of
sales by the Company and GSV during the 1995 calendar year (the "Large
Customers"), showing the total sales by the Company and GSV to each such
customer during such calendar year. The Company and GSV have a good business
relationship with its Large Suppliers and its Large Customers. None of the
Large Suppliers or Large Customers has canceled or otherwise terminated, or
threatened in writing to cancel or otherwise terminate, its relationship with
either the Company or GSV or, since January 1, 1996, decreased materially, or
threatened to decrease or limit materially, its products and services to either
the Company or GSV or its usage or purchase of products or services of either
the Company or GSV.

3.14 LEASED PROPERTY. The Disclosure Schedule sets forth a list of
all real property that is leased by the Company and GSV.

3.15 REAL PROPERTY. For purposes of this Agreement, "Fee
Property" shall mean all real property owned in whole or in part by the
Company or the Subsidiaries and all leased property. The Disclosure
Schedules contain an accurate and complete list of all Fee Property owned in
whole or in part by the Company or the Subsidiaries and includes the name of
the record title holder thereof and a list of all indebtedness secured by a
lien, mortgage or deed of trust thereon. The Company or the Subsidiaries has
good, valid, marketable and insurable title in fee simple to all the Fee
Property, free and clear of all encumbrances, liens, charges or other
restrictions of any kind or character, except for (a) liens reflected in the
Disclosure Schedules, (b) liens consisting of zoning or planning
restrictions, easements and other customary restrictions or limitations on
the use of real property which do not materially detract from the value of,
or impair the use of, such property by the Company or the Subsidiaries in the
operation of the business, and (c) liens for current taxes, assessments or
governmental charges or levies on property not yet due and payable
("Permitted Liens"). Except as set forth on the Disclosure Schedules, (a)
all of the buildings, structures and appurtenances situated in whole or in
part on any of the Real Property are in good operating condition and in a
state of good maintenance and repair in all material respects, are adequate
and suitable for the purposes for which they are presently being used and,
with respect to each, the Company and the Subsidiaries have adequate rights
of ingress and egress for operation of the business in the ordinary course
and consistent with past practice, (b) none of such buildings, structures or
appurtenances (or any equipment therein), nor the operation or maintenance
thereof, violates any restrictive covenant or any provision of any federal,
state or local law, ordinance, Rule or regulation, or encroaches on any
property owned by others in any way which could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, (c) no
condemnation proceeding or other litigation is pending or, to the best
knowledge of the Company and the Subsidiaries, threatened which would
preclude or impair the use of any Real Property by the Company and the
Subsidiaries for the purposes for which it is currently used, (d) none of the
Company or any of the Subsidiaries has violated or failed to hold any valid
and effective certificates of occupancy, underwriters' certificates relating
to electrical work, zoning, other permits and licenses (including building,

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<PAGE>

housing, safety, fire, health and similar permits and approvals) required by
applicable law with respect to any Real Property or the business conducted
thereat which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

3.16 COMPLIANCE WITH LAWS. The Company and the Subsidiaries are in
compliance with applicable federal, state or local statutes, laws and
regulations, including, without limitation, any applicable alcohol production
and sale, franchise, building, zoning, health, environmental, sanitation,
safety, labor relations or other law, ordinance or regulation, other than
violations, if any, which, individually or in the aggregate, could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

3.17 LICENSES AND PERMITS. Except as set forth in the Disclosure
Schedules, the Company and the Subsidiaries have all governmental or regulatory
licenses, permits and authorizations (all of which are in full force and effect)
necessary to conduct their business as it is now being conducted, including
without limitation those required by the U.S. Bureau of Alcohol, Tobacco and
Firearms and the California Alcoholic Beverage Control Board, except for such
governmental or regulatory licenses, permits and authorizations the absence of
which would not have, individually or in the aggregate, a Material Adverse
Effect, and none of such governmental or regulatory licenses, permits and
authorizations will be impaired as a result of the transactions contemplated by
this Agreement, except in any case that would not have, individually or in the
aggregate, a Material Adverse Effect. Neither the Company nor any of the
Subsidiaries has received any notice to the effect that, or otherwise been
advised that, it is not in compliance with, or that it is in violation of, any
such governmental or regulatory licenses, permits and authorizations in a manner
that would have, individually or in the aggregate, a Material Adverse Effect,
and there are not currently existing circumstances that are likely to result in
a failure of the Company or any Subsidiary to comply with, or in a violation by
the Company or any Subsidiary of, any such governmental or regulatory licenses,
permits or authorizations that would have, individually or in the aggregate, a
Material Adverse Effect.

3.18 TITLE TO ASSETS. The Company and the Subsidiaries own or
lease all tangible personal property necessary for the conduct of their business
as presently conducted. Each such asset has been maintained in accordance with
ordinary industry practice, is in good operating condition and is usable in the
ordinary course of business, other than where any such failures individually or
in the aggregate would not have a Material Adverse Effect. Except for liens
arising under documents set forth in the Disclosure Schedules and for other
imperfections which individually or in the aggregate would not have a Material
Adverse Effect and except for leased or licensed assets, the Company and the
Subsidiaries have good and marketable title to all of the owned tangible
personal property used in the conduct of their businesses, except for assets
disposed of in the ordinary course of business. The Company has good and valid
leasehold title to all leased tangible personal property leased by it from third
parties, free and clear of all liens, security interests and other encumbrances
except for imperfections individually or in the aggregate as would not cause a
Material Adverse Effect and except as set forth in the Disclosure Schedules.

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<PAGE>

3.19 INVENTORY. The value at which the inventory of the Company
and the Subsidiaries is carried on the June 30, 1995 consolidated balance sheet
(the "Balance Sheet") reflects the customary inventory valuation policy of the
Company and is consistently applied in accordance with GAAP. The Company's and
the Subsidiaries' current inventory consists of items of a quality which are
saleable in the ordinary course of business at prevailing prices, and is in a
quantity sufficient to service the operations of the business of the Company and
the Subsidiaries at the Company's and the Subsidiaries' respective, current
levels of operations. Since July 1, 1995 the Company and the Subsidiaries have
continued to replenish their inventory in the ordinary course of business
consistent with past practice, and have not made any change in their inventory
policies or procedures.

3.20 ACCOUNTS RECEIVABLE. All accounts receivable acquired since
June 30, 1995 by the Company and the Subsidiaries are collectible at the
aggregate recorded amounts thereof, net of any applicable reserves for doubtful
accounts as set forth in the Financials, which reserves are adequate and were
calculated consistent with past practices. There are no refunds, rebates,
discounts or other adjustments payable with respect to such accounts receivable.

3.21 TAXES. The Company and the Subsidiaries have paid, or the
Company's June 30, 1995 consolidated balance sheet contains adequate
provision for, all federal, state, local and foreign income, liquor,
licenses, alternative, add-on, gross receipts, franchise, payroll, F.I.C.A.,
unemployment, withholding, real property, personal property, sales, payroll,
disability and other taxes imposed on the Company or any of the Subsidiaries
or with respect to any of their respective properties, or otherwise payable
by any of them, including interest, penalties and other additions, if any, in
respect thereof (collectively, "Company Taxes"), for the taxable period ended
on June 30, 1995 and for all taxable periods ended prior thereto. Company
Taxes paid and/or incurred since July 1, 1995 until the Closing Date include,
or will include, only Company Taxes incurred in the ordinary course of
business determined in the same manner as in the taxable period ending on
June 30, 1996. Without limiting the foregoing representations in any way,
(a) the Company and the Subsidiaries have collected all sales, use and value
added taxes required to be collected, and have remitted, or will remit on a
timely basis, such amounts to the appropriate governmental authorities and
have furnished properly completed exemption certificates for all exempt
transactions and (b) the Company and the Subsidiaries have properly withheld
income and social security or other similar taxes and paid payroll taxes with
respect to all persons properly characterized as employees for federal, state
or local tax purposes. Other than between the Company and the Subsidiaries,
neither the Company nor any Subsidiary is a party to or bound by any tax
sharing, tax indemnity or tax allocation agreement or other similar
arrangement. The Company and the Subsidiaries have timely filed all returns,
reports and other filings related to Company Taxes which any of them is
required to file and have paid, or provided for, all the amounts shown to be
due thereon. The Company has made available to the Buyers (c) complete
copies of all such tax returns, reports and filings and (d) complete copies
of all audit reports and other governmental claims asserting Company Taxes in
addition to those Company Taxes set forth on such returns, reports and
filings. Except for actions and proceedings pending or threatened by any
governmental authority involving an aggregate amount of less than Fifty

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<PAGE>

Thousand Dollars ($50,000), no action or proceeding is pending or threatened by
any governmental authority for assessment or collection from the Company or any
of the Subsidiaries of any Company Taxes, no unresolved claim for assessment or
collection of any Company Taxes has been asserted against the Company or any of
the Subsidiaries, and all resolved assessments of Company Taxes have been paid
or are reflected in the Company's June 30, 1995 consolidated balance sheet.
There are no liens for Company Taxes (other than for current Company Taxes not
yet due and payable) upon the assets of the Company or any of the Subsidiaries.

3.22 ENVIRONMENTAL LAWS AND REGULATIONS.

(a) For the purposes of this section, the following words
and phrases shall have the following meanings:

"CURRENT REAL PROPERTY" means all Real Property currently
owned, operated, leased or occupied by the Company.

"ENVIRONMENTAL CONDITION" means any condition relating to the
presence, release, disposal, storage or treatment of Hazardous Materials in, at
on, under or about (i) the Real Property, or (ii) the environment beyond the
Real Property, which Hazardous Materials migrated or emanated from the Real
Property, or (iii) the disposal of Hazardous Materials at any property.

"ENVIRONMENTAL LAW" means any environmental or health and
safety-related law, regulation, rule, requirement, ordinance, order or
determination of any governmental or judicial authority at the federal, state,
or local level, whether existing as of the date hereof, previously enforced or
subsequently enacted.

"HAZARDOUS MATERIAL" means any pollutant, contaminant, toxic
substance, hazardous waste, hazardous material, hazardous substance, petroleum
or petroleum product, asbestos, polychlorinated biphenyls, underground storage
tanks and the contents thereof including, without limitation, any such materials
defined in or regulated pursuant to any Environmental Law.

"REAL PROPERTY" means any real property or "facility" (as
defined in the Resource Conservation and Recovery Act, 42 U.S.C Section 6901 et
seq. ("RCRA")) currently or formerly owned, operated, leased or occupied by the
Company.

"COMPANY" means Golden State Acquisition Corp., Golden State
Vintners, and/or any of the Subsidiaries or affiliates thereof.

(b) The Company has no liability under, and is in
compliance in all material respects with, all Environmental Laws applicable to
the Company's business, the Real Property and any facilities and operations
thereon.

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<PAGE>

(c) The Company possesses all permits and authorizations
under Environmental Laws required or necessary to conduct its business (the
"Required Permits"), except where the failure to obtain any such permits or
authorizations would not have, individually or in the aggregate, a Material
Adverse Effect. The Company is in compliance with all terms and conditions of
the Required Permits, except where the failure to comply would not, individually
or in the aggregate, have a Material Adverse Effect. The Required Permits are
in full force and effect and will not be impaired as a result of the
transactions contemplated hereby or by any of the Ancillary Agreements.

(d) In the last five (5) years, the Company has not: (i)
entered into or been subject to any outstanding consent decree, compliance order
or administrative order with respect to the Real Property or any facilities or
operations thereon the future compliance with which would, individually or in
the aggregate, have a Material Adverse Effect; or (ii) as of the date hereof
received any notice, complaint or claim from any governmental authority with
respect to any Environmental Condition. With respect to each of these matters,
the Company has taken all appropriate action consistent with all applicable
Environmental Laws, except where the failure to take any such action would not,
individually or in the aggregate, have a Material Adverse Effect.

(e) There has been no release, disposal, treatment, storage
or presence of any Hazardous Material at, in, on, under or about the Real
Property that could reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect.

(f) No lien has been imposed or, to the Company's
knowledge, is threatened on any or all of the Real Property by any governmental
agency at the federal, state, or local level in connection with the presence,
release, disposal, storage or treatment on or off the Real Property of any
Hazardous Material.

(g) Between July 1, 1991 and the date hereof, the
Company has not received any notice, complaint or claim from any governmental
authority that the Company and/or any Current Real Property is not in
compliance with any applicable Environmental Laws relating to: (i) the
maintenance of records of Hazardous Material handled at each Current Real
Property; (ii) reporting, monitoring, inspections and compliance with the
manifest system for tracking the movement of Hazardous Material; (iii)
operating methods, techniques and practices for treating, storing and
disposing of Hazardous Material; (iv) the location, design and construction
of the Current Real Property; (v) contingency plans for minimizing
unanticipated damage from Hazardous Material treatment, storage or disposal
activities; (vi) maintenance and operation of each Current Real Property,
including qualifications with respect to ownership, continuity of operation,
personnel training, financial responsibility and closure; and (vii)
compliance with RCRA permit requirements.

(h) None of the matters set forth in the Disclosure
Schedules with respect to this section, individually or in the aggregate, have a
Material Adverse Effect.

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<PAGE>

3.23 BROKERS; CERTAIN EXPENSES. The Company has not paid or become
obligated to pay any fee or commission to any broker, finder, investment banker
or other intermediary in connection with this Agreement, except as may be
contemplated in connection with the FAC/Exeter Securities Purchase Agreement.

3.24 NO AGREEMENTS TO SELL THE COMPANY. Except as contemplated by
this Agreement or the FAC/Exeter Securities Purchase Agreement, none of the
Company or any of the Subsidiaries or any of its stockholders has any legal
obligation, absolute or contingent, to any other person, firm or entity to sell
capital stock, material assets (other than in the ordinary course of business
and consistent with past practices) or business of the Company or any of the
Subsidiaries or to effect any merger, consolidation, liquidation, dissolution,
recapitalization or other reorganization of the Company or any of the
Subsidiaries or to enter into any agreement with respect thereto.

3.25 RELATED-PARTY TRANSACTIONS. Except as set forth in the
Disclosure Schedules, since July 1, 1994, no employee, officer, or director of
the Company or of any Subsidiary, or, to the knowledge of the Company, no
affiliate (as such term is defined in the Securities and Exchange Act of 1934,
as amended ("Affiliates")) of any such person, and no member of such persons'
immediate families is indebted to, or has engaged in any transaction with, the
Company or any Subsidiary. Except as set forth in the Disclosure Schedules,
neither the Company nor any Subsidiary is indebted to, or a party to any
contract, agreement or instrument with, any employee, officer, director or
Affiliate, of the Company or of any Subsidiary, or, to the knowledge of the
Company, any Affiliate of any such person, or any member of such persons'
immediate families. To the best of the Company's knowledge, except as set forth
in the Disclosure Schedules, none of such persons or affiliates have any direct
or indirect ownership interest in any firm or corporation with which the Company
or any Subsidiary is affiliated or with which the Company or any Subsidiary has
a business relationship, or any firm or corporation that competes with the
Company or any Subsidiary, except that employees, officers or directors of the
Company and any Subsidiary and members of their immediate families may own stock
in publicly traded companies that may compete with the Company or any
Subsidiary. Except as set forth in the Disclosure Schedules, no member of the
immediate family of any officer or director of the Company or any Subsidiary is
directly or indirectly interested in any Contract with the Company or any
Subsidiary. Section 3.25 of the Disclosure Schedules describes in detail (a)
the Company's business relationships with the Grape Group and (b) the owners of
S.E. Vineyards, the aggregate number of acres owned or controlled thereby and
the most recent financial statements thereof. All of the transactions described
in Section 3.25 of the Disclosure Schedules that were entered into after
January 1, 1995 were on terms no less favorable to the Company than would have
been available from an unaffiliated third party at the time such transactions
were entered into, provided that, with respect to transactions that have not by
the terms thereof been fully performed involving current employees, officers or
directors of the Company, affiliates of any such person and any member of such
persons' immediate family, this time limitation shall not apply, provided,
further that this provision shall not apply to employment agreements disclosed
on the Disclosure Schedules.

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<PAGE>

3.26 LABOR MATTERS.

(a) Neither the Company nor any Subsidiary is a party to or
bound by any collective bargaining agreements or other agreements with labor
unions. The Company and the Subsidiaries have not violated any laws,
regulations, orders or contract terms, affecting the collective bargaining
rights of employees, equal opportunity employment, or employees' health, safety,
welfare, wages and hours, the default or violation of which could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) Except as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect: (i) there are no
labor disputes existing, or to the Company's best knowledge, threatened,
involving strikes, slow-downs, work stoppages, job actions or lockouts of any
employees of the Company or any of the Subsidiaries (ii) there are no unfair
labor practices or petitions for election pending before the National Labor
Relations Board or any other federal or state Labor Commission relating to the
employees of the Company or any of the Subsidiaries, and (iii) no demand for
recognition heretofore made by any labor organization is pending with respect to
the Company or any of the Subsidiaries.

3.27 COMPLIANCE WITH THE IMMIGRATION REFORM AND CONTROL ACT. Since
January 1, 1991, each of the Company and GSV has complied with and has not
violated the terms and provisions of the Immigration Reform and Control Act of
1986, or any related Regulations promulgated thereunder (the "Immigration
Laws"). With respect to each employee (as defined in Section 274a.1(f) of
Title 8, Code of Federal Regulations) of the Company or GSV for whom compliance
with the Immigration Laws by an employer (as defined in Section 274a.1(g) of
Title 8, Code of Federal Regulations) is required, each of the Company and GSV
has in its records such employee's Form I-9 (Employment Eligibility Verification
Form) and all other records, documents or other papers in the Company's
possession with respect to such employee. Since January 1, 1991, neither the
Company nor GSV has been the subject of any inspection or, to the Company's
knowledge, investigation relating to its compliance with or violation of the
Immigration Laws, nor has it been fined or otherwise penalized by reason of any
failure to comply with the Immigration Laws, nor is any such proceeding pending
or, to the Company's knowledge, threatened.

3.28 PROPRIETARY RIGHTS. The Company and the Subsidiaries own or
have the right to use all of the federal and state registrations of trademarks
and of other marks, trade names or other trade rights, and all pending
applications for any such registrations and all of the patents and copyrights
and all pending applications therefor, all other trademarks and other marks,
trade names and other trade rights in which the Company or any of the
Subsidiaries has any interest whatsoever, and all other trade secrets, designs,
plans, specifications, technical information and other proprietary rights,
whether or not registered, which are material to the conduct of the business of
the Company and the Subsidiaries (collectively, "Proprietary Rights"). Other
than payments between the Company and the Subsidiaries, no person has a right to
receive from the Company or the Subsidiaries a royalty or similar payment in
respect of any Proprietary Rights whether or not pursuant to any contractual
arrangements entered into by the Company or any of the Subsidiaries. Neither
the Company nor any of the Subsidiaries have received any notice of

20
<PAGE>

invalidity or infringement of any rights of others with respect to Proprietary
Rights since July 1, 1992 which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. No proceedings
have been instituted against or notices received by the Company or any of the
Subsidiaries that are presently outstanding alleging that the Company's or any
of the Subsidiaries' use of any Proprietary Rights infringes upon or otherwise
violates any rights of a third party in or to such Proprietary Rights. All of
the Proprietary Rights are valid and enforceable rights of the Company or the
Subsidiaries and will not cease to be valid and in full force and effect by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated by this Agreement.

3.29 SMALL BUSINESS ADMINISTRATION MATTERS. The Company complies
with the size standards set forth in 13 C.F.R. Section 121.301(a) and, to the
extent relevant, those size standards set forth in 13 C.F.R. Section 121.601.
On or promptly after the Closing, the Company shall deliver to the Buyers,
upon request, (a) an executed copy of SBA Form 480 - Size Status Declaration,
(b) an executed copy of SBA Form 652 - Assurance of Compliance for
Nondiscrimination, and (c) the information needed to complete Part A of SBA
Form 1031 - Portfolio Financing Report.

3.30 DISCLOSURE. To the best knowledge of the Company, no
representation or warranty by the Company or any Subsidiary in this Agreement,
any of the Disclosure Schedules hereto or any other agreement delivered in
connection herewith contains any untrue statement of material fact or omits to
state any material fact necessary, in light of the circumstances under which it
was made, in order to make the statements herein not misleading.

ARTICLE IV

COVENANTS AND AGREEMENTS

4.1 ACCESS TO PROPERTIES AND RECORDS. The Company shall afford to
the Buyers and their accountants, counsel and other representatives, on
reasonable notice, full access during normal business hours from the date hereof
to the Closing Date to all of its and the Subsidiaries' properties, books,
accounts, agreements, personnel, facilities, proprietary information, contracts,
commitments and records and shall make reasonably available their officers and
employees to answer fully and promptly questions put to them thereby. As soon
as reasonably practicable, the Company shall furnish the Buyers with audited
consolidated financial statements for the fiscal year ended June 30, 1996. No
investigation pursuant to this Section 4.1 will affect or be deemed to modify
any representation or warranty made by the Company.

4.2 INDEMNIFICATION BY THE COMPANY.

(a) (i) The Company agrees to indemnify the Buyers, and
each of the Buyer's respective officers, directors, partners, employees, agents
and representatives, against and hold the Buyers, and each of the Buyer's
respective officers, directors, partners, employees,

21
<PAGE>

agents and representatives, harmless from all claims, obligations, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) and liabilities of and damages to the Buyers arising out of the
material breach of any representation, warranty, covenant or agreement of the
Company herein or arising out of or in any way relating to the transactions
contemplated by this Agreement, including without limitation, any of the
transactions contemplated by the FAC/Exeter Securities Purchase Agreement.

(ii) The Company agrees to indemnify the Buyers
against and hold the Buyers harmless from all claims, obligations, costs and
expenses (including, without limitation reasonable attorney's fees and expenses)
and liabilities of and damages to the Buyers if the Buyers becomes a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
instituted by any third party which challenges the transactions contemplated by
this Agreement, including without limitation, any of the transactions
contemplated by the FAC/Exeter Securities Purchase Agreement or otherwise arises
out of this Agreement.

(b) The Buyers agree to give the Company prompt written
notice of any claim, assertion, event or proceeding by or in respect of a third
party of which it has knowledge concerning any liability or damage as to which
it may request indemnification hereunder. The Company shall have the right to
direct, through counsel of its own choosing, the defense or settlement of any
such claim or proceeding (provided that the Company shall have first
acknowledged its indemnification obligations hereunder specifically in respect
of such claim or proceeding) at its own expense, which counsel shall be
reasonably satisfactory to the Buyers. If the Company elects to assume the
defense of any such claim or proceeding, the Buyers may participate in such
defense, but in such case the expenses of the Buyers incurred in connection with
such participation shall be paid by the Buyers. The Buyers shall cooperate with
the Company in the defense or settlement of any such claim, assertion, event or
proceeding. If the Company elects to direct the defense of any such claim or
proceeding, the Buyers shall not pay, or permit to be paid, any part of any
claim or demand arising from such asserted liability, unless the Company
consents in writing to such payment or unless the Company withdraws from the
defense of such asserted liability, or unless a final judgment from which no
appeal may be taken by or on behalf of the Company is entered against the Buyers
for such liability. If the Company shall fail to defend, or if, after
commencing or undertaking any such defense, the Company fails to prosecute or
withdraws from such defense, the Buyers shall have the right to undertake the
defense or settlement thereof at the Company's expense.

4.3 BEST EFFORTS. Upon the terms and subject to the conditions
herein provided, each of the Buyers and the Company agrees to use its reasonable
best efforts to take, or cause to be taken, all action, and to do, or cause to
be done, all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement including (a) to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby and (b) to
fulfill all conditions on its part to be fulfilled under this Agreement. In
case at any time after the Closing Date any further

22
<PAGE>

action is reasonably necessary or desirable to carry out the purposes of this
Agreement, the proper partners, officers or directors of each party to this
Agreement shall take all such reasonably necessary action. No party hereto will
take any action for the purpose of delaying, impairing or impeding the receipt
of any required consent, authorization, order or approval or the making of any
required filing. The Company shall each give prompt notice to the Buyers of (i)
the occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause any representation or warranty of the Company contained
in this Agreement, as the case may be, to be untrue or inaccurate in any
material respect any time from the date hereof to the Closing Date and (ii) any
material failure of the Company, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder, and the Company shall use all reasonable efforts to remedy such
failure. In addition, the Company shall give prompt notice to the Buyers of any
material developments involving the operations or activities of the Company or
any of the Subsidiaries.

4.4 CONSENTS. The Company and each of the Buyers will use its
reasonable best efforts to obtain all necessary waivers, consents and approvals
of all third parties and governmental authorities necessary to the consummation
of the transactions contemplated by this Agreement, including, but not limited
to, the transactions contemplated by the FAC/Exeter Securities Purchase
Agreement.

4.5 DELIVERY OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS.

(a) The Company shall deliver to the Buyers, as soon as
practicable, but in any event within ninety (90) days after the end of each
fiscal year of the Company, a statement of operations for such fiscal year, a
balance sheet of the Company as of the end of such year, and a statement of cash
flows for such year, such year-end financial reports to be in reasonable detail
and prepared in accordance with GAAP.

(b) The Company shall deliver to the Buyers, as soon as
practicable, but in any event within forty-five (45) days after the end of each
of the first three (3) quarters of each fiscal year of the Company, an unaudited
statement of operations, balance sheet, and statement of cash flows of the
Company for such fiscal quarters as of the end of such fiscal quarters.

(c) The Company shall deliver to the Buyers, as soon as
practicable, but in any event within thirty (30) days after the end of each
month, an unaudited statement of operations, balance sheet, and statement of
cash flows of the Company for such month and for the fiscal year-to-date.

(d) The Company shall deliver to the Buyers prior to the
close of each fiscal year, an operating budget for the next fiscal year
forecasting the Company's revenues, expenses and cash position, prepared on a
monthly basis, including balance sheets and sources and applications of funds
statements for such months.

23
<PAGE>

(e) The Company shall deliver to the Buyers, as soon as
practicable, but in any event within ten (10) days of receipt by the Company,
copies of any management letters of the Company's accountants.

(f) The Company shall promptly deliver to the Buyers: (i)
notice of any defaults under any Contracts or other material agreements and (ii)
notice of any material litigation.

(g) The Company shall deliver to the Buyers, as soon as
practicable, all other information requested by the Buyers, where such
information is readily available and may be reduced to written form.

4.6 ACCESS TO RECORDS. The Company shall afford to the Buyers and
their respective officers, directors, partners, employees, counsel and other
authorized representatives free and full access, at all reasonable times, to all
of the books, records and properties of the Company, including, without
limitation, those of any Subsidiary, and to all officers, employees and
accounting professionals of the Company or any Subsidiary.

4.7 NO TRANSACTIONS WITH AFFILIATES. Neither the Company nor any
Affiliate thereof will enter into any transaction with any stockholder of the
Company or any Affiliate thereof or with any member of management of the Company
unless the terms and conditions of each such transaction are no less favorable
to the Company or its Affiliate, as the case may be, than would be obtained in a
comparable arm's-length transaction with an unaffiliated third party.

4.8 QUALIFICATION AS A QUALIFIED SMALL BUSINESS. The Company
agrees to deliver to the Buyers, from time to time, such forms, documents,
schedules and other instruments reasonably requested by Buyers to cause the
Class B Stock to qualify as a qualified small business stock, as such term is
defined in Section 1202(b) of the Internal Revenue Code of 1986, as amended.

4.9 USE OF PROCEEDS; ACCESS TO RECORDS. The Company covenants and
agrees that it will use the proceeds from the sale of the Shares hereunder for
general working capital purposes, and otherwise as duly authorized by the Board
of Directors of the Company for the growth, expansion and modernization of the
Company. The Company will provide each Buyer requesting such information with
reasonable access to the Company's financial records so as to allow such Buyer
to confirm that such proceeds were used in the manner contemplated by this
Agreement, such access to include a review by such Buyer of the use of proceeds
within ninety (90) days after the Closing. The Company acknowledges and agrees
that, if the proceeds are not used in the manner contemplated hereby, each Buyer
shall have the right to demand the immediate repayment thereof.

4.10 BUYER'S RIGHT OF FIRST REFUSAL. The Company hereby grants to
each Buyer the right of first refusal to purchase, pro rata, all or any part of
New Securities, as defined below,

24
<PAGE>

which the Company may, from time to time, propose to offer, sell and issue. A
Buyer's pro rata share, for purposes of this right of first refusal, is equal to
such Buyer's percentage interest in the aggregate number of shares of common
stock of the Company then outstanding (assuming, for purposes of such percentage
interest, complete conversion of all outstanding convertible securities and
complete exercise of any and all outstanding options and warrants of the
Company). This right of first refusal shall be subject to the following
provisions:

(a) "New Securities" shall mean any shares of capital stock
of the Company, including common stock and preferred stock, whether or not
presently authorized, any rights, options or warrants to purchase such shares,
and securities of any type whatsoever that are, or may become, convertible into
such shares; provided that "New Securities" does not include (i) options, or
shares of common stock issuable upon exercise of options granted under the
Company's 1996 Stock Option Plan, (ii) shares issuable on exercise of up to
223,913 options granted to O'Neill and up to 50,000 options granted to Brian
Thompson, (iii) securities issued in connection with the leasing or financing of
equipment, or with the indebtedness of the Company to banks, insurance
companies, or other commercial leading institutions regularly engaged in the
business of lending money, (iv) securities issued pursuant to the acquisition of
another corporation by the Company by (A) merger, (B) purchase of substantially
all of the assets or (C) other reorganization whereby the Company owns not less
than fifty-one percent (51%) of the voting power of such corporation, (v) any of
the Company's Common Stock (or related options exercisable for such Common
Stock) issued to employees, officers and directors of, and consultants to, the
Company, pursuant to any arrangement approved by the Board of Directors of the
Company, (vi) stock issued upon conversion or exercise of any convertible
securities, options or warrants, provided that the rights of first refusal
established by this Section 4.10 first applied or were properly waived with
respect to the initial sale or grant by the Company of such convertible
securities, options or warrants, and (vii) stock issued in connection with any
stock split, stock dividend or recapitalization by the Company.

(b) In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Buyer written notice of its
intention, describing the type of New Securities, and the price and terms upon
which the Company proposes to issue the same. Each Buyer shall have thirty (30)
days from the date of receipt of any such notice to agree to purchase up to the
Buyer's pro rata share of such New Securities for the price and upon the terms
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased.

(c) In the event a Buyer fails to exercise the right of
first refusal within such thirty (30) day period, the Company shall have ninety
(90) days thereafter to sell the New Securities with respect to which the
Buyer's option was not exercised, at the price and upon terms no more favorable
to the purchasers of such securities than specified in the Company's notice. In
the event the Company has not sold the New Securities within said ninety (90)
day period, the Company shall not thereafter issue or sell any New Securities,
without first offering such securities to the Buyers in the manner provided
above.

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<PAGE>

(d) The right of first refusal shall terminate on the
consummation of the initial public offering of shares of the Company's common
stock of at least 20% of the common stock then outstanding that results in gross
proceeds to the Company of at least $35,000,000.

ARTICLE V

CONDITIONS PRECEDENT

5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the transactions contemplated by this
Agreement shall be subject to the conditions that no federal or state
governmental authority or other agency or commission or federal or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, injunction or other order (whether
temporary, preliminary, or permanent) which is in effect and has the effect of
prohibiting consummation of the transactions contemplated by this Agreement.

5.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation
of the Company to effect the transaction contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:

(a) The Buyers shall have performed in all material
respects their obligations under this Agreement required to be performed by them
on or prior to the Closing Date pursuant to the terms hereof.

(b) The representations and warranties of the Buyers
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing Date as if made at and as of such date, except to the
extent that any such representation or warranty is made as of a specified date
in which case such representation or warranty shall have been true and correct
as of such date. The Buyers shall have delivered a certificate to the effect
set forth in Sections 5.2(a) and (b).

5.3 CONDITIONS TO THE OBLIGATIONS OF THE BUYERS. The obligations
of the Buyers to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:

(a) The Company shall have performed in all material
respects its obligations under this Agreement required to be performed by it on
or prior to the Closing Date pursuant to the terms hereof.

(b) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing Date as if made at and as of such date, except to the
extent that any such representation or warranty is made

26
<PAGE>

as of a specified date in which case such representation or warranty shall have
been true and correct as of such date. The Company shall have delivered to the
Buyers a certificate to the effect set forth in Sections 5.3(a) and (b).

(c) Since January 1, 1996, there shall have been no
material adverse change in the financial condition, prospects or results of
operations of the Company and the Subsidiaries considered as a whole.

(d) The Buyers shall have received fully executed copies of
each of the Ancillary Agreements.

(e) The Buyers and their legal and financial advisors shall
have completed their due diligence of the Company, GSV and any Subsidiaries of
such entities, and the conclusions reached by such advisors is satisfactory to
all of the Buyers.

(f) The size and composition of the Board of Directors
shall be satisfactory to Buyers.

(g) All of the conditions to Closing set forth in
Section 4.3 of the FAC/Exeter Securities Purchase Agreement shall have been
satisfied or waived.

(h) The Buyers shall have received such other duly and
validly executed documents and instruments in connection with the Closing as are
reasonably requested by them.

(i) All necessary waivers, consents and approvals to or of
the transactions contemplated by this Agreement or the FAC/Exeter Securities
Purchase Agreement.

ARTICLE VI

MISCELLANEOUS

6.1 AMENDMENT. This Agreement may be amended by the parties
hereto. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto, provided that after the Closing
this Agreement may be amended without each party's written agreement, but no
such amendment shall be enforceable against any party which has not signed such
amendment.

6.2 WAIVER. At any time prior to the Closing Date, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions herein, provided that any such waiver of or failure to insist on
strict compliance with

27
<PAGE>

any such representation, warranty, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.

6.3 SURVIVAL. The representations and warranties set forth in
Articles II and III shall survive the Closing.

6.4 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been given or
made if in writing and delivered personally, sent by commercial carrier or
registered or certified mail (postage prepaid, return receipt requested) or
transmitted by facsimile to the parties at the following addresses and numbers:

(a) If to the Buyers to:

SBIC Partners, L.P.
201 Main Street, Suite 2302
Fort Worth, TX 76102
Fax No.: (817) 338-2047

Jeffrey B. O'Neill
60 East Sir Francis Drake Boulevard, Suite 302
Larkspur, CA 94939
Fax No.: (415) 461-4497

(b) If to the Company, to:

60 East Sir Francis Drake Boulevard, Suite 302
Larkspur, CA 94939
Fax No.: (415) 461-4497

or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made as
of the date actually received.

6.5 HEADINGS; AGREEMENT. The headings contained in this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement. The term "Agreement" for purposes of representations and warranties
hereunder shall be deemed to include the Exhibits hereto to be executed and
delivered by a party.

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<PAGE>

6.6 PUBLICITY. So long as this Agreement is in effect, the
parties hereto shall not, and shall cause their affiliates not to, issue or
cause the publication of any press release or other announcement with respect to
the transactions contemplated by this Agreement or this Agreement without the
consent of the other parties, which consent shall not be unreasonably withheld
or delayed.

6.7 ENTIRE AGREEMENT. This Agreement (including all the
Disclosure Schedules and Exhibits hereto) constitutes the entire agreement among
the parties and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof.

6.8 CONVEYANCE TAXES. The Company agrees to assume liability for
and to hold the Buyers harmless against any sales, use, transfer, stamp, stock
transfer, real property transfer or gains, and value added taxes, any transfer,
registration, recording or other fees, and any similar taxes incurred as a
result of the transactions contemplated hereby.

6.9 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefits of the parties hereto and their
respective successors and permitted assigns. Except as otherwise provided in
the Ancillary Agreements or Exhibits to this Agreement, and except for an
assignment of rights, interests or obligations by Buyers after the Closing,
neither this Agreement nor any of the rights, interests or obligations shall be
assigned by any of the parties hereto without the prior written consent of the
other parties, provided that SBIC Partners shall have the right to assign all or
any portion of its rights hereunder to any affiliate thereof without the consent
of any other party hereto.

6.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.

6.11 GOVERNING LAW. The validity and interpretation of this
Agreement shall be governed by the laws of the State of California, without
reference to the conflict of laws principles thereof.

6.12 THIRD PARTY BENEFICIARIES. This Agreement is not intended to
confer upon any other person any rights or remedies hereunder.

6.13 COSTS AND EXPENSES. The Company will pay all costs and
expenses incurred by Buyers in connection with the transactions contemplated
hereby, including without limitation, the legal fees and expenses of Riordan &
McKinzie, whether or not the transactions contemplated hereby are consummated.

29
<PAGE>

(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)

30
<PAGE>

IN WITNESS WHEREOF, each of the Buyers and the Company has caused this
Agreement to be duly signed as of the date first written above.

COMPANY: GOLDEN STATE ACQUISITION CORP.,
a Delaware corporation

By:
--------------------------------------------------
Jeffrey B. O'Neill
Chief Executive Officer

BUYERS:

SBIC PARTNERS: SBIC PARTNERS, L.P.,
a Texas limited partnership

By: Forrest Binkley & Brown L.P.,
General Partner

By: Forrest Binkley & Brown Venture Co.,
General Partner

By: ----------------------------------------
Jeffrey J. Brown
Office of the President

By: SL-SBIC Partners, L.P.,
General Partner

By: FW-SBIC, Inc.,
General Partner

By: ----------------------------------------
Name: Peter Sterling
Title: Chairman

O'NEILL: --------------------------------------
Jeffrey B. O'Neill

31
<PAGE>

GOLDEN STATE ACQUISITION CORP.
SUPPLEMENTAL SIGNATURE PAGE
TO
STOCK PURCHASE AGREEMENT

SUBSEQUENT CLOSING -- NOVEMBER 26, 1996

By their execution hereof, GOLDEN STATE ACQUISITION CORP., a Delaware
corporation (the "Company"), and the undersigned (each, a "Buyer" and
collectively, the "Buyers"), hereby become parties to the Stock Purchase
Agreement dated as of October 10, 1996 (the "Stock Purchase Agreement") by and
among the Company, SBIC Partners, L.P. and Jeffrey B. O'Neill. As of the
Subsequent Closing, as defined below, each Buyer hereby acknowledges and agrees
to the provisions, terms and conditions of the Stock Purchase Agreement and each
Buyer represents and warrants on his or its own behalf that the representations
and warranties set forth in Section 2 of the Stock Purchase Agreement are true
and correct. The shares of the Company's Class K Common Stock (the "Class K
Stock") acquired by the Buyers at the Subsequent Closing shall, for all intents
and purposes, be deemed to have been acquired under the Stock Purchase
Agreement.

The Buyers hereby agree to purchase and the Company agrees to sell and
issue the number of shares of Class K Stock as set forth opposite each Buyer's
name on the attached Exhibit B for the purchase price of $7.26 per share. The
purchase and sale of the Class K Stock shall take place at the offices of
Riordan & McKinzie, 300 South Grand Avenue, Suite 2900, Los Angeles, California
90071, at 10:00 a.m. on November 26, 1996, or at such other time and place as
the Company and the Buyers shall agree (the "Subsequent Closing").

IN WITNESS WHEREOF, this Supplemental Signature Page has been executed
and delivered as of the date forth set forth above.

GOLDEN STATE ACQUISITION CORP.

By:
----------------------------------------
Jeffrey B. O'Neill
President

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

<PAGE>

BUYERS: R&M PARTNERS/GSV, G.P.

By:
----------------------------------------
Jeffrey L. DuRocher
General Partner

Address: Riordan & McKinzie
300 South Grand Avenue
29th Floor
Los Angeles, CA 90071
Telephone: (213) 629-4824
Facsimile: (213) 229-8550

---------------------------------------------
Victor Palmieri

Address: The Palmieri Company
245 Park Avenue, 35th Floor
New York, New York 10167
Telephone: (212) 972-8060
Facsimile: (212) 972-7924

---------------------------------------------
Peter Mullin

Address: Mullin Consulting Inc.
644 South Figueroa Street
Los Angeles, CA 90017
Telephone: (213) 488-8500
Facsimile: (213) 622-4800

2
<PAGE>

EXHIBIT B

SCHEDULE OF SUBSEQUENT BUYERS

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Number of
Shares of Class K Aggregate
Buyer Common Stock Purchase Price
----- ------------ --------------
- ------------------------------------------------------------------------------
<S> <C> <C>
R&M Partners/GSV, G.P. 20,661 $149,998.86
- ------------------------------------------------------------------------------
Peter Mullin 6,887 $ 49,999.62
- ------------------------------------------------------------------------------
Victor Palmieri 6,887 $ 49,999.62
- ------------------------------------------------------------------------------
TOTAL 34,435 $249,998.10
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

</TABLE>

<PAGE>

Exhibit 10.21

EXETER VENTURE MANAGEMENT CORPORATION
10 East 53rd Street
New York, New York 10022

October 9, 1996

Golden State Acquisition Corp.
60 East Sir Francis Drake Boulevard, Suite 302
Larkspur, California 94939

Ladies and Gentlemen:

This letter sets forth the agreement and understanding (the "Agreement")
among Golden State Acquisition Corp. (together with its wholly-owned subsidiary,
Golden State Vintners ("GSV"), collectively "GSAC"), and Exeter Venture
Management Corporation ("Exeter"), regarding the performance by Exeter of
certain financial advisory services, as further described below.

1. GSAC hereby acknowledges the performance by Exeter of certain
financial advisory services to GSAC and its management with respect to certain
proposed debt and equity restructuring matters (collectively, the
"Transactions") which include, without limitation: (i) structuring and
negotiating the redemption of shares of GSAC's Class A Common Stock held by FAC,
Ltd. and shares of Class B Common Stock held by Exeter Equity Partners, L.P. and
Exeter Venture Lenders, L.P. (together, the "Exeter Partnerships"), (ii)
obtaining, structuring and negotiating the refinancing of a credit facility from
Sanwa Bank of California (the "Sanwa Refinancing"), (iii) structuring and
negotiating the refinancing of a credit facility from John Hancock Mutual Life
Insurance Company (the "Hancock Refinancing"), and (iv) certain other financial
and restructuring matters.

2. As consideration for the performance by Exeter of financial advisory
services in connection with GSAC's repurchase of: (i) 650,000 shares of Class A
Common Stock held by FAC, Ltd. for an aggregate price of $4,719,000 and (ii)
339,709 shares of Class B Common Stock held by the Exeter Partnerships for an
aggregate price of $2,466,287, GSAC shall, on or prior to the Closing Date, pay
to Exeter by wire transfer of immediately available funds, a fee in an amount in
cash equal to $125,000.

3. As consideration for the performance by Exeter of financial advisory
services in connection with: (i) the Sanwa Refinancing, including obtaining an
increase in the line of credit available to GSAC and GSV to $24,000,000, (ii)
the Hancock refinancing and (iii) certain other financial advisory and
restructuring matters, GSAC shall, on or prior to the Closing

<PAGE>

Date, pay to Exeter by wire transfer of immediately available funds, a fee in an
amount in cash equal to $125,000.

4. As consideration for the performance of financial advisory services by
Exeter in connection with obtaining certain consents necessary to complete the
Transactions, GSAC shall, on or prior to the Closing Date, pay to Exeter by wire
transfer of immediately available funds, a fee in an amount in cash equal to
$125,000.

5. The parties hereto agree that Exeter has and may in the future perform
services contemplated hereunder as an independent contractor, retaining control
over and responsibility for its own operations and personnel. As a result of
this Agreement, neither Exeter nor its partners, employees or agents shall be
considered employees or agents of GSAC, nor shall any of them have authority to
contract in the name of or bind GSAC, in either case except as otherwise
expressly agreed to in writing by GSAC.

6. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.

If the foregoing correctly sets forth the understanding and agreement
between Exeter and GSAC, please so indicate in the space provided below for this
purpose, whereupon this letter shall constitute a binding agreement.

EXETER VENTURE MANAGEMENT
CORPORATION

By: /s/ KEITH R. FOX
-------------------------------
Name: Keith R. Fox
----------------------
Title: President
----------------------

Accepted and Agreed to
as of October 9, 1996:

GOLDEN STATE ACQUISITION CORP.

By: /s/ JEFFREY J. BROWN
------------------------------
Name: Jeffrey J. Brown
Title: Director
2

<PAGE>

MANAGEMENT AGREEMENT

This Management Agreement (this "Agreement") is entered into as of this
31st day of May, 1997 by and between Golden State Vintners, a California
corporation (the "Company"), and Forrest Binkley & Brown Partners L.P., a
Delaware limited partnership ("FBB").

R E C I T A L S:

A. FBB and its partners and affiliates have financial, capital raising,
operational and managerial expertise that will assist the Company with its
development, growth and expansion.

B. The Company wishes to engage FBB to provide financial advice and
consultation, pursuant to the terms of this Agreement, and FBB wishes to accept
such engagement.

A G R E E M E N T:

NOW, THEREFORE, in consideration of the above-stated premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

1. ENGAGEMENT OF FBB; SERVICES RENDERED. The Company hereby engages FBB
to advise the Company from time to time with respect to all matters concerning
the fund raising, growth, development, expansion and operations of the Company
and FBB hereby accepts such engagement. In that regard, FBB will (a) provide
assistance to the Company with respect to any and all fund raising activities
undertaken from time to time by the Company, (b) introduce the Company to
investment bankers and secured and mezzanine lenders, (c) oversee the initial
public offering of the Company's common stock, (d) provide guidance to the
Company in the domestic capital marketplace, (e) assist the Company with its
regular quarterly presentations to financial analysts and related capital market
professionals,(f) advise the Company regarding the potential refinancing of its
senior and subordinated indebtedness, (g) advise the Company regarding its plans
for domestic and international expansion and (h) otherwise provide such advice
and consultation to the Company as may be reasonably requested.

2. MANAGEMENT FEE. In connection with the services rendered by FBB to
the Company pursuant to this Agreement, FBB shall receive an annual fee of
$125,000 payable in equal monthly installments during the term of this
Agreement.

<PAGE>

3. TERM. This Agreement shall continue for a period of five years from
the effective date hereof, unless extended or terminated by the mutual agreement
of the parties prior to the expiration of such term.

4. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.

5. EFFECTIVE DATE. For all intents and purposes, this Agreement shall be
deemed effective as of October 10, 1996.

6. COUNTERPARTS. This Agreement may be executed in two or more
counterparts with the same effect as if all parties hereto had signed the same
document. All counterparts so executed shall be deemed to be an original, shall
be construed together and shall constitute one agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

THE COMPANY: GOLDEN STATE VINTNERS

By: /s/ Jeffrey B. O'Neill
-----------------------------
Jeffrey J. O'Neill
Chief Executive Officer

FBB: FORREST BINKLEY & BROWN PARTNERS L.P.

By: Forrest Binkley & Brown Venture
Advisor Co., General Partner

By: /s/ Jeffrey J. Brown
---------------------------

Name: Jeffrey J. Brown
Office of the President

<PAGE>

GOLDEN STATE VINTNERS, INC.

1998 DIRECTOR STOCK OPTION PLAN

1. PURPOSES. The purposes of this 1998 Director Stock Option Plan (the
"Plan") are to retain the services of qualified individuals who are not
employees of Golden State Acquisition Corp., a Delaware corporation (the
"Company"), or Golden State Vintners ("GSV"), to serve as members of the Board
of Directors and to secure for the Company the benefits of the incentives
inherent in increased equity ownership by such individuals by granting such
individuals options to purchase shares of the Company's Class K Common Stock,
$.0.01 par value per share (the "Common Stock").

2. ADMINISTRATION. The Board of Directors, the Chairman of the Board of
Directors or an individual designated by the Board of Directors or the Chairman
(the "Administrator") will be responsible for administering the Plan. The
Administrator will have authority to adopt such rules as it may deem appropriate
to carry out the purposes of the Plan, and shall have authority to interpret and
construe the provisions of the Plan and any agreements and notices under the
Plan and to make determinations pursuant to any Plan provision. Each
interpretation, determination or other action made or taken by the Administrator
pursuant to the Plan shall be final and binding on all persons. The
Administrator shall not be liable for any action or determination made in good
faith, and shall be entitled to indemnification and reimbursement in the manner
provided in the Company's Certificate of Incorporation and By-Laws as such
documents may be amended from time to time.

3. SHARES AVAILABLE. Subject to the provisions of Section 6(b) of the
Plan, the maximum number of shares of Common Stock which may be issued under the
Plan shall not exceed 120,000 shares. Either authorized and unissued shares of
Common Stock or treasury shares may be delivered pursuant to the Plan. The
number of shares subject to an Option which lapses, expires or is otherwise
terminated without the issuance of such shares, shall increase the number of
shares available under this Plan.

4. OPTIONS. Each member of the Board of Directors that is not an
employee of the Company, GSV or any subsidiary of either entity (a "Non-Employee
Director") shall receive grants of Options under the Plan as follows:

(a) OPTION GRANTS.

(i) INITIAL GRANTS. Each Non-Employee Director who is
elected or appointed to the Board within thirty (30) days of the date that this
Plan is effective (the "Effective Date") shall be granted as of such date an
initial Option to purchase 5,170 shares of Common Stock. Each Non-Employee
Director who is elected or appointed to the Board more than thirty (30) days
after the Effective Date shall be granted an initial Option to purchase up

<PAGE>

to 3,450 shares of Common Stock as of the date of their election or appointment
to the Board. Each Non-Employee Director who was a member of the Board on the
Effective Date shall be granted as of such date an initial Option to purchase
2,586 shares of Common Stock.

(ii) ANNUAL GRANTS. Each Non-Employee Director who was a
member of the Board on the Effective Date shall receive an annual Option to
purchase 3,450 shares of Common Stock on May 1 of each year commencing with May
1, 1999; provided that such member has remained in continuous service as a
director of the Company since the Effective Date and is a Non-Employee Director
on the applicable May 1 date. Each Non-Employee Director who became a member of
the Board after the Effective Date shall receive an annual Option to purchase
3,450 shares of Common Stock on each anniversary of the Non-Employee Director's
initial election or appointment to the Board and on each subsequent anniversary
thereof; provided that such member has remained in continuous service as a
director of the Company for the preceding twelve (12) month period and is a
Non-Employee Director on the applicable anniversary date.

(b) EXERCISE PRICE. The per share exercise price of each Option
shall be the Fair Market Value of a share of Common Stock as of the date of
grant of the Option determined in accordance with the provisions of the Plan.
For purposes of this Plan, "Fair Market Value" means the value of Common Stock
determined as follows:

(i) If the Common Stock is listed on any established stock
exchange or a national market system (including without limitation the Nasdaq
National Market), its Fair Market Value shall be the closing sales price for
such stock or the closing bid if no sales were reported, as quoted on such
system or exchange for the date of determination or, if the date of
determination is not a trading day, the immediately preceding trading day, as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable.

(ii) If the Common Stock is regularly quoted on the Nasdaq
system (but not on the Nasdaq National Market) or quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices for the Common Stock on
the date of determination or, if there are no quoted prices on the date of
determination, on the last day on which there are quoted prices prior to the
date of determination.

(iii) in the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

(c) VESTING. Each Option shall vest and become exercisable on the
first anniversary of the date of grant, provided that the Non-Employee Director
has remained in continuous service as a director of the Company for the
preceding twelve (12) month period and is a Non-Employee Director on the
applicable anniversary date.

2
<PAGE>

(d) TERM OF OPTIONS.

(i) TEN-YEAR TERM. Each Option shall expire ten (10) years
from its date of grant, subject to earlier termination as provided herein.

(ii) EXERCISE FOLLOWING TERMINATION OF SERVICE DUE TO DEATH.
If a Non-Employee Director ceases to be a member of the Board by reason of such
Non-Employee Director's death, the Options granted to such Non-Employee Director
may be exercised by any beneficiary of such Non-Employee Director, but only to
the extent the Option was exercisable at the time of the Non-Employee Director's
death, at any time within one (1) year after the date of such termination of
service, subject to the earlier expiration of such Options as provided for in
Section 4(d)(i) above. At the end of such one-year period, the vested Option
shall expire. All unvested Options shall expire on the date of the Non-Employee
Director's death.

(iii) TERMINATION OF OPTIONS IF A NON-EMPLOYEE DIRECTOR IS
REMOVED FROM THE BOARD FOR CAUSE. In the event a Non-Employee Director is
removed from the Board for "cause," all Options granted to such Non-Employee
Director (whether or not then vested and exercisable) shall immediately
terminate and be of no further force and effect as of the effective date of such
removal from the Board. Whether a Non-Employee Director is removed by the Board
for "cause" shall be determined by the Board in the exercise of its business
judgement.

(iv) EXERCISE FOLLOWING OTHER TERMINATIONS OF SERVICE. If a
Non-Employee Director ceases to be a member of the Board for any reason other
than death or removal from the Board for cause, the Options granted to such
Non-Employee Director may be exercised by such Non-Employee Director, but only
to the extent the Option was exercisable at the time of the Non-Employee
Director's termination, at any time within ninety (90) days after the date of
such termination of service, subject to the earlier expiration of such Options
as provided for in Section 4(d)(i) above. At the end of such ninety-day period,
all vested Options shall expire. All unvested Options shall expire on the date
of the Non-Employee Director's termination of service with the Board.

(e) TIME AND MANNER OF EXERCISE OF OPTIONS.

(i) NOTICE OF EXERCISE. Subject to the other terms and
conditions hereof, a Non-Employee Director may exercise any Option, to the
extent such Option is vested, by giving written notice of exercise to the
Company, provided that in no event shall an Option be exercisable for a
fractional share. The date of exercise of an Option shall be the later of (A)
the date on which the Company receives such written notice and (B) the date on
which the conditions provided in Section 4(e)(ii) are satisfied.

3
<PAGE>

(ii) METHOD OF PAYMENT. The consideration to be paid for the
shares to be issued upon exercise of an Option may consist of (A) cash, (B)
check, (C) other shares which have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the shares as to which the Option shall
be exercised and which have been owned by the Non-Employee Director for at least
six (6) months at the time of exercise, (D) in the event the shares of the
Company's Common Stock are publicly traded, delivery of a properly executed
exercise notice together with irrevocable instructions to a broker to promptly
deliver to the Company the amount of proceeds required to pay the exercise
price, or (E) any combination of the foregoing methods of payment.

(iii) STOCKHOLDER RIGHTS. A Non-Employee Director shall have
no rights as a stockholder with respect to any shares of Common Stock issuable
upon exercise of an Option until a certificate evidencing such shares shall have
been issued to the Non-Employee Director pursuant to Section 4(e)(v), and no
adjustment shall be made for dividends or distributions or other rights in
respect of any share for which the record date is prior to the date upon which
the Non-Employee Director shall become the holder of record thereof.

(iv) LIMITATION ON EXERCISE. No Option shall be exercisable
unless the Common Stock subject thereto has been registered under the Securities
Act and qualified under applicable state "blue sky" laws in connection with the
offer and sale thereof, or the Company has determined that an exemption from
registration under the Securities Act and from qualification under such state
"blue sky" laws is available.

(v) ISSUANCE OF SHARES. Subject to the foregoing conditions,
as soon as is reasonably practicable after its receipt of a proper notice of
exercise and payment of the exercise price of the Option for the number of
shares with respect to which the Option is exercised, the Company or its
transfer agent and registrar, as the case may be, shall deliver to the
Non-Employee Director (or following the Non-Employee Director's death, the
Beneficiary entitled to exercise the Option), at the principal office of the
Company or at such other location as may be acceptable to the Company and the
Non-Employee Director (or such Beneficiary), one or more stock certificates for
the appropriate number of shares of Common Stock issued in connection with such
exercise, Shares sold in connection with a "cashless exercise" described in
clause C of Section 4(e)(ii) shall be delivered to the broker referred to
therein in accordance with the procedures established by the Company from time
to time.

(f) RESTRICTIONS ON TRANSFER. An Option may not be transferred,
pledged, assigned or otherwise disposed of, except by will or by the laws of
descent and distribution; provided that an Option may be, with the approval of
the Administrator, transferred to a Non-Employee Director's family members or to
one or more trusts established in whole or in part for the benefit of one or
more of such family members. The Option shall be exercisable, during the
Non-Employee Director's lifetime, only by the Non-Employee Director or by the
individual or entity to whom the Option has been transferred in accordance with
the previous sentence. No assignment or transfer of the Option, or of the
rights represented thereby,

4
<PAGE>

whether voluntary or involuntary, by operation of law or otherwise, except by
will or the laws of descent and distribution, shall vest in the assignee or
transferee any interest or right in the Option, but immediately upon any attempt
to assign or transfer the Option the same shall terminate and be of no force or
effect.

5. CHANGE IN CONTROL. Anything in the Plan to the contrary
notwithstanding, in the event of a Change in Control of the Company, the
following provisions shall apply:

(a) OPTIONS VEST. Any Options outstanding as of the date such Change
in Control is determined to have occurred that are not yet exercisable and
vested on such date shall become fully exercisable and vested.

(b) CASH OUT OF OPTIONS. The value of all outstanding Options (to
the extent not previously exercised) shall be cashed out on the date of the
Change in Control. The amount at which such Options shall be cashed out shall
be equal to the excess, if any, of (i) the Change in Control Price over (ii) the
exercise price of the Common Stock covered by the Option. The cash-out proceeds
shall be paid to the Non-Employee Director or, in the event of death of the
Non-Employee Director prior to payment, to the Beneficiary thereof.

(c) POOLING OF INTEREST EXCEPTION. If the Administrator shall
receive an opinion from the firm of independent accountants to the Company that
the cash-out provisions in Section 6(b) above with respect to Options will
prohibit the utilization of "pooling of interests" accounting in connection with
the transaction resulting in the Change in Control of the Company, then the
following shall apply, but only to the extent necessary to permit such
accounting treatment: (i) the provisions of Section 5(b) shall not apply to the
Options, (ii) each such Option shall become immediately vested and exercisable
as of the date such opinion is received by the Administrator, and (iii) the
Administrator shall promptly inform each Non-Employee Director of such opinion
and of the accelerated vesting and exercisability of the Option sufficiently
prior to the anticipated date of the Change in Control, so as to permit the
Option to be exercised prior to the date of the Change in Control.

(d) CHANGE IN CONTROL. For purposes of this Plan, "Change in
Control" means the happening of any of the following:

(i) When any "person", as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Company or any present shareholder
of the Company) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting power of the
Company's then outstanding securities; or

(ii) The occurrence of a transaction requiring shareholder
approval, and involving the sale of all or substantially all of the assets of
the Company or the merger of the Company with or into another corporation.

5
<PAGE>

For purposes of this Plan, "Change in Control Price" means, as
determined by the Administrator, (i) the highest Fair Market Value at any time
within the sixty-day period immediately preceding the date of determination of
the Change in Control Price by the Administrator or (ii) the highest price paid
or offered, as determined by the Administrator, in any bona fide transaction or
bona fide offer related to the Change in Control of the Company, at any time
within such sixty-day period.

6. RECAPITALIZATION OR REORGANIZATION.

(a) AUTHORITY OF THE COMPANY AND SHAREHOLDERS. The existence of the
Plan shall not affect or restrict in any way the right or power of the Company
or the shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.

(b) CHANGE IN CAPITALIZATION. Notwithstanding any other provision of
the Plan, in the event of any change in the outstanding Common Stock by reason
of a stock dividend, recapitalization, reorganization, merger, consolidation,
stock split, combination or exchange of shares (a "Change in Capitalization"),
(i) such proportionate adjustments as may be necessary (in the form determined
by the Administrator in its sole discretion) to reflect such change shall be
made to prevent dilution or enlargement of the rights of Non-Employee Directors
under the Plan with respect to the aggregate number of shares of Common Stock
authorized to be awarded under the Plan, the number of shares of Common Stock
covered by each outstanding Option and the exercise prices in respect thereof
and the number of shares of Common Stock covered by future Option grants and
(ii) the Administrator may make such other adjustments, consistent with the
foregoing, as it deems appropriate in its sole discretion.

(c) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each outstanding Option will vest and
become exercisable on a date prior to the consummation of the proposed action
that is reasonably sufficient to enable the Non-Employee Director to exercise
their Options.

7. TERMINATION AND AMENDMENT OF THE PLAN.

(a) TERMINATION. The Plan shall terminate on the tenth anniversary
of the Effective Date. Following such date, no further grants of Options shall
be made pursuant to the Plan.

6
<PAGE>

(b) GENERAL POWER OF BOARD. Notwithstanding anything herein to the
contrary, the Board may at any time and from time to time terminate, modify,
suspend or amend the Plan in whole or in part; provided that no such
termination, modification, suspension or amendment shall be effective without
shareholder approval if such approval is required to comply with any applicable
law or stock exchange rule.

(c) WHEN NON-EMPLOYEE DIRECTORS' CONSENTS REQUIRED. The Board may
not alter, amend, suspend, or terminate the Plan without the consent of any
Non-Employee Director to the extent that such action would adversely affect his
or her rights with respect to Options that have previously been granted.

8. MISCELLANEOUS.

(a) NO RIGHT TO REELECTION. Nothing in the Plan shall be deemed to
create any obligation on the part of the Board to nominate any of its members
for reelection by the Company's stockholders, nor confer upon any Non-Employee
Director the right to remain a member of the Board for any period of time, or at
any particular rate of compensation.

(b) SECURITIES LAW RESTRICTIONS. The Administrator may require each
Non-Employee Director purchasing or acquiring shares of Common Stock pursuant to
the Plan to agree with the Company in writing that such Non-Employee Director is
acquiring the shares for investment and not with a view to the distribution
thereof. All certificates for shares of Common Stock delivered under the Plan
shall be subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission or any exchange upon
which the Common Stock is then listed, and any applicable federal or state
securities law, and the Administrator may cause a legend or legends to be put on
any such certificates to make appropriate reference to such restrictions. No
shares of Common Stock shall be issued hereunder unless the Company shall have
determined that such issuance is in compliance with, or pursuant to an exemption
from, all applicable federal and state securities laws.

(d) APPLICABLE LAW. Except as to matters of federal law, the Plan
and all actions taken thereunder shall be governed by and construed in
accordance with the Laws of the State of California without giving effect to
conflicts of law principles.

(e) EFFECTIVE DATE. The Plan shall be effective as of the Effective
Date, subject to the approval thereof by the stockholders of the Company by no
later than the first anniversary of the Effective Date. If such stockholder
approval is not obtained, all prior Option grants shall be void AB INITIO and of
no further force and effect.

<PAGE>

GOLDEN STATE ACQUISITION CORP.

NONQUALIFIED STOCK OPTION AGREEMENT

THIS NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is entered into
as of January 1, 1998 by and between Golden State Acquisition Corp., a Delaware
corporation (the "Company"), and Jeffrey B. O'Neill ("Optionee").

R E C I T A L S:

A. Pursuant to the terms of that certain employment agreement dated as of
April 27, 1995 (the "Old Employment Agreement"), the Company engaged Optionee to
serve as President and Chief Executive Officer of the Company for a period of
five years.

B. Contemporaneously with the execution of the Old Employment Agreement,
the Company granted and issued to Optionee stock appreciation rights ("SARs")
pursuant to two separate Stock Appreciation Rights Agreements (the "Stock
Appreciation Rights Agreements") each of which was dated as of April 27, 1995
and which, together, represent Optionee's rights regarding an aggregate of
223,913 SARs.

C. Optionee and the Company wish to terminate (i) the Old Employment
Agreement and the Stock Appreciation Rights Agreements and (ii) provide for
Optionee the right to purchase shares of the Company's Class K Common Stock, par
value $.01 per share (the "Class K Common Stock"), pursuant to the terms and
conditions of this Agreement.

A G R E E M E N T:

NOW, THEREFORE, in consideration of the covenants hereinafter set forth,
the parties agree as follows:

1. OPTION; NUMBER OF SHARES. The Company hereby grants to Optionee the
right (the "Option") to purchase up to a maximum of 223,913 shares (the
"Shares") of Class K Common Stock at a price of $35.00 per share (the "Option
Price"), to be paid in accordance with Section 6 hereof.

<PAGE>

2. VESTING CRITERIA. The Option shall be fully vested as of the date
first set forth above.

3. TERM OF AGREEMENT. This Option, and Optionee's right to exercise this
Option, shall terminate when the first of the following occurs: (a) the
expiration of ten (10) years from the date hereof; or (b) 90 days after the date
of termination of Optionee's employment or other relationship with the Company
and any direct or indirect subsidiary of the Company (individually, a
"Subsidiary" and collectively, the "Subsidiaries"), unless such termination
results from Optionee's death or disability (within the meaning of
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"))
or Optionee dies within 90 days after the date of termination of Optionee's
employment or consulting relationship with the Company and the Subsidiaries, in
which case this Agreement and the Option shall terminate 180 days after the date
of termination of Optionee's employment or other relationship with the Company
and the Subsidiaries.

4. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP. The termination for
any reason of Optionee's employment or other relationship with the Company and
the Subsidiaries shall not affect the number of Shares with respect to which the
Option may be exercised, and this Option may only be exercised with respect to
that number of Shares which could have been purchased under the Option had the
Option been exercised by Optionee on the date of such termination.

5. DEATH OF OPTIONEE; NO ASSIGNMENT. The rights of Optionee under this
Agreement may not be assigned or transferred except by will, by the laws of
descent or distribution and may be exercised during the lifetime of Optionee
only by such Optionee, provided that in the event of disability (within the
meaning of Section 22(e)(3) of the Code) of Optionee, a designee of Optionee (or
the Optionee's legal representative if Optionee has not designated anyone) may
exercise the Option on behalf of Optionee (provided the Option would have been
exercisable by Optionee) until the right to exercise the Option expires pursuant
to Section 3 hereof. Any attempt to sell, pledge, assign, hypothecate, transfer
or otherwise dispose of the Option in contravention of this Agreement shall be
void and shall have no effect. If Optionee should die while engaged in an
employment or other relationship with the Company and/or any Subsidiary,
Optionee's designee, legal representative, or legatee, the successor trustee of
Optionee's inter vivos trust or the person who acquired the right to exercise
the Option by reason of the death of Optionee (individually, a "Successor")
shall succeed to Optionee's rights under this Agreement. After the death of
Optionee, only a Successor may exercise the Option, provided that any Shares
received by such Successor following such exercise shall be subject to
Section 13.

6. EXERCISE OF OPTION. Until termination of the Option in accordance
with Section 3 hereof, the Option may be exercised by Optionee (or such other
person specified in

<PAGE>

Section 5 hereof) to the extent exercisable as determined under Section 2
hereof, upon delivery of the following to the Company at its principal executive
offices:

(a) a written notice of exercise which identifies this Agreement and
states the number of Shares (which may not be less than 10,000) or all of the
Shares (if less than 10,000 Shares then remain covered by the Option) then being
purchased;

(b) a check, cash or any combination thereof in the amount of the
aggregate Option Price (or payment of the aggregate Option Price in such other
form of lawful consideration as the Company may approve from time to time);

(c) a check or cash in the amount reasonably requested by the Company
to satisfy the Company's withholding obligations under federal, state or other
applicable tax laws with respect to the taxable income, if any, recognized by
Optionee in connection with the exercise, in whole or in part, of the Option
(unless the Company and Optionee shall have made other arrangements for
deductions or withholding from Optionee's wages, bonus or other income paid to
Optionee by the Company or any Subsidiary, provided such arrangements satisfy
the requirements of applicable tax laws); and

(d) a written representation and undertaking, if requested by the
Company pursuant to Section 8(b) hereof, in such form and substance as the
Company may require, setting forth the investment intent of Optionee, or a
Successor, as the case may be, and such other agreements, representations and
undertakings as the Company may require.

7. REPRESENTATIONS AND WARRANTIES OF OPTIONEE.

(b) Optionee acknowledges that the Company may issue the Shares upon
the exercise of the Option without registering such securities under the Act on
the basis of certain exemptions from such registration requirement.
Accordingly, Optionee agrees that Optionee's exercise of the Option may be
expressly conditioned upon Optionee's delivery to the Company of such
representations and undertakings as the Company may reasonably require in order
to secure the availability of such exemptions, including a representation that
Optionee is acquiring the Shares for investment and not with a present intention
of selling or otherwise disposing of such Shares.

<PAGE>

(c) Optionee acknowledges receipt of this Agreement granting the
Option and understands that all rights and liabilities connected with the Option
are set forth herein.

8. NO RIGHTS AS A STOCKHOLDER. Optionee shall have no rights as a
stockholder of any shares of Common Stock covered by the Option until the date
(the "Exercise Date") an entry evidencing such ownership is made in the stock
transfer books of the Company. Except as may be provided under Section 11
hereof, the Company will make no adjustment for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the Exercise Date.

9. LIMITATION OF COMPANY'S LIABILITY FOR NONISSUANCE. The inability of
the Company to obtain, from any regulatory body having jurisdiction, authority
reasonably deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any of the Shares hereunder shall relieve the Company of
any liability in respect of the nonissuance or sale of such shares as to which
such requisite authority shall not have been obtained.

11. RECAPITALIZATION, REORGANIZATION; MERGER OR CONSOLIDATION.

(a) Subject to Section 11(b) hereof, if the outstanding shares of
Class K Common Stock of the Company are exchanged for different securities of
the Company through a reorganization, recapitalization or reclassification or if
the number of outstanding shares is changed through a stock split or stock
dividend, an appropriate adjustment shall be made (i) in the number or kind of
shares which may be purchased pursuant to the exercise of the Option and (ii) in
the number, exercise price, or kind of securities subject to the Option. Any
such adjustment in the Option, however, shall be made without change in the
total price applicable to the unexercised portion of the Option but with a
corresponding adjustment in the price for each share covered by the Option. In
making such adjustments, or in determining that no such adjustments are
necessary, the Company may rely upon the advice of counsel and accountants, and
the good faith determination of the Company shall be final, conclusive and
binding. No fractional shares of stock shall be issued or issuable under the
Option on account of any such adjustment.

<PAGE>

reorganization, merger, consolidation or exchange of securities in which the
Company does survive and any of the Company's stockholders have the opportunity
to receive cash, securities and/or other property in exchange for their shares
of the capital stock of the Company or (iv) any acquisition by any person or
group (as defined in Section 13(d) of the Exchange Act) of beneficial ownership
of more than 50% of the Company's then outstanding shares of the capital stock
of the Company (each of the events described in clauses (i), (ii), (iii) or (iv)
is referred to herein as an "Extraordinary Event"), the Option shall terminate.
In such event, if the Optionee is not tendered an option by the surviving entity
in accordance with all of the terms of the immediately succeeding sentence, or
does not accept any such substituted option which is so tendered, the Optionee
shall have the right until 10 days before the effective date of such
Extraordinary Event to exercise, in whole or in part, any portion of the
unexpired Option issued to the Optionee, to the extent that said Option is then
exercisable pursuant to the provisions of said Option. The Company shall use
its reasonable best efforts to cause the surviving entity in any Extraordinary
Event to tender to the Optionee an option or options to purchase other
securities of the surviving entity on the same basis as the Optionee may
purchase shares of Class K Common Stock hereunder (including satisfaction of
similar vesting provisions). The Company shall use its reasonable best efforts
to cause such new option or options to contain such terms and provisions as
shall substantially preserve the rights and benefits of the Option with any
reasonable changes to take into account the circumstances of the surviving
entity.

(c) The grant of this Option shall not affect in any way the right or
power of the Company to make adjustments, reclassifications or changes in its
capital or business structures or to merge, consolidate, dissolve or liquidate
or to sell or transfer all or any part of its business or assets.

12. RESTRICTIVE LEGENDS. Optionee hereby acknowledges that federal
securities laws and the securities laws of the state in which Optionee resides
may require the placement of certain restrictive legends upon the Shares issued
upon exercise of the Option, and Optionee hereby consents to the placing of any
such legends upon certificates evidencing the Shares as the Company, or its
counsel, may reasonably deem necessary, provided that any such legend or legends
shall be removed when no longer applicable.

13. REPURCHASE BY THE COMPANY.

(a) REPURCHASE OPTION. If Optionee's employment or other
relationship with the Company or any Subsidiary terminates for any reason
(including, without limitation, on the death, disability, retirement, voluntary
resignation or dismissal by the Company, with or without cause), the Company or
one or more designated assignees (each, an "Assignee") shall have the option
(the "Repurchase Option") to purchase from Optionee all or any portion of the
Shares then held by Optionee for a period of 180 days after the date of such
termination (the "Termination Date"). The purchase price for any such Shares to
be purchased

<PAGE>

pursuant to the Repurchase Option shall equal the greater of (i) the Option
Price or (ii) the fair market value of the Shares, as determined in good faith
by the Company's Board of Directors.

(c) EXERCISE OF REPURCHASE OPTION. The Repurchase Option shall be
exercised by the Company or any Assignee by delivery to Optionee, within the
180-day period specified in SECTION 13(b) above, of (i) a written notice
specifying the number of Shares to be purchased and (ii) a check in the amount
of the purchase price, calculated as provided in this SECTION 13, for all Shares
to be purchased.

(d) TERMINATION OF REPURCHASE OPTION. The Repurchase Option shall
terminate and have no further force or effect on and after the effectiveness of
the Company's first registration of shares of its equity securities pursuant to
the Securities Act of 1933, as amended.

14. NOTICES. All notices, requests and other communications hereunder
shall be in writing and, if given by telecopy, shall be deemed to have been
validly delivered 12 hours after confirmation of transmission to the fax numbers
set forth below, if sent during usual business hours; if given by personal
delivery, shall be deemed to have been validly served, given or delivered upon
actual delivery; and, if mailed, shall be deemed to have been validly served,
given or delivered three business days after deposit in the United States mails,
as registered or certified mail, with proper postage prepaid and addressed to
the party or parties to be notified, at the following addresses (or such other
address(es) as a party may designate for itself by like notice):

If to the Company:

Golden State Acquisition Corp.
500 Drake's Landing Road
Greenbrae, CA 94904
Fax No.: (415) 461-4497

<PAGE>

If to Optionee:

Jeffrey B. O'Neill
106 Cypress Avenue
Kentfield, CA 94104
Fax No.: (415) 461-4497

16. GOVERNING LAW. This Agreement shall be construed under and governed
by the laws of the State of Delaware without regard to the conflict of law
provisions thereof.

17. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and both of which together shall be deemed one
Agreement.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

<PAGE>

IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement
as of the date first above written.

THE COMPANY:

GOLDEN STATE ACQUISITION CORP.
a Delaware corporation

By:
---------------------------
Jeffrey J. Brown
Chairman of the Board

OPTIONEE:

--------------------------------
Jeffrey B. O'Neill

NONQUALIFIED STOCK OPTION AGREEMENT

<PAGE>

GOLDEN STATE ACQUISITION CORP.

TERMINATION OF STOCK APPRECIATION RIGHTS
AND
NONQUALIFIED STOCK OPTION AGREEMENT

THIS TERMINATION OF STOCK APPRECIATION RIGHTS AND NONQUALIFIED STOCK OPTION
AGREEMENT (this "Agreement") is entered into as of January 1, 1998 by and
between Golden State Acquisition Corp., a Delaware corporation (the "Company"),
and Brian R. Thompson ("Thompson" or "Optionee").

R E C I T A L S:

A. The Company granted and issued to Thompson stock appreciation rights
("SARs") pursuant to a Stock Appreciation Rights Agreement (the "Stock
Appreciation Rights Agreement") dated as of November 23, 1995 and which
represents Thompson's rights regarding an aggregate of 50,000 SARs.

B. Thompson and the Company wish to (i) terminate the Stock Appreciation
Rights Agreement, (ii) agree to the payment to Thompson of certain amounts due
thereto, pursuant to the Stock Appreciation Rights Agreement, and (iii) grant
and issue to Thompson the right to purchase shares of the Company's Class K
Common Stock, par value $.01 per share (the "Class K Common Stock"), pursuant to
the terms and conditions of this Agreement.

A G R E E M E N T:

NOW, THEREFORE, in consideration of the mutual premises set forth in this
Agreement, and such other consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:

1. TERMINATION OF STOCK APPRECIATION RIGHTS AGREEMENT. Thompson and the
Company hereby agree as follows:

(a) In consideration of and exchange for (i) the payment of
$1.375 million in cash (the "Payment"), as made pursuant to Section 1(b), and
(ii) the issuance of

<PAGE>

the Option, as defined below, Thompson and the Company hereby terminate the
Stock Appreciation Rights Agreement, which shall have no further force or
effect.

(b) The Payment may be in any combination of cash and a promissory
note as may be agreed to by Thompson, with such promissory note to be on terms
and conditions mutually agreeable to Thompson and the Company.

2. OPTION; NUMBER OF SHARES; VESTING. The Company hereby grants to
Optionee the right (the "Option") to purchase up to a maximum of 50,000 shares
(the "Shares") of Class K Common Stock at a price of $35.00 per share (the
"Option Price"), to be paid in accordance with Section 6 hereof. The Option
shall be fully vested as of the date first set forth above.

4. TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP. The termination for
any reason of Optionee's employment or other relationship with the Company and
the Subsidiaries shall not affect the number of Shares with respect to which the
Option may be exercised, and this Option may only be exercised with respect to
that number of Shares which could have been purchased under the Option had the
Option been exercised by Optionee on the date of such termination.

<PAGE>

Optionee should die while engaged in an employment or other relationship with
the Company and/or any Subsidiary, Optionee's designee, legal representative, or
legatee, the successor trustee of Optionee's inter vivos trust or the person who
acquired the right to exercise the Option by reason of the death of Optionee
(individually, a "Successor") shall succeed to Optionee's rights under this
Agreement. After the death of Optionee, only a Successor may exercise the
Option, provided that any Shares received by such Successor following such
exercise shall be subject to Section 13.

6. EXERCISE OF OPTION. Until termination of the Option in accordance
with Section 3 hereof, the Option may be exercised by Optionee (or such other
person specified in Section 5 hereof) to the extent exercisable as determined
under Section 2 hereof, upon delivery of the following to the Company at its
principal executive offices:

(b) a check, cash or any combination thereof in the amount of the
aggregate Option Price (or payment of the aggregate Option Price in such other
form of lawful consideration as the Company may approve from time to time);

(c) a check or cash in the amount reasonably requested by the Company
to satisfy the Company's withholding obligations under federal, state or other
applicable tax laws with respect to the taxable income, if any, recognized by
Optionee in connection with the exercise, in whole or in part, of the Option
(unless the Company and Optionee shall have made other arrangements for
deductions or withholding from Optionee's wages, bonus or other income paid to
Optionee by the Company or any Subsidiary, provided such arrangements satisfy
the requirements of applicable tax laws); and

(d) a written representation and undertaking, if requested by the
Company pursuant to Section 8(b) hereof, in such form and substance as the
Company may require, setting forth the investment intent of Optionee, or a
Successor, as the case may be, and such other agreements, representations and
undertakings as the Company may require.

7. REPRESENTATIONS AND WARRANTIES OF OPTIONEE.

<PAGE>

(c) Optionee acknowledges receipt of this Agreement granting the
Option and understands that all rights and liabilities connected with the Option
are set forth herein.

8. NO RIGHTS AS A STOCKHOLDER. Optionee shall have no rights as a
stockholder of any shares of Common Stock covered by the Option until the date
(the "Exercise Date") an entry evidencing such ownership is made in the stock
transfer books of the Company. Except as may be provided under Section 11
hereof, the Company will make no adjustment for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the Exercise Date.

11. RECAPITALIZATION, REORGANIZATION; MERGER OR CONSOLIDATION.

<PAGE>

price for each share covered by the Option. In making such adjustments, or in
determining that no such adjustments are necessary, the Company may rely upon
the advice of counsel and accountants, and the good faith determination of the
Company shall be final, conclusive and binding. No fractional shares of stock
shall be issued or issuable under the Option on account of any such adjustment.

(b) Upon (i) the dissolution, liquidation or sale of all or
substantially all of the business, properties and assets of the Company, (ii)
any reorganization, merger, consolidation or exchange of securities in which the
Company does not survive, (iii) any reorganization, merger, consolidation or
exchange of securities in which the Company does survive and any of the
Company's stockholders have the opportunity to receive cash, securities and/or
other property in exchange for their shares of the capital stock of the Company
or (iv) any acquisition by any person or group (as defined in Section 13(d) of
the Exchange Act) of beneficial ownership of more than 50% of the Company's then
outstanding shares of the capital stock of the Company (each of the events
described in clauses (i), (ii), (iii) or (iv) is referred to herein as an
"Extraordinary Event"), the Option shall terminate. In such event, if the
Optionee is not tendered an option by the surviving entity in accordance with
all of the terms of the immediately succeeding sentence, or does not accept any
such substituted option which is so tendered, the Optionee shall have the right
until 10 days before the effective date of such Extraordinary Event to exercise,
in whole or in part, any portion of the unexpired Option issued to the Optionee,
to the extent that said Option is then exercisable pursuant to the provisions of
said Option. The Company shall use its reasonable best efforts to cause the
surviving entity in any Extraordinary Event to tender to the Optionee an option
or options to purchase other securities of the surviving entity on the same
basis as the Optionee may purchase shares of Class K Common Stock hereunder
(including satisfaction of similar vesting provisions). The Company shall use
its reasonable best efforts to cause such new option or options to contain such
terms and provisions as shall substantially preserve the rights and benefits of
the Option with any reasonable changes to take into account the circumstances of
the surviving entity.

12. RESTRICTIVE LEGENDS. Optionee hereby acknowledges that federal
securities laws and the securities laws of the state in which Optionee resides
may require the placement of certain restrictive legends upon the Shares issued
upon exercise of the Option, and Optionee hereby consents to the placing of any
such legends upon certificates evidencing the Shares as the Company, or its
counsel, may reasonably deem necessary, provided that any such legend or legends
shall be removed when no longer applicable.

<PAGE>

13. REPURCHASE BY THE COMPANY.

(c) EXERCISE OF REPURCHASE OPTION. The Repurchase Option shall be
exercised by the Company or any Assignee by delivery to Optionee, within the
180-day period specified in SECTION 13(b) above, of (i) a written notice
specifying the number of Shares to be purchased and (ii) a check in the amount
of the purchase price, calculated as provided in this SECTION 13, for all Shares
to be purchased.

(d) TERMINATION OF REPURCHASE OPTION. The Repurchase Option shall
terminate and have no further force or effect on and after the effectiveness of
the Company's first registration of shares of its equity securities pursuant to
the Securities Act of 1933, as amended.

14. NOTICES. All notices, requests and other communications hereunder
shall be in writing and, if given by telecopy, shall be deemed to have been
validly delivered 12 hours after confirmation of transmission to the fax numbers
set forth below, if sent during usual business hours; if given by personal
delivery, shall be deemed to have been validly served, given or delivered upon
actual delivery; and, if mailed, shall be deemed to have been validly served,
given or delivered three business days after deposit in the United States mails,
as registered or certified mail, with proper postage prepaid and addressed to
the party or parties to be notified, at the following addresses (or such other
address(es) as a party may designate for itself by like notice):

<PAGE>

If to the Company:

Golden State Acquisition Corp.
500 Drake's Landing Road
Greenbrae, CA 94904
Fax No.: (415) 461-4497

If to Optionee:

Brian R. Thompson
26 Mela Lane
Rancho Palos Verdes, CA 90275
Fax No.: (310) 541-2651

16. GOVERNING LAW. This Agreement shall be construed under and governed
by the laws of the State of Delaware without regard to the conflict of law
provisions thereof.

17. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and both of which together shall be deemed one
Agreement.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

<PAGE>

IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement
as of the date first above written.

THE COMPANY:

GOLDEN STATE ACQUISITION CORP.
a Delaware corporation

By:
---------------------------
Jeffrey J. Brown
Chairman of the Board

OPTIONEE:

---------------------------
Brian R. Thompson

TERMINATION OF STOCK APPRECIATION RIGHTS AND NONQUALIFIED STOCK OPTION AGREEMENT

<PAGE>

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of January 1, 1998
between GOLDEN STATE ACQUISITION CORP., a Delaware corporation (the "Company"),
and JEFFREY B. O'NEILL (the "Executive").

R E C I T A L S :

A. Pursuant to the terms of that certain employment agreement dated as of
April 27, 1995 (the "Old Employment Agreement"), the Company engaged Executive
to serve as President and Chief Executive Officer of the Company for a period of
five years.

B. Contemporaneously with the execution of the Old Employment Agreement,
the Company granted and issued to Executive stock appreciation rights ("SARs")
pursuant to two separate Stock Appreciation Rights Agreements (the "Stock
Appreciation Rights Agreements") each of which was dated as of April 27, 1995
and which, together, represent Executive's rights regarding an aggregate of
223,913 SARs.

C. Executive and the Company wish to terminate (i) the Old Employment
Agreement and the Stock Appreciation Rights Agreements and (ii) establish the
terms of Executive's employment with the Company, pursuant to the terms and
conditions set forth herein.

A G R E E M E N T :

In consideration of the covenants and agreements of the parties
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:

1. TERMINATION MATTERS. With respect to the Old Employment
Agreement and the Stock Appreciation Rights Agreements, Executive and the
Company hereby agree as follows:

(a) In consideration of and exchange for the payment of
$2.5 million in cash by the Company to Executive (the "Employment Payment")
pursuant to the terms of Section 1(c), Executive and the Company hereby
terminate the Old Employment Agreement which, after the date hereof, shall have
no further force or effect.

(b) In consideration of and exchange for (i) the payment of
$6.967 million in cash (the "SAR Payment") pursuant to the terms of Section 1(c)
and (ii) the issuance of non-qualified options (the "Options") to purchase
223,913 shares of the Company's

<PAGE>

Class K Common Stock, par value $.01 per share (the "Class K Stock"), Executive
and the Company hereby terminate the Stock Appreciation Rights Agreements, which
shall have no further force or effect.

(c) With respect to the Employment Payment and the SAR Payment,
Executive may elect to receive all or any portion of such amounts in the form of
a promissory note, the terms of which shall be mutually agreeable to Executive
and the Company.

(d) The Options shall be subject to the terms and conditions set
forth in that certain Non-Qualified Stock Option Agreement attached hereto as
Exhibit A.

(e) Following the effectiveness of a registration statement with
respect to shares of the Company's Class B Stock with the Securities and
Exchange Commission (the "Commission"), the Company shall file with the
Commission a registration statement on Form S-8 with respect to the shares of
the Company's capital stock underlying any and all options held by Executive and
shall maintain the continual effectiveness of such registration statement during
the Term, as defined below.

(f) The Company shall take all steps that may be necessary to
ensure that, during the term of this Agreement, Executive is appointed to the
Board of Directors.

2. EMPLOYMENT. The Company agrees to employ Executive, and
Executive agrees to perform for the Company, on the terms and subject to the
conditions set forth in this Agreement.

3. TERM.

(a) The term of this Agreement (the "Term") shall commence as of
January 1, 1998 and terminate on June 30, 2001.

(b) Notwithstanding the above, this Agreement may be terminated
prior to the expiration of the Term pursuant to the provisions of Section 8
hereof.

4. POSITION AND DUTIES. During the Term, Executive shall serve on
an exclusive and full-time basis as the President and Chief Executive Officer of
the Company in and from the Company's offices in Greenbrae, California,
St. Helena, California and/or Cutler, California, in Executive's discretion.
Executive will have the authority and responsibility normally attendant to an
officer of a corporation holding such positions and will be responsible for,
among other things, overseeing all financial, accounting, legal, business
affairs, facilities, personnel, purchasing and related functions of the Company.
All such services shall be rendered in accordance with the ultimate direction
of, and Executive shall report to, the Board of Directors of the Company, and
Executive shall have such additional authority and responsibility as shall be
determined from time to time by the Board of Directors. Additionally, Executive
shall be

<PAGE>

entitled to hire and fire all non-executive officer personnel of the Company.
Executive will at all times perform all of the duties and obligations required
of him by the terms of this Agreement in a loyal and conscientious manner and to
the best of Executive's ability and experience.

Nothing set forth herein shall preclude Executive from devoting
reasonable periods of time required to serve as a member of the board of
directors of other non-competitive companies, which shall include Fresh
International, __________________ and such other boards as may be reasonably
approved by the Board of Directors, and to charitable and public service
activities so long as, in the aggregate, such activities do not interfere with
the performance by Executive of his duties under this Agreement.

5. BASE SALARY COMPENSATION.

(a) The Company shall pay Executive for the services rendered
hereunder a base salary at the rate of Three Hundred Fifty Thousand Dollars
($350,000) per year (the "Base Salary"). Such Base Salary shall be payable in
equal installments at such intervals as salaries are paid by the Company to
other executives of the Company, subject to the usual and required payroll
deductions and withholdings.

(b) On an annual basis, the Board of Directors may, in its sole
discretion, determine to increase the Base Salary of Executive to an amount
greater than the amount determined pursuant to Section 5(a) and the benefits
described in Section 7 hereof, such Board determination to be based, among other
things, on the performance of Company during prior periods.

6. BONUSES. The Board of Directors may, in its sole discretion,
consider the payment of a cash bonus to Executive based on the Company's
performance during any prior period and, in that regard, the Board will take
into account any acquisitions made by the Company during such period.

7. EXPENSES AND BENEFITS.

(a) Executive shall be entitled to reimbursement for all
reasonable and ordinary expenses incurred by Executive in the course of, and
directly related to, the rendering of services pursuant to this Agreement.
Additionally, Executive will be provided with an automobile of his choice, and
all leasing charges of up to $15,000 annually plus all gasoline, insurance,
maintenance and telephone charges shall be reimbursed by the Company. Such
expenses shall be supported by reasonable documentation and shall be subject to
reasonable audit by the Company.

(b) The Company will provide comprehensive medical and dental
insurance to Executive and members of his immediate family during the term of
this Agreement. In addition, during the period of this Agreement, Executive
will have the right to participate in

<PAGE>

all stock option, group life, health or accident insurance, retirement, pension
and other employee benefit plans of the Company if such plans are available at
any time during the period of employment hereunder to any of the Company's
employees. With respect to any such plans in which Executive is currently
participating, the Company shall maintain such plans during the term of this
Agreement in substantially the same form as they currently exist.

(c) The Company shall maintain Executive's current policy of
disability insurance, providing for benefits payable to Executive of not less
than $25,000 per month, so long as such policy is available at a reasonable
cost. The premiums for such coverage shall be paid by the Company but shall be
deemed additional compensation to Executive for tax purposes.

(d) Executive shall be entitled to four weeks of paid vacation
during each calendar year of his employment (prorated in any calendar year
during which Executive is employed under this Agreement for less than the entire
such year in accordance with the number of days in such calendar year during
which he is so employed). Such vacation time shall accrue and cumulate to the
extent not actually taken by Executive until Executive is entitled to six weeks
of accrued vacation but shall not accrue or cumulate in an amount greater than
six weeks. Subject to the preceding sentence, as a senior executive of the
Company, Executive shall be entitled to customary flexibility in using such
vacation time without strict regard to the actual accrual of vacation.
Executive also shall be entitled to all paid holidays given by the Company to
its senior executives.

8. TERMINATION.

(a) The Company's obligations and Executive's employment under
this Agreement shall terminate upon his death, except only with respect to the
Company's obligations referred to in Section 9(a).

(b) The Company may terminate Executive's employment and the
Company's obligations under this Agreement if Executive is disabled for any
aggregate period of one hundred twenty (120) days in any period of three hundred
and sixty-five (365) days. Executive shall be deemed disabled if he is unable
to substantially perform his assigned duties under this Agreement. If there
should be a dispute between the parties as to Executive's physical and mental
disability for purposes of this Agreement, the question shall be settled by the
opinion of an impartial reputable physician or psychiatrist agreed upon for this
purpose by the parties to this Agreement or their representatives, or if the
parties cannot agree within thirty (30) days of a request for a designation of
such party, then by a physician or psychiatrist designated by the Marin County
Medical Association. The certification of such physician or psychiatrist as to
the question in dispute shall be final and binding on the parties.

(c) The Company may terminate Executive's employment and the
Company's obligations under this Agreement (except only the payment obligation
referred to in

<PAGE>

Section 9(c) below) for any of the following reasons: (i) the material breach
by Executive of any material covenant contained in this Agreement which breach,
if capable of cure, is not cured within thirty (30) days after written demand
for cure is given by the Company identifying the breach with reasonable
particularity; (ii) the engaging by Executive in conduct adverse to the Company
and the failure to cease such conduct and rectify any harm to the Company within
thirty (30) days after written demand therefor by the Company identifying with
reasonable particularity such conduct and harm; (iii) the repudiation or
purported termination of this Agreement by Executive (other than a termination
For Good Reason by Executive pursuant to Section 8(e) below); or (v) the
conviction (by trial or upon a plea) of Executive of (A) a felony or (B) a
misdemeanor involving moral turpitude. Any such termination by the Company
pursuant to this Section 8(c) is herein referred to as a termination "For
Cause."

(d) The Company may terminate Executive's employment and the
Company's obligations under this Agreement (except only the obligations referred
to in Section 9(d) below) at any time at its discretion and without regard to
the circumstances described in Sections 8(a), (b) or (c) above (any such
discretionary termination being herein referred to as a termination "Without
Cause").

(e) Executive may terminate Executive's employment under this
Agreement and the Company's obligations under this Agreement (except only the
obligations referred to in Section 9(d) below) (i) upon the material breach
by the Company of any material covenant contained in this Agreement which
breach, if capable of cure, is not cured within thirty (30) days after
written demand for cure is given by Executive identifying the breach with
reasonable particularity, (ii) if the Company assigns to Executive duties and
responsibilities substantially inconsistent with the duties and
responsibilities described in Section 4 of this Agreement and if (A)
Executive thereafter notifies the Board of Directors of the Company in
writing of the fact that Executive believes such has occurred, describing
with reasonable particularity the facts upon which such conclusion is based,
and (B) the Company fails, within thirty (30) days following its receipt of
such notice, to reassign to Executive duties and responsibilities
substantially consistent with those described in Section 4 hereof, or (iii)
within six months following the sale by the Company of all of substantially
all of the capital stock or assets of the Company, or the consummation of any
transaction or series of related transactions, including any merger,
reorganization or recapitalization, in which any person or group acting
together for the purpose of acquiring, holding, voting or disposing of the
capital stock of the Company (an "Acquiror") shall have acquired beneficial
ownership (as defined pursuant to Rule 13d-3 of the Securities Exchange Act
of 1934, as amended, as such Rule is in effect as of the date hereof) of more
than fifty percent (50%) of the outstanding capital stock of the Company
(each, a "Change in Control"), provided that neither the sale or other
disposition by (X) SBIC Partners, L.P., Exeter Equity Partners, L.P. and/or
Exeter Venture Lenders, L.P. or all or any portion of the shares of capital
stock held by any such party nor (Y) the Company of shares of capital stock
pursuant to one or more registration statements filed under the Securities
Act of 1933, as amended, shall be deemed a Change in Control for purposes of
this Section 8(e) unless such sale or disposition results in the acquisition
by an Acquiror of more than fifty percent (50%)

<PAGE>

of such capital stock. Any such termination by Executive pursuant to this
Section 8(e) is herein referred to as a termination "For Good Reason."

(f) Any termination by the Company or Executive pursuant to this
Section 8 shall be effected by written notice of termination given to the other,
and such termination shall be effective upon the giving of such notice.

9. COMPENSATION UPON TERMINATION OR DURING DISABILITY.

(a) If Executive's employment shall be terminated by reason of
his death, the Company shall pay to such person as he shall designate in a
notice filed by him with the Company, or, if no such person shall be designated,
to his estate, Executive's Base Salary, all accrued but unused vacation pay
(which shall be based solely upon the Base Salary and not upon any other
compensation or benefits and which, as provided in Section 7(c), shall be
limited to the six weeks of maximum accrual) and any fully vested (i.e., all
conditions to Executive's right thereto shall have been satisfied) but unpaid
bonus (such Base Salary, vacation pay and vested bonus being herein referred to
as "Accrued Compensation") to the last day of the month in which his death
occurs. Any payments that Executive's spouse, beneficiaries or estate shall be
entitled to receive pursuant to any then existing Company death benefit policy
or then existing pension or Executive benefit plan of which Executive then is a
participant, or then existing life insurance policy maintained by the Company
under which Executive has the right to designate the beneficiary, which shall
not include any key man insurance under which the Company is the beneficiary,
except to the extent that such rights have, with the approval of the Company,
previously been assigned to any beneficiary designated by Executive, shall be
paid to the designated beneficiary. The Company shall have no other obligations
to Executive or any other person under this Agreement after the date of his
death.

(b) During any period that Executive is disabled under this
Agreement, but terminating upon any termination of this Agreement pursuant to
Section 8(b), Executive shall continue to receive an amount equal to his Base
Salary minus any compensation received by Executive under any disability
insurance policy the premiums for which have been paid by the Company. Upon any
termination of this Agreement pursuant to Section 8(b), the Company shall pay
Executive his Accrued Compensation through the date of such termination.

(c) If the Company terminates Executive's employment and its
obligations under this Agreement For Cause, the Company shall pay Executive his
Accrued Compensation through the date on which his employment is terminated, and
the Company shall have no other obligations to Executive under this Agreement
after the date of termination, but the Company shall retain all rights and
remedies it may have against Executive by reason of any breach of this Agreement
by Executive.

(d) If the Company terminates Executive's employment under this
Agreement Without Cause, or if Executive terminates such employment For Good
Reason, then

<PAGE>

upon either such event the Company shall pay Executive his Accrued Compensation
through the date on which his employment is terminated, and additionally shall
provide the following severance benefits to Executive:

(i) the Company will continue to pay to Executive the
Base Salary for a period of two (2) years;

(ii) the Company shall continue at its sole expense to
provide Executive and his family with such medical, dental and life
insurance coverage as the Company would be obligated to provide hereunder
if Executive had remained employed pursuant to this Agreement, for a period
ending upon the first to occur of (A) eighteen (18) months following such
termination, (B) upon the termination of the Term or (C) when Executive
obtains employment with another employer; and

(iii) the Company shall take all necessary steps to
accelerate the vesting of all unvested options held by Executive as of the
date of such termination.

10. CONFIDENTIALITY. During and for a period of three years after
the termination of this Agreement, Executive will not disclose any confidential
or proprietary information of the Company except: (i) as necessary in
furtherance of the business of the Company; (ii) as required by law or judicial
order; or (iii) to the extent such information otherwise is available to the
public. This covenant shall not be construed as prohibiting Executive from
utilizing information that is not specific to the Company about the wine
industry, including the names of suppliers and customers of the Company derived
from Executive's years of experience with the Company and the industry.

11. NON-COMPETITION. Reference hereafter in this Section 11 to
"Executive" means Executive individually and any entity in which Executive
serves as an officer, director, shareholder holding 3% or more of the shares,
partner, employee, consultant or advisor, where such entity is engaged in the
bulk wine, wine processing and/or finished case goods business (the "Business"),
which term means an entity which processes grapes into wine for sale in bulk to
customers, offering customers a range of wine processing and storage services or
producing and bottling wine, in any event within the State of California.

For a two-year period following termination of Executive's employment,
Executive will not engage in the Business. Further, for two years following any
such termination, Executive will not directly or indirectly compete with Company
for any business opportunity which Company was actively pursuing or
contemplating on the date of termination of Executive's employment, and
Executive will not, during such period, solicit, induce, cause or authorize to
be solicited or induced the resignation by any employee of Company, and
Executive will not employ any former employee who was employed on the date of
Executive's termination of employment until a period of six months have elapsed
since the resignation from Company of such former employee.

<PAGE>

12. NOTICES. For the purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered in person, mailed by
first class United States certified or registered mail, return receipt
requested, postage prepaid, by facsimile transmission or by Federal Express or
other national overnight courier service addressed as follows:

If to Executive:

Jeffrey B. O'Neill
106 Cypress Avenue
Kentfield, CA 94904
Fax No. (415) 453-__________

If to the Company:

c/o Forrest Binkley & Brown
840 Newport Center Drive, Suite 480
Newport Beach, CA 92660
Fax No.: (714) 729-3226
Attention: Jeffrey J. Brown

or to such other address and facsimile number as either party may have furnished
to the other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.

13. MODIFICATION/WAIVER; GOVERNING LAW; ATTORNEY FEES.

(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing, and is signed by Executive and on behalf of the Company by the person
specifically designated by the Board of Directors of the Company for such
purpose. No waiver by either party to this Agreement at any time of any breach
by the other party of, or compliance with, any agreement, condition or provision
of this Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar agreements, provisions or conditions at the same or at
any prior or subsequent time.

(b) The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of California.

(c) If either party institutes any legal action to enforce his
or its rights under or to recover damages for breach of, this Agreement, the
prevailing party in such action shall be entitled to recover from the other
party all costs and all reasonable expenses for attorney's fees and the
disbursements incurred by him or it.

<PAGE>

14. BINDING AGREEMENT; ASSIGNEES. This Agreement may not be assigned
by either party hereto without the written consent of the other provided that
Executive's rights to payments hereunder shall, upon his death, inure to the
benefit of Executive's personal or legal representatives, executors,
administrators, heirs, distributees, devisees and legatees.

15. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

16. ENTIRE AGREEMENT. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter of this
Agreement have been made by either party which are not set forth expressly in
this Agreement and the exhibits hereto. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter contained herein and
supersedes any and all prior or contemporaneous written or oral agreements among
the parties, including without limitation, the Old Employment Agreement and the
Stock Appreciation Rights Agreements.

17. EQUITABLE REMEDIES. Executive and the Company agree that the
services to be rendered by Executive pursuant to this Agreement are of a
special, unique and extraordinary character which gives them a particular value,
the loss of which may not be reasonably or adequately compensated in damages in
any action at law, and that a breach by Executive of any of the terms of this
Agreement may cause the Company great and irreparable injury and damage.
Executive expressly agrees that the Company may apply for the remedies of
injunction, specific performance and other equitable relief to prevent a breach
of this Agreement by Executive. This provision shall not, however, be construed
as a waiver of any of the rights which the Company may have hereunder, at law,
for damages, or otherwise.

18. HEADINGS. The headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.

COMPANY: Golden State Acquisition Corp.

By:
------------------------------------
Jeffrey J. Brown
Chairman of the Board

EXECUTIVE:
------------------------------------
Jeffrey B. O'Neill

<PAGE>
PROMISSORY NOTE

$452,791.17 May 16, 1995

FOR VALUE RECEIVED, Golden State Vintners, a California corporation
("Maker") promises to pay to Cottonwood Vineyard, a California corporation
("Holder"), in lawful money of the United States, the principal sum of Four
Hundred Fifty-Two Thousand Seven Hundred Ninety-One Dollars and Seventeen Cents
($452,791.17) as set forth below.

1. INTEREST. Interest on the principal sum of this note shall accrue at
the rate of eight percent (8%) per annum until October 1, 1997, and thereafter
at the rate of ten percent (10%) per annum, based on a 365 day year and the
actual number of days elapsed.

2. PAYMENTS: DUE ON SALE. Interest only shall be payable annually on
December 31, commencing on December 31, 1995, and continuing until January 1,
2003, at which time the entire principal sum and all accrued but unpaid interest
and any other sums payable hereunder shall be due and payable. In the event of
a voluntary sale, alienation, or conveyance of any portion of the property
described in the Deed of Trust securing this Note and irrespective of the
maturity date expressed herein, any indebtedness or obligation hereunder shall
at the option of the holder become immediately due and payable.

3. PREPAYMENT. This Note may be prepaid in whole or in part, at any
time, without penalty or premium, on any date that a payment of interest is due
hereunder, upon thirty (30) days prior written notice to Holder.

4. APPLICATION OF PAYMENTS. All payments received by Holder shall be
applied first to accrued interest, then to other charges due with respect to
this Note and then to the unpaid principal balance.

5. This Note is secured by a Deed of Trust and Assignment of Rents (the
"Deed of Trust") of even date herewith, encumbering certain real property
located in Kern County, California (the "Property").

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

1
<PAGE>

7. MAXIMUM LEGAL RATE OF INTEREST. All agreements between Maker and
Holder, whether now existing or hereafter arising, are hereby limited so that in
no event shall the interest charged hereunder or agreed to be paid to Holder
exceed the maximum amount permissible under applicable law. Holder shall be
entitled to amortize, prorate and spread throughout the full term of this Note
all interest paid or payable so that the interest paid does not exceed the
maximum amount permitted by law. If Holder ever receives interest or anything
deemed interest in excess of the maximum lawful amount, an amount equal to the
excessive interest shall be applied to the reduction of the principal. If
interest otherwise payable to Holder would exceed the maximum lawful amount, the
interest payable shall be reduced to the maximum amount permitted under
applicable law. This paragraph shall control all agreements between Maker and
Holder in connection with the indebtedness evidenced hereby.

8. NON-RECOURSE. Neither Maker, any partner of Maker nor any successor
or assign of Maker approved by Holder shall be liable personally for the
repayment of the indebtedness evidenced by this Note (the "Indebtedness");
provided, however, that this provision shall not be construed to release or
impair the Indebtedness or the lien created by the Deed of Trust, or preclude
the application of the Property to the payment of the Indebtedness as provided
by the Deed of Trust.

9. MISCELLANEOUS.

a. Maker shall pay all costs, including, without limitation,
reasonable attorneys' fees incurred by Holder in collecting the sums due
hereunder or in connection with the release of any security for this Note.

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

c. This Note shall be governed by California law.

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

e. Time is of the essence with respect to all matters set forth in
this Note.

2
<PAGE>

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

Maker: GOLDEN STATE VINTNERS
a California corporation

By: /s/ Mark D. McDonnell
----------------------------------
Its: Secretary
----------------------------------

<PAGE>

PROMISSORY NOTE

$500,000.00 September 4, 1996

FOR VALUE RECEIVED, the undersigned, GOLDEN STATE VINTNERS, a California
corporation (the "Borrower"), promises to pay to the order of VINTNERS
INTERNATIONAL COMPANY, INC., a New York corporation, or its assignee, (the
"Lender"), the principal sum of $500,000.00 (Five Hundred Thousand Dollars),
with interest thereon at eight percent (8%) per annum, compounded monthly, upon
the terms and conditions set forth herein. The principal and accrued interest
shall be fully due and payable in a lump sum, in lawful money of the United
States, twenty-four (24) months from the date of the execution of this Note.
The Borrower shall have the right to prepay all of any part of the unpaid
principal balance of this Promissory Note, together with all interest accrued
through the date of the prepayment upon ten (10) days advance notice to Lender,
and then in accordance with Section 2 hereof.

1. Should an Event of Default (as defined herein) occur and be
continuing, the whole sum of principal and interest shall become immediately due
at the option of the Lender. If an action is instituted on this Note, the
undersigned agrees to reimburse, indemnify and hold harmless the Lender from all
costs and expenses of any kind, including attorneys' fees and costs, court
costs, expert witness fees and all other such cost and expenses incurred by
Lender in exercising its rights hereunder, as well as pay the whole sum of
principal and interest. After an Event of Default, interest shall continue to
accrue, compounded daily at 20% or the highest interest rate permitted by law,
whichever is less.

2. The payment of principal and interest to be made by the Borrower under
this Note shall be made in immediately available funds, by wire transfer to an
account at a commercial bank (which account shall be identified in a notice to
the Borrower not later than three Business Days prior to the date of such
payment), not later than 1:00 p.m New York time on the date on which such
payment shall become due or on the noticed date of prepayment (such payment made
after such time on such due date will be deemed to have been made on the next
succeeding Business Day). All amounts payable under this Note shall be paid
free and clear of, and without reduction by reason of, any deduction, set-off or
counterclaim. If the due date of any payment under this Note would otherwise
fall on a day that is not a Business Day, such due date shall be extended to the
next succeeding Business Day, and interest shall be payable on any principal so
extended for the period of such extension. Interest payable under this Note
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable.

<PAGE>

3. Upon the occurrence of an Event of Default, the Borrower shall within
ten (10) days of such occurrence, provide to Lender all financial documents
reasonably necessary to represent the current financial condition of the
Borrower, including, but not limited to, balance sheets, profit and loss
statements, and statements of changes in financial condition, for its most
recent fiscal year, the prior fiscal year and the stub period preceding such
occurrence. The President and Chief Financial Officer of Borrower shall
represent that all financial statements and data are complete and correct in all
material respects as of the date given, accurately present the financial
condition of the Borrower, and have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
covered.

4. No failure on the part of the Lender to exercise and no delay in
exercise, and no course of dealing with respect to, any right, power or
privilege under this Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege under this Note
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege to the extent not prohibited by law. The remedies
provided herein are cumulative and not exclusive of any remedies provided by
law.

5. All notices and other communications in respect of this Note shall be
given or made in writing and shall be personally delivered, or sent by
registered, certified or express first-class mail, postage prepaid, or by
telecopy or reputable overnight courier service, addressed as follows:

If to Seller: Vintners International Company, Inc.
116 Buffalo Street
Canandaigua, New York 14424
Attn: Robert S. Sands, Vice President
Telecopier: (716) 396-7675

If to Buyer: Golden State Vintners
60 East Sir Francis Drake Blvd., Suite 302
Larkspur, California 94939
Attn: Jeffrey B. O'Neill President
Telecopier: (415) 461-4497

Each such notice or other communication given by mail shall be deemed to
have been given when it is delivered by hand, deposited in the United States
mail in the manner specified herein, deposited with a reputable overnight
courier service or telecopied and the appropriate confirmation of transmission
is received. Either party may change its address or telecopier number for the
purpose hereof by giving notice in accordance with this provision.

6. As used in this Note, the following terms shall have the following
respective meanings:

2
<PAGE>

"BUSINESS DAY" shall mean any day on which commercial banks are not
authorized or required to close in New York City.

"EVENT OF DEFAULT" means the occurrence of any one of the following events:

(a) the Borrower shall default in the payment of any amount owing
under this Note and such default shall not be cured within five (5) days
following written notice from Lender;

(b) the Borrower shall default in the performance of any of its other
obligations under this Note and such default shall not be cured within fifteen
(15) days following written notice from Lender;

(c) the Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due;

(d) if any judgment in excess of 10% of Borrower's net worth (assets
minus liabilities) against the Borrower shall remain unpaid in whole or in part
for five (5) or more days after the entry thereof.

(e) Upon the dissolution, liquidation, merger, consolidation or sale
or transfer not in the ordinary course of business of a major portion of the
assets of the Borrower, unless the successor or surviving or resulting entity

(i) shall be organized under the laws of the United States, a
state thereof or the District of Columbia;

(ii) shall assume all of the obligations of the Borrower under
this Note prior to the consummation of such transaction;

(iii) shall furnish the Lender with an opinion of counsel
satisfactory to the Lender as to the validity of its action referred to in (ii)
above; and

(iv) shall furnish the Lender with an opinion of the regularly
retained certified public accountant of the Borrower, that the net worth of the
successor or surviving or resulting entity immediately after the consummation of
the transaction equals or exceeds that of the Borrower immediately prior
thereto.

(f) the Borrower shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee, examiner or
liquidator of itself or of all or a substantial part of its property, (ii) make
a general assignment for the benefit of its creditors, (iii) commence a
voluntary case under the Federal Bankruptcy Code, (iv) file a petition seeking
to take advantage of any other law relating to bankruptcy, insolvency,

3
<PAGE>

reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Federal Bankruptcy Code or (vi) take any corporate
action for the purpose of effecting any of the foregoing; and

(g) a proceeding or case shall be commenced, without the application
or consent of the Borrower, in any court of competent jurisdiction, seeking (i)
its reorganization, liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a receiver,
custodian, trustee, examiner, liquidator or the like of the Borrower or of all
or any substantial part of its property, or (iii) similar relief in respect of
the Borrower under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of (60) or more days; or an order for relief against the
Borrower shall be entered in an involuntary case under the Federal Bankruptcy
Code and such order remains undismissed or unstayed for a period of sixty (60)
or more days.

7. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK. EACH OF THE BORROWER AND THE LENDER, BY ITS
ACCEPTANCE OF THE BENEFITS OF THIS NOTE, HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE
TRANSACTIONS CONTEMPLATED HEREBY. WITH THE EXCEPTION OF AN ACTION TO ENFORCE A
JUDGMENT AGAINST BORROWER, BOTH PARTIES HEREBY AGREE AND CONSENT TO THE
EXCLUSIVE JURISDICTION AND VENUE OF THE U.S. FEDERAL DISTRICT COURT FOR THE
WESTERN DISTRICT OF NEW YORK, ROCHESTER, NY OR, AT LENDERS OPTION, THE NEW YORK
STATE SUPREME COURT, LOCATED IN ROCHESTER, NEW YORK, FOR ANY ACTION ARISING
UNDER OR IN CONNECTION WITH THIS NOTE.

GOLDEN STATE VINTNERS
a California Corporation,

By:
-----------------------------------------
Its:
----------------------------------------

<PAGE>

Loan No. 7-500-411

FIRST SUPPLEMENTAL MODIFICATION AND EXTENSION AGREEMENT

THIS AGREEMENT, made this 5th day of May, 1995 by and between the
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation
(hereinafter called "Beneficiary") and THE GRAPE GROUP, a California
Corporation, (hereinafter called "Owner"),

WITNESSETH:

WHEREAS, Owner is the fee simple owner of the real property legally
described on Exhibit "B" attached hereto and by this reference made a part
hereof (the "Premises"); and

WHEREAS, Beneficiary is the owner and holder of a Promissory Note made
by the Owner and dated September 30, 1986 (the "Note") in the original
principal sum of THREE MILLION THREE HUNDRED FIFTY THOUSAND and No/100
(3,350,000.00) DOLLARS, which Note is secured by a Deed of Trust of even date
therewith (the "Deed of Trust") executed by Owners and recorded in the Office
of the Recorder of Kern County, California on September 30, 1986 in Book
5921, Page 2252 as Document No. 0441578 Pursuant to a Partial Reconveyance
dated September 1, 1992 and recorded September 28, 1992, the real property
legally described on Exhibit "A" attached hereto was released from the lien
of the Deed of Trust. As of the date of this Agreement, the lien of the Deed
of Trust covers and encumbers the Premises described on Exhibit "B." Exhibits
"A" and "B" attached hereto are incorporated into this Agreement by this
reference; and

WHEREAS, the terms of the Note and Deed of Trust have previously been
changed, altered, modified and extended pursuant to a Modification and
Extension Agreement entered into by and between the parties on April 30, 1992
and filed for record in the office of the Recorder of Kern County, California
on May 22, 1992 in Book 5577 at Page 1411 as Document No. 784220 (the "Prior
Modification"); and

WHEREAS, the Owner has requested that the Beneficiary agree to further
change, alter, modify and extend the terms of the Note and Deed of Trust and
the Beneficiary is willing to accommodate the request of Owner under the
terms, provisions and conditions set forth below; and

WHEREAS, Owner represents to Beneficiary that there is no second Deed of
Trust or other subsequent lien now outstanding against the Trust Premises
and that the lien of the Deed of Trust is a valid, first and subsisting lien
on said Trust Premises and Owner

<PAGE>

acknowledges that the Beneficiary is relying upon these representations of
Owner as an inducement to enter into this First Supplemental Modification and
Extension Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and of other good and valuable consideration, the
receipt and sufficiency of which is expressly acknowledged by each of the
parties and upon the express conditions that the lien of the Deed of Trust
held by Beneficiary is a valid, first and subsisting lien on said Trust
Premises and that the execution of this Agreement will not impair the lien of
the Deed of Trust and that, as represented to the Beneficiary by Owner, there
is no existing second mortgage or other lien subsequent to the lien of the
Deed of Trust held by Beneficiary nor any outstanding contract to purchase,
(for breach of which conditions, or either of them, this Agreement shall, at
Beneficiary's sole option, not take effect and shall be voidable and/or may
be declared void and of no force and effect), IT IS HEREBY AGREED AS FOLLOWS:

1. The foregoing Recitals are incorporated into and made a part of
this Agreement by this reference.

2. The terms, provisions and conditions of this Agreement shall
supersede and take precedence over the terms, provisions and conditions of
the Prior Modification dated April 30, 1992.

3. Upon the Effective Date of this Agreement (defined below), the
maturity date of the Note heretofore extended to September 30, 1997 by the
Prior Modification is hereby further extended from September 30, 1997 to
January 1, 2003.

4. Upon the Effective Date, the interest rate set forth in the Note
shall be increased from Eight (8%) per annum to Eleven and Six/Tenths (11.6%)
per annum.

5. Upon the Effective Date, the annual principal payment of Two
Hundred Thousand and No/100 ($200,000.00) Dollars due from Owner to
Beneficiary on December 31, 1994, December 31, 1995 and December 31, 1996
pursuant to the terms of the Note and Prior Modification shall be postponed
and deferred to the maturity date of the Note, as extended by this Agreement,
to January 1, 2003. Principal payments shall resume and become due and
payable commencing on December 31, 1997 and continue annually thereafter
until the maturity date. Interest payments required by the Note, as modified
by this Agreement, are not postponed or deferred.

6. Upon the Effective Date and upon receipt from Golden State Vintners
("GSV") of an executed Acknowledgement of Purchaser in the form provided by
Exhibit "C" attached hereto and incorporated herein by this reference,
Beneficiary shall consent to transfer of title to the Premises to GSV,
without release of liability of Owner on the Note, provided, however, that a
title company acceptable to Beneficiary issues an endorsement or title
insurance policy, at

<PAGE>

Owner's cost and expense, fully insuring Beneficiary as to the continuing
enforceability and first lien priority of the Deed of Trust following
recording of this Agreement and transfer of title to the Premises to GEV.

7. Upon the Effective Date, the provision of the Note which provides:

"Privilege is reserved to make additional payments on the principal of
this indebtedness in sums of $100 or multiples thereof on any date when
interest becomes due and payable."

is deleted in its entirety and the terms, provisions and conditions for
prepayments under the Note as contained on Exhibit "D" attached hereto and
incorporated herein by this reference shall be substituted therefor.

8. In the event that Owner has completed the grafting of the vineyard
located on the Premises to the complete satisfaction of Beneficiary to be
determined by Beneficiary within its sole and absolute discretion, then upon
written request of Owner, Beneficiary agrees that the interest payment of
$283,156.00 due December 31, 1995 may not be paid in cash but, instead, shall
be added to the principal balance of the Note thereby creating a new loan
balance of $2,724,156.00 as of December 31, 1995. Notwithstanding the
foregoing, Owner may elect to pay Beneficiary the interest due as of December
31, 1995 whereupon the principal balance of the Note will not be increased.

9. If any term, covenant, restriction or provision of this Agreement
is determined to be void, invalid or unenforceable, the remainder of the
terms, covenants, restrictions or provisions of this Agreement shall remain
in full force and effect, and the provisions of the Note and/or Deed of Trust
amended or modified by such void, invalid or unenforceable part hereof shall
be reaffirmed and enforceable to the same extent as if this Agreement had not
been executed.

10. The parties mutually covenant and agree that, except as expressly
modified herein, the Note and Deed of Trust shall remain in full force and
effect, and all of the remaining terms and provisions of the Note and Deed of
Trust are hereby ratified and confirmed.

11. Notwithstanding the date upon which this Agreement is signed by
each of the parties hereto, the terms, provisions and conditions hereof shall
become binding and effective as of December 31, 1994 (the "Effective Date").

12. The parties mutually covenant and agree, except as expressly
modified by this Agreement, that:

Grape Group Supp.
Mod. and Ext. Agree.
04/04/95 3

<PAGE>

(A) Owner hereby covenants, promises and agrees, restates and
reaffirms Owner's obligation (i) to pay the Note at the times,
in the manner and in all respects as therein provided; (ii) to
perform each and all of the covenants, agreements and
obligations in the Deed of Trust to be performed by Trustor
therein, at the time, in the manner and in all respects as
therein provided; and (iii) to be bound by each and all of the
terms and provisions of the Note and Deed of Trust made,
executed and delivered by Owner, recognizing, however, the
payment modifications described in this Agreement.

(B) All of the Premises shall remain, in all respects, subject to
the lien, charge or encumbrance of the Deed of Trust, or
conveyance of title (if any) affected thereby, and nothing
herein contained, and nothing done pursuant hereto, shall
affect or be construed to affect the lien, charge or
encumbrance of, or warranty of title in, or conveyance
effected by the Deed of Trust, or the priority thereof over
other liens, charges, encumbrances or conveyances, or, except
as expressly provided herein, to release or affect the
liability of any party or parties whomsoever who may now or
hereafter be liable under or on account of the Note and/or
Deed of Trust; nor shall anything herein contained or done in
pursuance hereof affect or be construed to affect any other
security or instrument, if any, held by Beneficiary as
security for or evidence of the aforesaid indebtedness.

Grape Group Supp.
Mod. and Ext. Agree.
04/04/95 4

<PAGE>

IN WITNESS WHEREOF, this instrument has been executed by the parties
hereto in manner and form sufficient to bind them, as of the day and year
first above written.

BENEFICIARY:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
A New Jersey Corporation,

By: /s/ William K. Beyer Attest:
------------------------------ -----------------------------
Vice President Secretary
-----
WILLIAM K. BEYER

OWNER:
THE GRAPE GROUP, A California Corporation,

By: /s/ JEFFREY B. O'NEILL Attest: /s/ JEFFREY B. O'NEILL
------------------------------ -----------------------------
Vice President Secretary
-----
JEFFREY B. O'NEILL JEFFREY B. O'NEILL

STATE OF ILLINOIS )
) ss:
COUNTY OF DUPAGE )

I, ____________________________, a Notary Public in and for the State
aforesaid, do hereby certify that ______________________________, personally
known to me to be a Vice President of the PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation and personally known to me to be the same
person whose name is subscribed to the foregoing instrument, appeared before
me this day in person and acknowledged that he signed and delivered the said
instrument as Vice President of said corporation, and caused the corporate
seal of said corporation to be affixed thereto, pursuant to authority given
by the Board of Directors of said corporation, as his free and voluntary act
and as the free and voluntary act and deed of said corporation for the uses
and purposes therein set forth.

Given under my hand and official seal this ____ day of _____________,
19___.

- ---------------------------
Notary Public

My Commission Expires:______________________

<PAGE>

PRUDENTIAL LOAN NO. 7-500-411

CONSENT

This Consent is attached to and made a part of a First Supplemental
Modification and Extension Agreement (the "Agreement") dated May 16, 1995
between THE GRAPE GROUP, a California corporation and THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA as Beneficiary.

The Undersigned, as owner and holder of the following junior lien(s):

A Deed of Trust securing additional indebtedness against the
property not to exceed $452,791.17

covering real estate described on Exhibit "B" of the Agreement, does hereby
consent to the execution and recording of the Agreement, and the terms as
outlined therein, and the Undersigned agrees that said lien shall remain
subordinate to the Deed of Trust of The Prudential Insurance Company of
America and the Prudential Deed of Trust, as modified and extended, is and
shall continue to be the prior first lien on the property described therein.
The undersigned also consent to the possible increase in the indebtedness
described in the Agreement.

Dated: 5-12-95
------------

COTTONWOOD VINEYARD

By: /s/ William S. Hagopian
------------------------
WILLIAM S. HAGOPIAN
GENERAL PARTNER

<PAGE>

Loan No 7 500-411

SECOND SUPPLEMENTAL MODIFICATION AGREEMENT

THIS AGREEMENT, made this 7th day of August 1997 by and between
----- --------
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation
(hereinafter called "Beneficiary"); and THE GRAPE GROUP, (hereinafter
called "Owner").

WITNESSETH:

WHEREAS, Owner is the fee simple owner of the real property legally
described on Exhibits "A" attached hereto and by this reference made a part
hereof the (the "Trust Premises"); and

WHEREAS, Beneficiary is the owner and holder of a Promissory Note dated
September 30, 1986 (the "Note") in the original principal sum of THREE
MILLION THREE HUNDRED FIFTY THOUSAND and NO/100 DOLLARS ($3,350,000.00),
which Note is secured by a Deed of Trust of even date therewith (the "Deed
of Trust") recorded in the Office of the Recorder of Kern County,
California on September 30, 1986 in Book 5921, Page 2252 as document No.
0441578 and pursuant to a Partial Reconveyance dated September 1, 1992 and
recorded September 28, 1992, the real property legally described on Exhibit
"A" attached hereto was released from the lien of the Deed of Trust. As of
the date of this Agreement, the lien of the Deed of Trust covers and
encumbers the Premises described on Exhibit "B"; and

WHEREAS, the terms of the Note and Deed of Trust have previously been
changed, altered, modified and extended pursuant to a Modification and
Extension Agreement entered into by and between the parties on April 30, 1992
and filed for record in the office of the Recorder of Kern County, California
on May 22, 1992 in Book 6677 at Page 1411 as Document No. 784220 and
subsequently by a First Supplemental Modification and Extension Agreement
dated May 5, 1995 and recorded in Kern County, California on May 16, 1995 as
Document No. 0195058173; and

WHEREAS, Owner has requested that Beneficiary agree to a further change,
alteration and modification of the terms of the Note and Deed of Trust and the
Beneficiary is willing to accommodate the request of Owner under the terms,
provisions and conditions set forth below; and

WHEREAS, Owner represents to Beneficiary that there is no second Deed of
Trust or other subsequent lien now outstanding against the Trust Premises and
that the lien of the Deed of Trust is a valid, first and subsisting lien and
said Trust Premises.

NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, and upon the express conditions that the lien of
the Deed of Trust held by Beneficiary is a valid, first and subsisting lien
on said Trust Premises and that the execution of this Agreement will not
impair the lien of the Deed of Trust and that, as represented to Beneficiary
by Owner, there is no existing second mortgage or other lien subsequent to
the lien of the Deed of Trust held by Beneficiary nor any outstanding
contract to purchase, (for breach of which conditions, or either or them,
this Agreement shall, at Beneficiary's sole option, not take affect and shall
be voidable and/or may be declared void and of no force and affect). IT IS
HEREBY AGREED AS FOLLOWS:

1. Effective as of the date of this Agreement, the annual payment date
under the Note shall be changed from December 31st of each year to
October 31st of each year. The first payment due from the Owner to
Beneficiary under the Note, as revised herein, shall be due and
payable on October 31, 1997.

2. If any term, covenant, restriction or provision of this Agreement
is determined to be void, invalid or unenforceable, the remainder
of the terms, covenants, restrictions or provisions of this
Agreement shall remain in full force and effect, and the provisions
of the Note and Deed of Trust amended or modified by such void,
invalid or unenforceable part hereof shall

<PAGE>

be reaffirmed and enforceable to the same extent as if this
Agreement had not been executed.

3. The parties mutually covenant and agree that, except as expressly
modified herein, the Note and Deed of Trust shall remain in full
force and effect, and all of the remaining terms and provisions of
the Note and Deed of Trust are hereby ratified and confirmed.

4. The parties mutually covenant and agree, except as expressly
modified by this Agreement, that:

(A) Owner hereby covenants, promises and agrees (i) to pay the
Note at the times in the manner and in all respects as therein
provided; (ii) to perform each and all of the covenants,
agreements and obligations in the Deed of Trust to be
performed by Trustor therein, at the time, in the manner and
in all respects as therein provided; and (iii) to be bound by
each and all of the terms and provisions of the Note and Deed
of Trust as though the Note and Deed of Trust had originally
been made, executed and delivered by Owner, recognizing,
however, the payment modification described in this Agreement.

(B) All of the Trust Premises shall remain in all respects subject
to the lien, charge or encumbrance of the Deed of Trust, or
conveyance of title (if any) effected thereby, and nothing
herein contained, and nothing done pursuant hereto, shall
affect or be construed to affect the lien, charge or
encumbrance of, or warranty of title in, or conveyance
effected by the Deed of Trust, or the priority thereof over
other liens, charges, encumbrances or conveyances, or, except
as expressly provided herein, to release or affect the
liability of any party or parties whomsoever who may now or
hereafter be liable under or on account of the Note and/or
Deed of Trust; nor shall anything herein contained or done in
pursuance hereof affect to be construed to affect any other
security or instrument, if any, held by Beneficiary as
security for or evidence of the aforesaid indebtedness.

IN WITNESS WHEREOF, this instrument has been executed by the parties
hereto in manner and form sufficient to bind them, as of the day and year
first above written.

BENEFICIARY:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
A New Jersey Corporation,

By: [ILLEGIBLE]
-------------------------------
Vice President

OWNER:

The Grape Group, A California Corporation,

By:
-------------------------------
Vice President

<PAGE>

EXHIBIT 10.31

REAL ESTATE LOAN NOTE
SUMITOMO BANK OF CALIFORNIA

LOAN AMOUNT LOAN NO. 003976811-20

**$2,120,000.00** JANUARY 17, 1990

BORROWER'S PROMISE TO PAY:

FOR VALUE RECEIVED, THE undersigned, jointly (if more than one) and
severally, promise to pay in lawful money of the United States of America, to
The Sumitomo Bank of California ("Sumitomo") at its Sacramento Office in
Sacramento, California, or to its order, the principal sum of Two Million
One Hundred Twenty Thousand and No/100 Dollars (**$2,120,000.00**), together
with interest thereon from the date funds are actually disbursed until this
Note is paid in full in accordance with the terms and conditions below:

INTEREST RATE:

Interest on the principal sum outstanding shall be payable at a rate per
annum:

1. January 18, 1990 to January 15, 1997, (The "First Interest Period") at
the Fixed Rate of Ten and Three Quarters percent (10.750%) per annum;

2. January 15, 1997 to January 15, 2000, (The "Second Interest Period") at a
Fixed Rate which is Two and One-Quarter Percent (2.250%) per annum above the
LIBOR Rate in effect at the commencement of the Second Interest Period:

For the purpose of this Note, LIBOR Rate means rate of interest at which
deposits in Eurodollars for such period are offered to first-class banks in
the London Interbank Market (as quoted for the mid-morning average LIBOR Rate
published by Reuters Monitoring Systems), two (2) Business Days prior to the
commencement of the relevant Interest Period. The last day of each LIBOR
interest period shall be determined in accordance with the practices of
London Interbank Market as from time to time in effect. In the event the
Reuters quote is not available, the British Bankers Association's Interest
Settlement Rate shall be used.

It is understood that the interest due upon this Note shall be calculated on
the basis of a 360-day period consisting of twelve (12) 30-day months and
that the term "per annum" means said 360-day period.

REPAYMENT SCHEDULE:

Promise and agree to pay Bank or order as follows:

From January 18, 1990 principal and interest shall be paid in equal monthly
instalments of Nineteen Thousand Seven Hundred Ninety and 00/100 Dollars,
(**$19,790.00**) commencing February 15, 1990 and continuing on the 15th day
of each successive month until January 15, 1997 ("the Anniversary Date").

On the Anniversary Date, until maturity, monthly instalments of principal and
interest shall be determined according to the following factors in effect at
such time.

a. Principal Amount: Then outstanding principal balance.

b. Amortization Period: 360 months less the number of months expired
from the loan commencement date.

c. Amortization Rate: Two and one quarter percentage (2.25%) points
above The LIBOR Rate in effect on the date of
such adjustment.

At maturity on January 15, 2000, or when due because of the exercise of an
option by Sumitomo, the entire balance of principal and interest unpaid shall
be due and payable.

<PAGE>

APPLICATION OF PAYMENT:

Any instalment when paid, shall be credited first to any late charge, then to
interest and the remainder to principal.

PREPAYMENT PENALTY:

The undersigned may prepay all or part of the original amount of this Note
during the first eighty two months of the First Interest Period only upon
payment of a prepayment fee of Five percent (5.000%) of each prepayment.
Prepayments may be made during the last two months of the First Interest
Period without payment of a additional fee.

The undersigned may prepay all or part of the original amount of this Note
during the Second Interest Period only upon payment of a prepayment penalty
of Three percent (3.000%) of each prepayment.

LATE CHARGE PROVISION:

If any instalment of principal or interest is not paid within fifteen days
from the date it becomes due, then the undersigned shall pay a late charge
for each unpaid instalment equal to Six percent (6.000%) of the instalment
amount.

DEFAULT INTEREST:

If this Note is not paid in full when due at maturity, or when due because of
an option by Sumitomo notwithstanding any provision of this Note, the
undersigned agrees to pay interest on the outstanding principal and interest
at an interest rate Two percentage points (2.000%) above the interest rate
described above.

DEFAULT PROVISIONS:

Sumitomo may declare all outstanding sums of principal and interest under this
Note immediately due and payable without notice of default, presentment or
demand for payment, protest, or other notices of nonpayment or dishonor if
the undersigned or any Guarantor or Endorser hereof: (a) Fails to make any
payment hereunder when due; (b) Becomes insolvent, fails in business, or
makes a general assignment for the benefit of creditors, or files under any
bankruptcy law, or any law for the benefit of creditors; (c) Permits or
suffers the filing of an involuntary petition in Bankruptcy which remains
undismissed for a period of 60 days; (d) Permits or suffers the appointment
of a receiver of trustee for a substantial portion of its assets; (e) Permits
or suffers any levy of attachment, execution, assessment for taxes or similar
process; or, (f) Breaches or defaults under any other obligation to Sumitomo
or under any of the agreements contained in the Deed of Trust securing this
Note.

In addition, the undersigned agrees to pay all cost of collection (including
reasonable attorney's fees) incurred with or without suit by Sumitomo.

This Note is secured by a Deed of Trust, dated January 11, 1990 as Trustee:
Founders Title Company.
The Deed of Trust contains an acceleration clause reading substantially as
follows:

Upon default by Trustor in payment of any indebtedness secured hereby or in
performance of any agreement hereunder, or in the event Trustor or any
successor in interest to Trustor in the property sells, conveys, alienates,
assigns or transfers said property, or any part thereof, or any interest
therein, or becomes divested of Trustor's title or any interest therein in
any manner or way, whether voluntary or involuntary. Beneficiary shall have
the right, at its option, to declare said Note or Notes or any other
indebtedness or obligations secured hereby, irrespective of the maturity
dates specified in any Note or written agreement evidencing the same,
immediately due and payable without notice or demand, and no waiver of this
right shall be effective unless in writing and signed by Beneficiary.

BY: /s/ William D. Reid BY: /s/ Johnye B. Reid
- ---------------------------- --------------------------
WILLIAM D. REID JOHNYE B. REID

<PAGE>

EXHIBIT 10.32

PROMISSORY NOTE

$104,887.00 June 15, 1995

FOR VALUE RECEIVED, the undersigned, separately and collectively,
hereafter referred to as "Borrower," promises to pay in lawful money of the
United States of America, to The Sumitomo Bank of California ("Lender") at
its Sacramento Main Office or its order, the principal sum of One Hundred
Four Thousand Eight Hundred Eighty-Seven Dollars ($104,887.00), or so much
thereof as is disbursed, plus interest thereon from the date funds are
actually disbursed until this Note is paid in full in accordance with the
terms and conditions below.

DEFINITIONS:

As used herein, capitalized terms shall have the following definitions:

"Agreement" means the Modification Agreement between Lender and
Borrower of even date herewith.

"Business Day" means a day on which Lender's Sacramento Main Office is
opened for business, excluding Saturdays.

"Borrowing Date" means the initial date funds are actually disbursed
under this Note.

"Maturity" means January 15, 2000.

"Prime Rate" means the per annum rate publicly announced by Lender from
time to time at its head office in San Francisco as its Prime Rate. The Prime
Rate is determined by Lender from time to time as a means of pricing credit
extension to some customers and it is neither indirectly tied to any external
rate of interest or index nor necessarily the lowest rate of interest charged
by Lender at any given time for any particular class of customers or credit
extensions.

All other capitalized terms used herein shall have the meanings set
forth in the Agreement.

1. TERM. This Note shall be for a term through Maturity.

2. INTEREST. Borrower agrees to pay interest on the outstanding principal
amount of the Loan as follows:

(a) From the Borrowing Date until Maturity, at a floating rate equal
to the Prime Rate plus one and one-half percent (1.5%);

<PAGE>

(b) Interest shall be calculated on the basis of a 360-day period
consisting of twelve 30-day months, and the term "per annum" means
such 360-day period;

(c) The interest rate shall be adjusted each month according to any
change in the Prime Rate. Any change in the interest rate due to a
change in the Prime Rate shall become effective without notice on
the 15th day of each month based upon the Prime Rate in effect on
that day.

3. PAYMENTS.

(a) From the Borrowing Date, principal and interest shall be paid in
equal monthly installments of Two Thousand Four Hundred
Eighty-Eight Dollars and Fifty-Nine Cents ($2,488.59) commencing
on July 15, 1995 and continuing on the 15th day of each successive
month through December 15, 1999.

(b) At Maturity on January 15, 2000, or when due because of the
exercise of an option by Lender, the entire balance of principal
and interest unpaid shall be due and payable.

(c) Any installment, when paid, may be credited by Lender first to
Lender's expenses assessed to Borrower under the Agreement, then
to any late charge, then to interest and the remainder to
principal or in any other sequence as Lender shall elect. Any
failure of Lender to apply an installment to late charges,
Lender's expenses, principal or interest shall not constitute a
waiver of Lender's right to collect the same. If because of a
change in the Prime Rate the payment of any installment of
principal and interest is not sufficient for the payment of
Lender's expenses, late charges, and interest then due, the
Borrower shall pay to Lender on the payment date indicated above,
any additional amount required for the full payment of Lender's
expenses, late charge and interest.

4. LATE CHARGE. If any payment of interest or principal is not paid within
fifteen (15) days of when due, the Borrower shall pay a late charge for each
unpaid amount equal to six percent (6%) of such unpaid amount.

5. DEFAULT INTEREST. If this Note is not paid in full when due at
maturity, or when due because of an option by Lender notwithstanding any
provision of this Note, the undersigned agrees to pay interest on the
outstanding principal and interest at an interest rate two percentage points
(2.0%) above the interest rate described above.

6. PREPAYMENT. Borrower may prepay all or any part of the outstanding
principal balance of the Loan without penalty. Principal paid cannot be
reborrowed.

7. DEFAULT. Lender may, at its option, declare all outstanding sums of
principal and interest under this Note immediately due and payable without
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor, if the undersigned or any

<PAGE>

Guarantor or Endorser hereof:

(a) Fails to make any payment hereunder when due;

(b) Causes an Event of Default under the Agreement;

(c) Becomes insolvent, fails in business, or makes a general
assignment for the benefit of creditors, or files under any
bankruptcy law, or any law for the benefit of creditors;

(d) Permits or suffers the filing of an involuntary petition in
Bankruptcy which remains undismissed for a period of 60 days;

(e) Permits or suffers the appointment of a receiver or trustee for a
substantial portion of its assets;

(f) Permits or suffers any levy of attachment, execution, assessment
for taxes or similar process; or

(g) Breaches or defaults under any other obligation to Lender or under
any of the agreements contained in the Deed of Trust securing this
Note.

8. COSTS OF COLLECTION. Borrower agrees to pay all costs of collection,
including reasonable attorneys' fees and expert witness fees, incurred with
or without suit by Lender.

9. CONFLICTING TERMS. This Note is governed by the terms of the Agreement.
If there is any conflict between the terms of this Note and the Agreement,
the terms of this Note shall prevail.

10. NO WAIVER. No failure or delay on Lender's part in exercising any right
hereunder shall operate as a waiver thereof or of any other right, nor shall
any single or partial exercise of any such right preclude any other or
further exercise thereof or of any other right. Each waiver or consent under
any provision hereof shall be effective only in the specific instances for
the purpose for which given.

11. NOTE SECURED. This Note is secured by a Deed of Trust of even date
herewith executed by Borrower, as Trustor, to Lender, as Beneficiary.

12. DUE ON SALE. The Deed of Trust contains an acceleration clause reading
substantially as follows:

Upon default by trustor in payment of any indebtedness secured hereby
or in performance of any agreement hereunder, or in the event Trustor or any
successor in interest to Trustor in the property sells, conveys, alienates,
assigns or transfers said property, or any part thereof, or any interest
therein, or becomes divested of Trustor's title or any interest therein in
any manner or way, whether voluntary or

<PAGE>

involuntary, Beneficiary shall have the right, at its option, to declare
said Note or Notes or any other indebtedness or obligations secured hereby,
irrespective of the maturity dates specified in any Note or written
agreement evidencing the same, immediately due and payable without notice or
demand, and no waiver of this right shall be effective unless in writing and
signed by the Beneficiary.

BORROWER:

/s/ William D. Reid
----------------------------
William D. Reid

/s/ Johnye B. Reid
----------------------------
Johnye B. Reid

<PAGE>

EXHIBIT 21.1

Golden State Vintners, a California corporation.

<PAGE>
EXHIBIT 23.1

The accompanying consolidated financial statements have been adjusted to give
retroactive effect to the split of the Company's common stock which will result
in each share of common stock being split into 2.9 shares of common stock as
described in Note 15 to the consolidated financial statements. The May 1998
stock split is expected to be completed prior to the commencement of the public
offering. The following consent and report on schedule is in the form that will
be furnished by Deloitte & Touche LLP upon the effectiveness of the May 1998
stock split and the issuance of our report on the Company's consolidated
financial statements included in this Registration Statement, assuming that from
September 15, 1997 to the effective date of such stock split, no other events
shall have occurred that would materially affect the accompanying consolidated
financial statements or notes thereto.

"INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE

To the Stockholders and Board of Directors
of Golden State Vintners, Inc.

We consent to the use in this Registration Statement relating to 4,300,000
shares of Class B Common Stock of Golden State Vintners, Inc. on Form S-1 of our
report dated September 15, 1997 (November 21, 1997 as to Note 6 and May , 1998
as to Note 15), appearing in the Prospectus, which is a part of this
Registration Statement, and to the references to us under the headings "Selected
Consolidated Financial Data" and "Experts" in such Prospectus.

Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of Golden State Vintners, Inc.
(the "Company") and Golden State Vintners ("Predecessor"), listed in Item 16.
This financial statement schedule is the responsibility of the Company's and the
Predecessor's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

Fresno, California
June , 1998"

DELOITTE & TOUCHE LLP
Fresno, California
April 29, 1998

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
GOLDEN STATE VINTNERS, INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEAR ENDED JUNE 30, 1997 AND THE SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1997
<PERIOD-START> JUL-01-1997 JUL-01-1996
<PERIOD-END> DEC-31-1997 JUN-30-1997
<CASH> 850,865 1,218,525
<SECURITIES> 0 0
<RECEIVABLES> 29,079,395 5,740,252
<ALLOWANCES> 151,000 100,000
<INVENTORY> 31,832,146 23,424,008
<CURRENT-ASSETS> 65,744,764 31,371,935
<PP&E> 81,596,503 77,641,795
<DEPRECIATION> 9,543,661 7,448,581
<TOTAL-ASSETS> 138,272,732 102,111,335
<CURRENT-LIABILITIES> 53,377,004 21,985,874
<BONDS> 0 0
8,879,928 8,813,415
0 0
<COMMON> 23,661 23,661
<OTHER-SE> 16,811,749 12,549,945
<TOTAL-LIABILITY-AND-EQUITY> 138,272,732 102,111,335
<SALES> 89,530,481 95,784,825
<TOTAL-REVENUES> 89,530,481 95,784,825
<CGS> 66,033,690 71,661,816
<TOTAL-COSTS> 77,583,470 79,069,995
<OTHER-EXPENSES> 480,875 676,701
<LOSS-PROVISION> 60,000 43,427
<INTEREST-EXPENSE> 3,445,711 5,879,945
<INCOME-PRETAX> 8,020,425 10,158,184
<INCOME-TAX> 3,123,000 3,988,000
<INCOME-CONTINUING> 4,897,425 6,170,184
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,897,425 6,170,184
<EPS-PRIMARY> .62 .71
<EPS-DILUTED> .59 .71

</TABLE>