Exhibit 10.69

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THE CHALONE WINE GROUP, LTD.

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SECOND AMENDMENT

Dated as of May 11,2004

To

AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
Dated as of April 19, 2002

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Re: $5,000,000 Adjustable Rate Senior Secured Guaranteed Notes, Series A,
Due September 15, 2010
$10,000,000 Adjustable Rate Senior Secured Guaranteed Notes, Series B,
Due September 15, 2010
$15,000,000 Adjustable Rate Senior Secured Guaranteed Notes, Series C,
Due September 15, 2010

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SECOND AMENDMENT TO AMENDED AND RESTATED NOTE PURCHASE AGREEMENT

This Second Amendment dated as of May 11, 2004 (the or this “Second Amendment”)
to the Amended and Restated Note Purchase Agreement dated as of April 19, 2002
is among The Chalone Wine Group, Ltd., a California corporation (the “Company”),
the Subsidiary Guarantors (as defined below) and Farm Credit Services of
America, PCA and Farm Credit Services of Minnesota Valley, PCA, DBA PCS
Commercial Finance Group (collectively, the “Noteholders”).

RECITALS:

          A. The Company and the Noteholders have heretofore entered into that
certain Amended and Restated Note Purchase Agreement dated as of April 19, 2002,
as amended by that certain First Amendment to Amended and Restated Note Purchase
Agreement dated July 11, 2002 (as so amended and otherwise amended, restated,
supplemented or otherwise modified from time to time, the “Note Agreement”). The
Company has heretofore issued its $5,000,000 Adjustable Rate Senior Secured
Notes, Series A, Due September 15, 2010 bearing PPN 157639 B*5 (the “Series A
Notes”), dated April 19, 2002, its $10,000,000 Adjustable Rate Senior Secured
Notes, Series B, Due September 15, 2010 bearing PPN 157639 C* 4 (the “Series B
Notes”), dated July 1, 2003 and its $15,000,000 Adjustable Rate Senior Secured
Notes, Series C, Due September 15, 2010 bearing PPN 157639 B# 1, dated April 19,
2002 (the “Series C Notes”; the Series A Notes, the Series B Notes and the
Series C Notes are hereinafter collectively referred to as the “Notes”) pursuant
to the Note Agreement. The Noteholders are the holders of 100% of the principal
amount of the Notes presently outstanding.

          B. Edna Valley Vineyard, a California general partnership (“Edna
Valley”), SHW Equity Co., a Washington corporation (“SHW”), Canoe Ridge
Vineyard, LLC, a Washington limited liability company (“Canoe Ridge”), Canoe
Ridge Winery, Inc., a Washington corporation (“CRW”), and Staton Hills Winery
Company Limited, a Washington corporation (“Staton”; Edna Valley, SHW, Canoe
Ridge, CRW and Staton are hereinafter collectively referred to as the
“Subsidiary Guarantors”), have heretofore entered into those certain Amended and
Restated Subsidiary Guarantee Agreements, each dated as of April 19, 2002
(collectively, the “Subsidiary Guarantee Agreements”) under and pursuant to
which each of the Subsidiary Guarantors guaranteed the payment of the Notes and
the performance by the Company of its obligations under the Note Agreement,

          C. The Company and the Noteholders now desire to amend the Note
Agreement in the respects, but only in the respects, hereinafter set forth. The
Subsidiary Guarantors now desire to affirm their respective obligations under
the Subsidiary Guarantee Agreements.

          D. All requirements of law have been fully complied with and all other
acts and things necessary to make this Second Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed have
been done or performed.

 

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          NOW, THEREFORE, upon the full and complete satisfaction of the
conditions precedent to the effectiveness of this Second Amendment set forth in
§6 hereof, the Company, the Subsidiary Guarantors and the Noteholders, for good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, do hereby agree as follows:

     SECTION 1 Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Note Agreement shall have
the meaning assigned to such term in the Note Agreement. Each reference to
“hereof”,“hereunder”, “herein” and “hereby” and each other similar reference and
each reference to “this Agreement” and each other similar reference contained in
the Note Agreement shall from and after the date hereof refer to the Note
Agreement as amended hereby.

     SECTION 2 Amendments.

     (a) Schedule B to the Note Agreement shall be and is hereby amended by
deleting the definition of “Specified Loan to Value Event” and replacing the
following definition therefor:

     “ ‘Specified Loan to Value Event’ means, in connection with a sale,
transfer or other disposition of any Term Debt Priority Collateral, any
circumstance where the outstanding principal amount of the Term Debt on the date
of determination thereof equals or exceeds 65% of the fair market value (as
determined by an appraisal reasonably acceptable to the Required Holders
performed within three (3) years of the date of determination thereof) of the
Term Debt Priority Collateral which is to remain subject to the Collateral
Documents after giving effect to such sale, transfer or other disposition,”

     (b) Schedule B to the Note Agreement shall be and is hereby amended by
adding a quotation mark in front of the definition of “Subsidiary” therein.

     (c) Section 10.4(a) of the Note Agreement shall be and is hereby amended in
its entirety to read as follows:

     “(a) Leverage Ratio.

               The Company shall maintain a ratio of (a) Consolidated
Indebtedness plus six times Consolidated Rent Expense (measured on a rolling
4-quarter basis) to (b) Consolidated EBITDA plus one times Consolidated Rent
Expense (in each case, measured on a rolling 4-quarter basis) (such ratio, the
“Leverage Ratio”) as of the last day of each fiscal quarter of not more than
(i) 5.50 to 1.00 for the second, third and fourth fiscal quarters of 2004, the
first second, third and fourth fiscal quarters of 2005, and the first fiscal
quarter of 2006, (ii) 5.00 to 1.00 for the second and third fiscal quarters of
2006, (iii) 4.50 to 1.00 for the fourth fiscal quarter of 2006 and the first
fiscal quarter of 2007, and (iv) 3.50 to 1.00 for the second fiscal quarter of
2007 and each fiscal quarter ending thereafter.”

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     (d) Section 10.4(c) of the Note Agreement shall be and is hereby amended in
its entirety to read as follows:

     “(c) Interest Coverage Ratio.

               The Company shall maintain a ratio of Consolidated EBIT to
Consolidated Interest Expense, for each period of four consecutive fiscal
quarters then ended, of not less than (i) 1.05 to 1.00 as of the last day of the
second and third fiscal quarters of 2004, (ii) 1.25 to 1.00 as of the last day
of the fourth fiscal quarter of 2004, the first, second, third and fourth fiscal
quarters of 2005 and the first and second fiscal quarters of 2006, (iii) 1.50 to
1.00 as of the last day of the third and fourth fiscal quarters of 2006,
(iv) 2.00 to 1.00 as of the last day of the first fiscal quarter of 2007, and
(v) 3.50 to 1.00 as of the last day of the second fiscal quarter of 2007 and
each fiscal quarter ending thereafter.”

     (e) Section 10.4(d) of the Note Agreement shall be and is hereby amended in
its entirety to read as follows:

     “(d) Fixed Charge Coverage Ratio.

               The Company shall maintain a ratio of (i) Consolidated EBITDA to
(ii) the sum of Consolidated Interest Expense plus regularly scheduled principal
payments on Indebtedness (including such payments attributable to Capital
Leases) plus cash income taxes plus cash dividends, of the Company and its
Subsidiaries on a consolidated basis, as determined in accordance with GAAP, for
each period of four consecutive fiscal quarters then ended of not less than
(1) 1.10 to 1.00 as of the last day of the second fiscal quarter of 2004 through
the last day of the first fiscal quarter of 2007 and (2) 1.25 to 1.00 as of the
last day of the second fiscal quarter of 2007 and each fiscal quarter ending
thereafter.”

     (f) Subsection 10.4(e)(ii) of the Note Agreement shall be and is hereby
amended in its entirety to read as follows:

“(ii) The Company shall not, and shall not permit any of its Subsidiaries to,
make or become legally obligated to make any expenditure in respect of the
purchase or other acquisition of any fixed or capital assets (excluding those
assets set out in clause (i) above), where such expenditure exceeds, in the
aggregate for the Company and its Subsidiaries during each fiscal year set forth
below, the amount set forth opposite such fiscal year:

          Fiscal Year     Ending

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  Amount

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2004
  $ 5,000,000  
2005
  $ 4,500,000  
2006
  $ 6,000,000  
2007
  $ 3,000,000  

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2008
  $ 2,500,000  
2009
  $ 2,500,000  
2010
  $ 2,500,000 ”

     (g) Section 9 of the Note Agreement shall be and is hereby amended by
adding a new subsection 9.10 thereto as follows:

    “Section 9.10 Provenance Property. The Company shall, and shall cause its
Subsidiaries to, on or prior to June 30, 2004, deliver the following items with
respect to that certain parcel of real property owned by the Company described
on Exhibit A to the Provenance Deed of Trust (the “Provenance Property”) and
with respect to the remaining parcels of real property currently subject to
Deeds of Trusts in favor of the Collateral Agent (the “Existing Mortgaged
Properties”): (a) a loan title insurance policy issued by a title insurance
company reasonably satisfactory to the Noteholders (or, in the alternative, a
commitment to issue a loan title insurance policy issued by a title insurance
company reasonably satisfactory to the Noteholders and marked and initialed by
an authorized agent of such title insurance company to show all changes to be
made in connection with the actual issuance of such title insurance policy) for
the Provenance Property which shall be satisfactory in scope, amount and form to
the Noteholders; (b) a “date-down” endorsement to the loan title policies for
the Existing Mortgaged Properties, together with amended “tie-in” endorsements
to include the Provenance Property therein, which shall be satisfactory to the
Noteholders in scope and form; (c) a survey for the Provenance Property to the
Noteholders which shall be satisfactory to the Noteholders in scope and form;
(d) deliver an original policy of insurance (or certificate as to the existence
of such policy or any blanket insurance policy) with respect to the Provenance
Property; and (e) a Phase I Environmental Site Assessment in general accordance
with ASTM Standard El 527-00 prepared by a company acceptable to the
Noteholders, together with a letter from such company addressed to the
Noteholders permitting the Noteholders to rely on such Phase I Environmental
Site Assessment and, in the case of each of the foregoing, otherwise in form and
substance reasonably satisfactory to the Noteholders. Simultaneously with the
satisfaction of the foregoing conditions, the Company shall make payment in full
of all title insurance charges and premiums and all fees, charges and taxes in
connection with the recordation or filing and of the Deed of Trust with respect
to the Provenance Property and any other agreement or instrument, financing
statement or any publication of notice required to be filed or recorded to
protect the validity of the liens securing the obligations of the Notes.”

     SECTION 3 Representations and Warranties of the Company and Subsidiary
Guarantors. To induce the Noteholders to execute and deliver this Second
Amendment (which

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     representations shall survive the execution and delivery of this Second
Amendment), each of the Company and the Subsidiary Guarantors represent and
warrant to the Noteholders that:

     (a) since December 31, 2003, there has been no change in the condition,
financial or otherwise, of the Company and its Subsidiaries as shown on the
consolidated balance sheet as of such date except changes in the ordinary course
of business, none of which individually or in the aggregate has had, or
reasonably could be expected to have, a Material Adverse Effect;

     (b) this Second Amendment has been duly authorized, executed and delivered
by it and this Second Amendment constitutes the legal, valid and binding
obligation, contract and agreement of the Company and Subsidiary Guarantors
enforceable against it in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally and general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or in law);

     (c) the Note Agreement, as amended by this Second Amendment, constitutes
the legal, valid and binding obligation, contract and agreement of the Company
enforceable against it in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors’ rights generally and general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or in law);

     (d) the execution, delivery and performance by the Company and Subsidiary
Guarantors of this Second Amendment (i) has been duly authorized by all
requisite corporate action and, if required, shareholder action, (ii) does not
require the consent or approval of any governmental or regulatory body or
agency, and (iii) will not (A) violate (1) any provision of law, statute, rule
or regulation or its certificate of incorporation or bylaws, (2) any order of
any court or any rule, regulation or order of any other agency or government
binding upon it, or (3) any provision of any material indenture, agreement or
other instrument to which it is a party or by which its properties or assets are
or may be bound, including, without limitation, the Credit Agreement, or (B)
result in a breach or constitute (along or with due notice or lapse of time or
both) a default under any indenture, agreement or other instrument referred to
in clause (iii)(A)(3) of this §3(d);

     (e) as of the date hereof and after giving effect to this Second Amendment,
no Default or Event of Default has occurred which is continuing; and

     (f) except as otherwise set forth in the Schedules to the Note Agreement or
on Schedule I hereto, all the representations and warranties contained in
Section 5 of the Note Agreement are true and correct in all material respects
with the same force and effect as if made by the Company and Subsidiary
Guarantors on and as of the date hereof.

     SECTION 4 Affirmation of Subsidiary Guarantee Agreements. Each of the
Subsidiary Guarantors hereby affirm each of their obligations under their
respective Subsidiary Guarantee Agreements after giving effect to this Second
Amendment.

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     SECTION 5 Conditions to Effectiveness of this Amendment. This Second
Amendment shall not become effective until, and shall become effective when,
each and every one of the following conditions shall have been satisfied:

     (a) executed counterparts of this Second Amendment, duly executed by the
Company, the Subsidiary Guarantors and the Required Holders, shall have been
delivered to the Noteholders;

     (b) executed counterparts of an amendment to the Intercreditor Agreement,
duly executed by the Company and the thereto shall have been delivered to the
Noteholders;

     (c) executed counterparts of the Deed of Trust with respect to the
Provenance Property, duly executed by the Company shall have been delivered to
the Noteholders;

     (d) the Noteholders shall have received evidence satisfactory to them that
the Credit Agreement has been amended and restated which amendment and
restatement shall be in form and substance satisfactory to the Noteholders;

     (e) the Company shall have caused to be delivered to the Noteholders an
appraisal for the Provenance Property and such appraisal shall be satisfactory
to the Noteholders in scope and form;

     (f) the Deed of Trust with respect to the Provenance Property (the
“Provenance Deed of Trust”) and the financing statements relating thereto, shall
be duly filed or recorded, as applicable, in such manner and in such places as
is required to establish, preserve and protect the liens and security interests
of the Deed of Trust as a valid first mortgage lien and a security interest of
record on the Provenance Property (including, without limitation, all Trade
Property (as defined in the Provenance Deed of Trust) located thereon);

     (g) the loan title insurance policy shall have been issued to the
Noteholders with respect to the Provenance Property in scope and form
satisfactory to the Noteholders and the “date-down” endorsements and amended
“tie-in” endorsements to the title insurance policies in place for the remaining
parcels of real property currently subject to Deeds of Trust in favor of the
Collateral Agent shall have been issued and delivered to the Noteholders in
scope and form satisfactory to the Noteholders;

     (h) the representations and warranties of the Company and the Subsidiary
Guarantors set forth in Section3 hereof are true and correct on and with respect
to the date hereof;

     (i) each Noteholder shall have received opinions in form and substance
satisfactory to such Noteholder from (A) special counsel for the Company
covering such matters incident to the transactions contemplated hereby as such
Noteholder may reasonably request and (B) special counsel for the Company
covering such matters incident to the transactions contemplated hereby as such
Noteholder may reasonably request;

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     (j) the Company shall have paid the reasonable fees and expenses of
McDermott, Will & Emery, counsel to the Noteholders, in connection with the
negotiation, preparation, approval, execution and delivery of this Second
Amendment; and

     (k) the Company shall have paid the amendment fee in the amount of $45,000
pro rata to the Noteholders.

     SECTION 6 Miscellaneous.

     (a) This Second Amendment shall be construed in connection with and as part
of the Note Agreement, and except as modified and expressly amended by this
Second Amendment, all terms, conditions and covenants contained in the Note
Agreement, as amended on the date hereof, are hereby ratified and shall be and
remain in full force and effect.

     (b) Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this Second Amendment
may refer to the Note Agreement without making specific references to this
Second Amendment but nevertheless all such references shall include this Second
Amendment unless the context otherwise requires.

     (c) The descriptive headings of the various Sections or parts of this
Second Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.

     (d) This Second Amendment shall be governed by and construed in accordance
with New York law.

     (e) The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Second Amendment may be
executed in any number of counterparts, each executed counterpart constituting
an original, but all together only one agreement.

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          IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed by their respective authorized officers as of the
day and year first above written.

     

  THE CHALONE WINE GROUP, LTD.
 
   

  By:  /s/ Thomas Selfridge
                                                                               
 
          Title:
 
   

  EDNA VALLEY VINEYARD
 
   

  By: The Chalone Wine Group, Ltd.,

             Managing General Partner
 
   

  By:  /s/ Thomas Selfridge
                                                                               
 
          Title:
 
   

  SHW EQUITY CO.
 
   

  By:  /s/ Thomas Selfridge
                                                                               
 
          Title:
 
   

  CANOE RIDGE VINEYARD LLC
 
   

  By:  /s/ Thomas Selfridge
                                                                               
 
           Title:
 
   

  CANOE RIDGE WINERY, INC.
 
   

  By:  /s/ Thomas Selfridge
                                                                               
 
           Title:
 
   

  STATON HILLS WINERY COMPANY LIMITED
 
   

  By:  /s/ Thomas Selfridge
                                                                               
 
           Title:

 

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Accepted and Agreed:
  FARM CREDIT SERVICES OF AMERICA,
PCA
 
   

  By: /s/ Bruce P. Rouse                              
     Title:  Bruce P. Rouse VP

 

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Accepted and Agreed:
  FARM CREDIT SERVICES OF MINNESOTA VALLEY,
PCA, DBA PCS COMMERCIAL FINANCE GROUP
 
   
 
  By:   /s/ James M. Grafing
 
     

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      Name: James M. Grafing
 
      Title:  SVP - SYNDICATED FINANCE