Senior Unsecured Notes (series A,b,c)

FINAL


________________________________________________________________________________


THE CHALONE WINE GROUP, LTD.


$ 5,000,000 8.75% Senior Guaranteed Notes, Series A, Due September 15, 2010 $ 10,000,000 8.78% Senior Guaranteed Notes, Series B, Due September 15, 2010 $ 15,000,000 8.90% Senior Guaranteed Notes, Series C, Due September 15, 2010


_______________________


NOTE PURCHASE AGREEMENT
_______________________


Dated as of September 15, 2000


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TABLE OF CONTENTS


Page


1. Authorization Of Notes.............................................. 1 2. Sale And Purchase Of Notes.......................................... 2 3. Closing ............................................................ 2 4. Conditions To Closing............................................... 2
4.1 Representations and Warranties................................ 2
4.2 Performance; No Default....................................... 3
4.3 Compliance Certificates....................................... 3
4.4 Opinions of Counsel........................................... 3
4.5 Original Subsidiary Guarantee Agreement....................... 4
4.6 Purchase Permitted By Applicable Law, etc..................... 4
4.7 Sale of Other Notes........................................... 4
4.8 Payment of Special Counsel Fees............................... 4
4.9 Private Placement Number...................................... 4
4.10 Changes in Corporate Structure................................ 4
4.11 Consent of Other Lenders...................................... 5
4.12 Proceedings and Documents..................................... 5
4.13 Farm Credit Act Matters....................................... 5 5. Representations And Warranties Of The Company....................... 5
5.1 Organization; Power and Authority............................. 5
5.2 Authorization, etc............................................ 5
5.3 Disclosure.................................................... 6
5.4 Organization and Ownership of Shares of Subsidiaries;
Affiliates................................................. 6
5.5 Financial Statements.......................................... 7
5.6 Compliance with Laws and Instruments.......................... 7
5.7 Governmental Authorizations, etc.............................. 8
5.8 Litigation; Observance of Agreements, Statutes and Orders..... 8
5.9 Taxes......................................................... 8
5.10 Title to Property; Leases..................................... 8
5.11 Licenses, Permits, etc........................................ 9


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TABLE OF CONTENTS
(continued)


Page


5.12 Compliance with ERISA......................................... 9
5.13 Private Offering by the Company............................... 10
5.14 Use of Proceeds; Margin Regulations........................... 10
5.15 Existing Debt; Future Liens................................... 10
5.16 Foreign Assets Control Regulations, etc....................... 11
5.17 Status under Certain Statutes................................. 11
5.18 Environmental Matters......................................... 11
5.19 Parity of Obligations......................................... 12
5.20 Solvency...................................................... 12
5.21 Consolidated and Integrated Business of the Company and its
Restricted Subsidiaries.................................... 13
5.22 No Burdensome Restrictions.................................... 13 6. Representations Of The Purchasers................................... 13
6.1 Purchase for Investment....................................... 13
6.2 Source of Funds............................................... 13 7. Information As To Company........................................... 15
7.1 Financial and Business Information............................ 15
7.2 Officer's Certificate......................................... 18
7.3 Inspection.................................................... 18 8. Prepayment Of The Notes............................................. 18
8.1 Required Prepayments.......................................... 19
8.2 Optional Prepayments with Make-Whole Amount................... 20
8.3 Allocation of Partial Prepayments............................. 20
8.4 Maturity; Surrender, etc...................................... 20
8.5 Purchase of Notes............................................. 21
8.6 Make-Whole Amount............................................. 21 9. Affirmative Covenants............................................... 22
9.1 Compliance with Law........................................... 22
9.2 Insurance..................................................... 23
9.3 Maintenance of Properties..................................... 23


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TABLE OF CONTENTS
(continued)


Page


9.4 Payment of Taxes and Claims................................... 23
9.5 Corporate Existence, etc...................................... 23
9.6 Notes and Guarantee to Rank Pari Passu........................ 24 10. Negative Covenants.................................................. 24
10.1 Transactions with Affiliates.................................. 24
10.2 Merger, Consolidation, etc.................................... 24
10.3 Liens......................................................... 25
10.4 Consolidated Net Worth........................................ 27
10.6 Limitation on Funded Debt..................................... 27
10.7 Limitation on Restricted Payments............................. 28
10.8 Limitation on Investment...................................... 29
10.9 Sale of Assets................................................ 30
10.10 Limitations on Sale-and-Leaseback Transactions................ 31
10.11 Subsidiary Guarantors......................................... 32
10.12 Line of Business.............................................. 33 11. Events Of Default................................................... 33 12. Remedies On Default, Etc............................................ 35
12.1 Acceleration.................................................. 36
12.2 Other Remedies................................................ 36
12.3 Rescission.................................................... 36
12.4 No Waivers or Election of Remedies, Expenses, etc............. 37 13. Registration; Exchange; Substitution Of Notes....................... 37
13.1 Registration of Notes......................................... 37
13.2 Transfer and Exchange of Notes................................ 37
13.3 Replacement of Notes.......................................... 38 14. Payment Of Notes.................................................... 38
14.1 Place of Payment.............................................. 38
14.2 Home Office Payment........................................... 38 15. Expenses, Etc....................................................... 39


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TABLE OF CONTENTS
(continued)


Page


15.1 Transaction Expenses.......................................... 39
15.2 Survival...................................................... 39 16. Survival Of Representations And Warranties; Entire Agreement........ 39 17. Amendment And Waiver................................................ 40
17.1 Requirements.................................................. 40
17.2 Solicitation of Holders of Notes.............................. 40
17.3 Binding Effect, etc........................................... 40
17.4 Notes Held by Company, etc.................................... 41 18. Notices............................................................. 41 19. Reproduction Of Documents........................................... 41 20. Confidential Information............................................ 42 21. Substitution Of Purchaser; Participation............................ 43 22. Miscellaneous....................................................... 43
22.1 Successors and Assigns........................................ 43
22.2 Payments Due on Non-Business Days............................. 43
22.3 Severability.................................................. 44
22.4 Construction.................................................. 44
22.5 Counterparts.................................................. 44
22.6 Governing Law; Jurisdiction and Service of Process............ 45
22.7 Agent for Service of Process.................................. 45


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TABLE OF CONTENTS
(continued)


SCHEDULES


Schedule A Information Relating to Purchasers Schedule B Defined Terms Schedule 4.10 Corporate Changes Schedule 5.4 Subsidiaries Schedule 5.5 Financial Statements Schedule 5.8 Litigation Schedule 5.11 Licenses Schedule 5.14 Use of Proceeds Schedule 5.15 Existing Debt Schedule 5.19 Senior Debt


EXHIBITS


Exhibit 1-A Form of Series A Note Exhibit 1-B Form of Series B Note Exhibit 1-C Form of Series C Note Exhibit 4.4(a) Form of Opinion of Counsel for the Company Exhibit 4.4(b) Form of Opinion of Special Counsel for the Purchasers Exhibit 4.5 Form of Subsidiary Guarantee Agreement Exhibit 10.11(a)Representations and Warranties of Original Subsidiary
Guarantors


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THE CHALONE WINE GROUP, LTD.
621 Airpark Road
Napa, California 94558


$ 5,000,000 8.75% Senior Guaranteed Notes, Series A, Due September 15, 2010 $ 10,000,000 8.78% Senior Guaranteed Notes, Series B, Due September 15, 2010 $ 15,000,000 8.90% Senior Guaranteed Notes, Series C, Due September 15, 2010


September 15, 2000


TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:


Ladies and Gentlemen;


THE CHALONE WINE GROUP, LTD., a California corporation (the "Company"), agrees with each of the purchasers named in Schedule A to this Agreement (the "PURCHASERS") as follows:


1. AUTHORIZATION OF NOTES


1.1 AUTHORIZATION OF NOTES.


The Company will authorize the issue and sale of (i) $5,000,000 8.75% Senior Guaranteed Notes, Series A, Due September 15, 2010 (the "Series A Notes"); (ii) $10,000,000 8.78% Senior Guaranteed Notes, Series B, Due September 15, 2010 (the "Series B Notes"); and (iii) $15,000,000 8.90% Senior Guaranteed Notes, Series C, Due September 15, 2010 (the "Series C Notes"), and together with the Series A Notes and the Series B Notes, the "Notes", such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement). The Series A Notes shall be substantially in the form set out in Exhibit 1-A, the Series B Notes shall be substantially in the form set out in Exhibit 1-B, and the Series C Notes shall be substantially in the form set out in Exhibit 1-C, with such changes therefrom, if any, as may be approved by you and the Company. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.


1.2 SALE OF NOTES.


The payment and performance obligations of the Company under and pursuant to this Agreement and the Notes are to be fully and unconditionally guaranteed by each of the Subsidiary Guarantors pursuant to a Subsidiary Guarantee Agreement (the "Guarantee").


2. SALE AND PURCHASE OF NOTES.


Subject to the terms and conditions of this Agreement, the Company will issue and sell to each Purchaser and each Purchaser will purchase from the Company, at the Closing provided for in Section 3, Notes of the Series and in the principal amount specified opposite each Purchaser's name in Schedule A at the purchase price of 100% of the principal amount thereof. The obligation of each Purchaser shall be several and not joint and no Purchaser shall have any obligation or any liability to any Person for the performance or non-performance by any other Purchaser hereunder.


3. CLOSING.


The sale and purchase of the Notes shall occur at the offices of McDermott, Will & Emery, 227 West Monroe Street, Chicago, Illinois, at 10:00 a.m., Central time, at a closing (the "CLOSING") on September 15, 2000 or on such other Business Day thereafter on or prior to September 21, 2000 as may be agreed upon by the Company and the Purchasers (the "Closing Date"). At the Closing the Company will deliver the Notes to be purchased by each Purchaser in the form of a single Note (or such greater number of Notes in denominations of at least $100,000 as each Purchaser may request) dated the Closing Date and registered in such Purchaser's name (or in the name of its nominee), against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 8026002533 at Bank of New York, New York, New York, ABA number 021-000018, Reference: Chalone Wine Group, Attention: Christine Dell'Aira. If at the Closing the Company shall fail to tender such Notes to be purchased by any Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to such Purchaser's satisfaction, such Purchaser shall, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Purchaser may have by reason of such failure or such non-fulfillment.


4. CONDITIONS TO CLOSING.


Each Purchaser's obligation to purchase and pay for the Notes to be sold to such Purchaser at the Closing is subject to the fulfillment to such Purchaser's satisfaction, prior to or at the Closing, of the following conditions:


4.1 REPRESENTATIONS AND WARRANTIES.


The representations and warranties of the Company in this Agreement, and the representations and warranties of the Original Subsidiary Guarantors contained in Exhibit 10.11 (a) to this Agreement, shall be correct when made and at the time of the Closing.


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4.2 PERFORMANCE; NO DEFAULT.


The Company and each of the Original Subsidiary Guarantors shall have performed and complied with all agreements and conditions contained in this Agreement and the Original Subsidiary Guarantee Agreements required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14) no Default or Event of Default shall have occurred and be continuing. Neither the Company nor any Restricted Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Section 10 hereof had such Section applied since such date.


4.3 COMPLIANCE CERTIFICATES.


(a) Officer's Certificate of the Company. The Company shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.10 have been fulfilled.
(b) Secretary's Certificate of the Company. The Company shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and this Agreement.


(c) Officer's Certificate of the Guarantors. Each Original Subsidiary Guarantor shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.10 have been fulfilled in respect of such Original Subsidiary Guarantor.


(d) Secretary's Certificate of the Guarantors. Each Original Subsidiary Guarantor shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the subject Original Subsidiary Guarantee Agreement.


4.4 OPINIONS OF COUNSEL.


You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a) from Farella Braun & Martel LLP, counsel for the Company and the Original Subsidiary Guarantors, covering the matters set forth in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to you) and (b) from McDermott, Will & Emery, your special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(b) and covering such other matters incident to such transactions as each Purchaser may reasonably request.


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4.5 ORIGINAL SUBSIDIARY GUARANTEE AGREEMENT.


You shall have received a counterpart original of a Subsidiary Guarantee Agreement, duly executed and delivered by each of the Original Subsidiary Guarantors, in substantially the form set forth in Exhibit 4.5 (the "Original Subsidiary Guarantee Agreement"), together with such other documents as to each Original Subsidiary Guarantor as are sufficient to comply with Section 10.11, and each Original Subsidiary Guarantee Agreement shall be in full force and effect.


4.6 PURCHASE PERMITTED BY APPLICABLE LAW, etc.


On the Closing Date each Purchaser's purchase of Notes shall (i) be permitted by the laws and regulations of each jurisdiction to which it is subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (ii) not violate any applicable law or regulation (including, without limitation, Regulation U, T or X of the Board of Governors of the Federal Reserve System) and (iii) not subject any Purchaser to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by any Purchaser, such Purchaser shall have received an Officer's Certificate certifying as to such matters of fact as such Purchaser may reasonably specify to enable such Purchaser to determine whether such purchase is so permitted.


4.7 SALE OF OTHER NOTES.


Contemporaneously with the Closing the Company shall sell to the Purchasers and the Purchasers shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A.


4.8 PAYMENT OF SPECIAL COUNSEL FEES.


Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the reasonable fees, charges and disbursements of the Purchasers' special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing.


4.9 PRIVATE PLACEMENT NUMBER.


A Private Placement number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each series of the Notes.


4.10 CHANGES IN CORPORATE STRUCTURE.


Except as specified in Schedule 4.10, neither the Company nor any Original Subsidiary Guarantor shall have changed its jurisdiction of incorporation or been a party to any merger or consolidation nor shall it have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5.


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4.11 CONSENT of OTHER LENDERS.


Any consents or approvals required to be obtained from any lender or holder of any outstanding debt of the Company or any Original Subsidiary Guarantor and any amendments of agreements pursuant to which any debt may have been incurred by the Company or any Original Subsidiary Guarantor, including, but not limited to, the Credit Agreement, which shall be necessary to permit the consummation of the transactions contemplated hereby shall have been obtained and all such consents, approvals or amendments shall be satisfactory in form and substance to each Purchaser and special counsel to the Purchasers.


4.12 PROCEEDINGS AND DOCUMENTS.


All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to each Purchaser and the Purchasers' special counsel, and each Purchaser and the Purchasers' special counsel shall have received all such counterpart originals or certified or other copies of such documents as each Purchaser or special counsel to the Purchasers' may reasonably request.


4.13 FARM CREDIT ACT MATTERS.


The Company shall have acquired stock in each Purchaser for an aggregate purchase price of $2,000. The Company shall have executed and delivered the Farm Credit Act Documents.


5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.


The Company represents and warrants to the Purchasers that:


5.1 ORGANIZATION; POWER AND AUTHORITY.


The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate or other legal entity power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Notes and to perform the provisions hereof and thereof.


5.2 AUTHORIZATION, ETC.


This Agreement has been duly authorized by all necessary corporate or other legal entity action on the part of the Company, and this Agreement constitutes, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a


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proceeding in equity or at law). Upon execution and delivery thereof, each Note will constitute a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or in law).


5.3 DISCLOSURE.


The Company, through its agent, Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A., "Rabobank Nederland," New York Branch (the "AGENT"), has delivered to each Purchaser a copy of a Confidential Private Placement Memorandum dated June 2000 (the "MEMORANDUM"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. This Agreement, the Memorandum, the documents, certificates or other communications made or delivered to each Purchaser by or on behalf of the Company and the Original Subsidiary Guarantors in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Since June 30, 2000, there has been no change in the financial condition, operations, business or properties of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other communications made or delivered to you by or on behalf of the Company or any Original Subsidiary Guarantor specifically for use in connection with the transactions contemplated hereby.


5.4 ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.


(a) Schedule 5.4 contains (except as noted therein) complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its Capital Stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) of the Company's Restricted Subsidiaries, (iii) of the Company's Affiliates, other than Subsidiaries, and (iv) of the Company's directors and senior officers.


(b) All of the o ...