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Exhibit 10.67 [Execution Version] AMENDED AND RESTATED SECURITY AGREEMENT
(Edna Valley Vineyard) THIS AMENDED AND RESTATED SECURITY AGREEMENT (this Agreement), dated as
of May 11, 2004, is made between Edna Valley Vineyard, a joint venture (the
Debtor), and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., Rabobank
International, New York Branch (Rabobank), as Collateral Agent. The Chalone Wine Group, Ltd., a California corporation (the Borrower),
certain lenders and Rabobank, as issuer of letters of credit (in such capacity,
the Issuing Lender), as swingline lender (in such capacity, the Swingline
Lender) and as administrative agent (in such capacity, the Agent), are
parties to an Amended and Restated Credit Agreement dated as of May 11, 2004
(as the same may be hereafter amended, restated, modified, supplemented,
renewed or extended from time to time, the Credit Agreement) pursuant to
which the Lenders have made available to the Borrower a revolving credit
facility and term loan facility, as provided therein. The Borrower is also party to that certain Amended and Restated Note
Purchase Agreement dated as of April 19, 2002 (the Note Agreement), entered
into by the Borrower with the Purchasers listed on the signature pages thereto.
Pursuant to the Note Agreement, the Borrower delivered certain amended and
restated notes to the Purchasers (the Amended and Restated Senior Secured
Notes). The Borrower has requested that the Noteholders amend the Note
Agreement and the Noteholders are willing to enter into and execute that
certain Second Amendment to Note Purchase Agreement dated May 11, 2004 ( as the
same may hereafter be amended, modified and/or restated from time to time, the
Amended and Restated Note Agreement). It is a condition precedent to the amendment and restatement of the Credit
Agreement that the Debtor enter into this Agreement to amend and restate the
Original Security Agreement and grant to the Collateral Agent, for itself and
for the ratable benefit of the Agent, the Lenders and the Noteholders, the
security interests hereinafter provided to secure the obligations of the
Borrower and the Debtor as described below. The Collateral Agent, the Agent, the Lenders, the Noteholders, the
Borrower, the Debtor and certain of its affiliates have entered into an
Intercreditor and Collateral Agency Agreement dated as of April 19, 2002 (as
amended, restated, supplemented or otherwise modified from time to time, the
Intercreditor Agreement) pursuant to which, among other things, the Lenders
and Noteholders have agreed (i) to the appointment of Rabobank as Collateral
Agent and (ii) to the relative priority of their security interests in the
Collateral and the manner and order in which certain rights and remedies of the
Lenders and Noteholders may be exercised, all as provided therein. Accordingly, the parties hereto agree as follows: 1




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SECTION 1 Definitions; Interpretation. (a) Terms Defined in Credit Agreement. All capitalized terms used in this
Agreement (including in the preamble and recitals hereof) and not otherwise
defined herein shall have the meanings assigned to them in the Credit
Agreement. (b) Certain Defined Terms. As used in this Agreement (including in the
preamble and recitals hereof), the following terms shall have the following
meanings: Accounts means any and all of the Debtors accounts, as such term is
defined in Section 9-102 of the UCC. Books means all books, records and other written, electronic or other
documentation in whatever form maintained now or hereafter by or for the Debtor
in connection with the ownership of its assets or the conduct of its business
or evidencing or containing information relating to the Collateral, including:
(i) ledgers; (ii) records indicating, summarizing, or evidencing the Debtors
assets (including Inventory and Rights to Payment), business operations or
financial condition; (iii) computer programs and software; (iv) computer discs,
tapes, files, manuals, spreadsheets; (v) computer printouts and output of
whatever kind; (vi) any other computer prepared or electronically stored,
collected or reported information and equipment of any kind; and (vii) any and
all other rights now or hereafter arising out of any contract or agreement
between the Debtor and any service bureau, computer or data processing company
or other Person charged with preparing or maintaining any of such Debtors
books or records or with credit reporting, including with regard to such
Debtors Accounts. Bulk Wine means any and all of the Debtors bulk wine, whether held for
sale in the bulk wine market or otherwise, and whether or not classified as
inventory under Section 9-102 of the UCC. Chattel Paper means any and all of the Debtors chattel paper, as such
term is defined in Section 9-102 of the UCC, including all Electronic Chattel
Paper, evidencing a monetary obligation, whether or not earned by performance,
for Inventory or Bulk Wine that has been or is to be sold, leased, licensed,
assigned, or otherwise disposed of, by or on behalf of the Debtor. Collateral has the meaning set forth in Section 2. Credit Facility Secured Obligations means the indebtedness, liabilities
and other obligations of the Borrower and the Debtor to the Collateral Agent,
the Agent and the Lenders under or in connection with the Credit Agreement, the
Revolving Notes, the Term Notes, the Guaranties, the Letters of Credit and the
other Loan Documents, including all unpaid principal of the Loans, all unpaid
drawings under Letters of Credit, all interest accrued thereon, all fees due
under the Credit Agreement and the other Loan Documents and all other amounts
payable by the Borrower or the Debtor to the Collateral Agent, the Agent and
the Lenders thereunder or in connection therewith, whether now existing or
hereafter arising, and whether due or to become due, absolute or contingent,
liquidated or unliquidated, determined or undetermined. 2




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Documents means any and all of the Debtors documents, as such term is
defined in Section 9-102 of the UCC. Electronic Chattel Paper means any and all of the Debtors electronic
chattel paper, as such term is defined in Section 9-102 of the UCC. Instruments means any and all of the Debtors instruments, as such term
is defined in Section 9-102 of the UCC, evidencing a right to payment of a
monetary obligation, whether or not earned by performance, for Inventory or
Bulk Wine that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, by or on behalf of the Debtor. Inventory means any and all of the Debtors inventory, as such term is
defined in Section 9-102 of the UCC. Lenders means the lenders from time to time party to the Credit
Agreement as Lenders. References to the Lenders shall include references to
Rabobank in its capacity as the Issuing Lender and the Swingline Lender; for
purposes of clarification only, to the extent that Rabobank may have any rights
or obligations in addition to those of the Lenders due to its status as the
Issuing Lender or the Swingline Lender, its status as such will be specifically
referenced. Unless the context otherwise clearly requires, the Lenders shall
include any such Person in its capacity as Swap Provider. Unless the context
otherwise clearly requires, references to any such Person as a Lender shall
also include any of such Persons Affiliates that may at any time of
determination be Swap Providers. Noteholders means the noteholders from time to time holding one or more
of the Amended and Restated Senior Secured Notes and in whose name such Amended
and Restated Senior Secured Note(s) are registered in the register maintained
by the Borrower pursuant to the Amended and Restated Note Agreement. Private Placement Secured Obligations means the indebtedness,
liabilities and other obligations of the Borrower and the Debtor to the
Collateral Agent and the Noteholders under or in connection with the Amended
and Restated Note Agreement, the Amended and Restated Senior Secured Notes, the
Subsidiary Guarantee Agreement (as defined in the Amended and Restated Note
Agreement) and the other Loan Documents (as defined in the Amended and Restated
Note Agreement), including all unpaid principal of the Amended and Restated
Senior Secured Notes, all interest accrued thereon, all fees due under the
Amended and Restated Note Agreement and the other Loan Documents (as so
defined) and all other amounts payable by the Borrower or the Debtor to the
Collateral Agent and the Noteholders thereunder or in connection therewith,
whether now existing or hereafter arising, and whether due or to become due,
absolute or contingent, liquidated or unliquidated, determined or undetermined. Proceeds means all proceeds, as such term is defined in Section 9-102 of
the UCC. Rights to Payment means any and all of the Debtors Accounts and any and
all of the Debtors rights and claims to the payment or receipt of money or
other forms of 3




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consideration of any kind in, to and under or with respect to its Chattel
Paper, Documents, Instruments, Proceeds and Supporting Obligations. Secured Obligations means the Credit Facility Secured Obligations and
the Private Placement Secured Obligations. Original Security Agreement means the Security Agreement dated as of
April 19, 2002, between Edna Valley Vineyard and Rabobank. Supporting Obligations means all supporting obligations, as such term is
defined in Section 9-102 of the UCC. UCC means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California. (c) Terms Defined in UCC. Where applicable and except as otherwise
defined herein, terms used in this Agreement shall have the meanings assigned
to them in the UCC. (d) Interpretation. The rules of interpretation set forth in Section 1.03
of the Credit Agreement shall be applicable to this Agreement and are
incorporated herein by this reference. SECTION 2 Security Interest. (a) Grant of Security Interest. As security for the payment and
performance of the Secured Obligations, the Debtor hereby grants to the
Collateral Agent, for itself and on behalf of and for the ratable benefit of
the Agent, the Lenders and the Noteholders, a security interest in all of the
Debtors right, title and interest in, to and under all of the following
personal property, wherever located and whether now existing or owned or
hereafter acquired or arising (collectively, the Collateral): (i) all
Accounts; (ii) all Bulk Wine; (iii) all Chattel Paper; (iv) all Documents; (v)
all Instruments; (vi) all Inventory; and (vii) all money, all products and
Proceeds of any and all of the foregoing, and all Supporting Obligations of any
and all of the foregoing. Debtor does not grant hereby any security interest
in Debtors real property or in Debtors personal property other than the
Collateral listed in this Section 2(a). (b) Debtor Remains Liable. Anything herein to the contrary
notwithstanding, (i) the Debtor shall remain liable under any contracts,
agreements and other documents included in the Collateral, to the extent set
forth therein, to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (ii) the exercise by
the Collateral Agent of any of the rights hereunder shall not release such
Debtor from any of its duties or obligations under such contracts, agreements
and other documents included in the Collateral, and (iii) the Collateral Agent
shall not have any obligation or liability under any contracts, agreements and
other documents included in the Collateral by reason of this Agreement, nor
shall the Collateral Agent be obligated to perform any of the obligations or
duties of such Debtor thereunder or to take any action to collect or enforce
any such contract, agreement or other document included in the Collateral
hereunder. 4




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(c) Continuing Security Interest. The Debtor agrees that this Agreement
shall create a continuing security interest in the Collateral which shall
remain in effect until terminated in accordance with Section 22. SECTION 3 Perfection and Priority. (a) Financing Statements. The Debtor shall execute and deliver to the
Collateral Agent concurrently with the execution of this Agreement, and such
Debtor hereby authorizes the Collateral Agent to file (with or without such
Debtors signature), at any time and from time to time thereafter, all
financing statements, continuation financing statements, termination
statements, security agreements relating to the Intellectual Property
Collateral, if any, assignments, fixture filings, affidavits, reports, notices
and other documents and instruments, in form satisfactory to the Collateral
Agent, and take all other action, as the Collateral Agent may request, to
perfect and continue perfected, maintain the priority of or provide notice of
the Collateral Agents security interest in the Collateral and to accomplish
the purposes of this Agreement. Without limiting the generality of the
foregoing, the Debtor ratifies and authorizes the filing by the Collateral
Agent of any financing statements filed prior to the date hereof provided that
any such financing statement or other document or instrument shall recite that
Debtor has not granted a security interest in any of Debtors real property or
in Debtors personal property other than the Collateral listed in Section 2(a);
provided, further, however, that it is agreed and acknowledged that any failure
to so include such recitation shall not in any way affect the security
interests in the Collateral granted hereunder. (b) Bailees. Any Person (other than the Collateral Agent) at any time and
from time to time holding all or any portion of the Collateral shall be deemed
to, and shall, hold the Collateral as the agent of, and as pledge holder for,
the Collateral Agent. At any time and from time to time, the Collateral Agent
may give notice to any such Person holding all or any portion of the Collateral
that such Person is holding the Collateral as the agent and bailee of, and as
pledge holder for, the Collateral Agent, and obtain such Persons written
acknowledgment thereof. Without limiting the generality of the foregoing, such
Debtor will join with the Collateral Agent in notifying any Person who has
possession of any Collateral of the Collateral Agents security interest
therein and obtaining an acknowledgment from such Person that it is holding the
Collateral for the benefit of the Collateral Agent. (c) Control. The Debtor will cooperate with the Collateral Agent in
obtaining control (as defined in the UCC) of Collateral consisting of any
Electronic Chattel Paper. SECTION 4 Representations and Warranties. In addition to the
representations and warranties made by Borrower, for and on behalf of Debtor,
in Article IX of the Credit Agreement, which are incorporated herein by this
reference, Debtor represents and warrants to the Agent, each Lender, each
Noteholder and the Collateral Agent that: (a) Location of Chief Executive Office and Collateral. Its chief
executive office and principal place of business (as of the date of this
Agreement) is located at the address set forth in Schedule 1; and all other
locations (as of the date of this Agreement) from which Debtor conducts
business or in which the Collateral is kept are set forth in Schedule 1. 5




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(b) Locations of Books. All locations where Books pertaining to the
Rights to Payment are kept, including all equipment necessary for accessing
such Books and the names and addresses of all service bureaus, computer or data
processing companies and other Persons keeping any Books or collecting Rights
to Payment for such Debtor, are set forth in Schedule 1. (c) Jurisdiction of Organization and Names. The Debtors jurisdiction of
organization is set forth in Schedule 1; and the Debtors exact legal name is
as set forth in the first paragraph of this Agreement. All trade names and
trade styles under which the Debtor presently conducts its business operations
are set forth in Schedule 1, and, except as set forth in Schedule 1, the Debtor
has not, at any time in the past: (i) been known as or used any other
corporate, trade or fictitious name; (ii) changed its name; (iii) been the
surviving or resulting corporation in a merger or consolidation; or (iv)
acquired through asset purchase or otherwise any business of any Person. (d) Collateral. The Debtor has rights in or the power to transfer the
Collateral, and such Debtor is, and, except as permitted by Section 5(i), will
continue to be, the sole and complete owner of the Collateral (or, in the case
of after-acquired Collateral, at the time such Debtor acquires rights in such
Collateral, will be the sole and complete owner thereof), free from any Lien
other than Permitted Liens. (e) Enforceability; Priority of Security Interest. (i) This Agreement
creates a security interest which is enforceable against the Collateral in
which the Debtor now has rights and will create a security interest which is
enforceable against the Collateral in which the Debtor hereafter acquires
rights at the time such Debtor acquires any such rights, subject to the
Permitted Liens and the Intercreditor Agreement; and (ii) the Collateral Agent
has a perfected and first priority security interest in the Collateral in which
the Debtor now has rights, and will have a perfected and first priority
security interest in the Collateral in which such Debtor hereafter acquires
rights at the time such Debtor acquires any such rights, in each case securing
the payment and performance of the Secured Obligations and subject to Permitted
Liens and the Intercreditor Agreement. (f) Other Financing Statements. Other than (i) financing statements
disclosed to the Agent, the Noteholders and the Lenders in writing, and (ii)
financing statements in favor of the Collateral Agent on behalf of itself, the
Agent, the Lenders and the Noteholders, no effective financing statement naming
the Debtor as debtor, assignor, grantor, mortgagor, pledgor or the like and
covering all or any part of the Collateral is on file in any filing or
recording office in any jurisdiction. (g) Rights to Payment. (i) The Rights to Payment represent valid, binding and enforceable
obligations of the account debtors or other Persons obligated thereon,
representing undisputed, bona fide transactions completed in accordance with
the terms and provisions contained in any documents related thereto, and are
and will be genuine, free from Liens, and not subject to any adverse claims,
counterclaims, setoffs, defaults, disputes, defenses, discounts, retainages,
holdbacks or conditions precedent of any kind of character, except to the
extent reflected by the Debtors reserves for uncollectible Rights to Payment
or to the extent, if any, that such account 6




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debtors or other Persons may be entitled to normal and ordinary course
trade discounts, returns, adjustments and allowances in accordance with Section
5(m), or as otherwise disclosed to the Collateral Agent, the Agent, the Lenders
and the Noteholders in writing; (ii) to the best of the Debtors knowledge and belief, all account debtors
and other obligors on the Rights to Payment are solvent and generally paying
their debts as they come due; (iii) all Rights to Payment comply with all applicable laws concerning
form, content and manner of preparation and execution, including where
applicable any federal or state consumer credit laws; (iv) Debtor has not assigned any of its rights under the Rights to Payment
except as provided in this Agreement or as set forth in the other Loan
Documents; (v) with respect to the Rights to Payment constituting Eligible
Receivables, except as disclosed in writing to the Agent and the Lenders,
Debtor has no knowledge that any of the criteria for eligibility are not
satisfied; (vi) all statements made, all unpaid balances and all other information in
the Books and other documentation relating to the Rights to Payment are true
and correct and in all respects what they purport to be; and (vii) Debtor has no knowledge of any fact or circumstance which would
impair the validity or collectibility of any of the Rights to Payment. (h) Inventory. No Inventory or Bulk Wine is stored with any bailee or
warehouseman or similar Person or on any premises leased to the Debtor, nor has
any Inventory or Bulk Wine been consigned to the Debtor or consigned by the
Debtor to any Person or is held by the Debtor for any Person under any bill
and hold or other arrangement, except as set forth in Schedule 1; and with
respect to the Inventory constituting Eligible Inventory, except as disclosed
in writing to the Agent and the Lenders, no Debtor has any knowledge that any
of the criteria for eligibility are not or are no longer satisfied. (i) Instruments and Chattel Paper. All Instruments and Chattel Paper held
by the Debtor are also set forth in Schedule 1. (j) Leases. Debtor is not nor will Debtor become a lessee under any real
property lease or other agreement governing the location of Collateral at the
premises of another Person pursuant to which the lessor or such other Person
may obtain any rights in any of the Collateral, and no such lease or other such
agreement now prohibits, restrains, impairs or will prohibit, restrain or
impair the Debtors right to remove any Collateral from the premises at which
such Collateral is situated, except for the usual and customary restrictions
contained in leases of real property. (k) Consideration. The Debtor has received at least reasonably equivalent
value and sufficient consideration to support the indebtedness, obligations,
liens and security interests created hereunder and under the other Loan
Documents to which the Debtor is a party. The 7




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Debtor acknowledges that it will derive substantial direct and indirect
benefits from the making of the Loans to the Borrower and the issuances of
letters of credit pursuant to the Credit Agreement and, without limiting the
generality of the foregoing, agrees to the inclusion of the Debtors assets in
the Borrowing Base as provided in the Credit Agreement. SECTION 5 Covenants. In addition to the covenants made for and on behalf
of the Debtor by Borrower in the Credit Agreement and the other Loan Documents
and in the Amended and Restated Note Agreement and the other Loan Documents (as
defined in the Amended and Restated Note Agreement), so long as any of the
Secured Obligations remain unsatisfied or any Lender shall have any Commitment,
the Debtor agrees that: (a) Defense of Collateral. It will appear in and defend any action, suit
or proceeding which may affect to a material extent its title to, or right or
interest in, or the Collateral Agents right or interest in, the Collateral. (b) Preservation of Collateral. It will do and perform all reasonable
acts that may be necessary and appropriate to maintain, preserve and protect
the Collateral. (c) Compliance with Laws, Etc. It will comply with all laws, regulations
and ordinances, and all policies of insurance, relating in a material way to
the possession, operation, maintenance and control of the Collateral. (d) Location of Books and Chief Executive Office. It will: (i) keep all
Books pertaining to the Rights to Payment at the locations set forth in
Schedule 1; and (ii) give at least 30 days prior written notice to the
Collateral Agent, the Agent and the Noteholders of (a) any changes in any such
location where Books pertaining to the Rights to Payment are kept, including
any change of name or address of any service bureau, computer or data
processing company or other Person preparing or maintaining any Books or
collecting Rights to Payment for the Debtor or (b) any change in the location
of its chief executive office or principal place of business. (e) Location of Collateral. It will: (i) keep the Collateral at the
locations set forth in Schedule 1 and not remove the Collateral from such
locations (other than disposals of Collateral permitted by subsection (i)
below) except upon at least 30 days prior written notice of any removal to the
Collateral Agent, the Agent and the Noteholders; and (ii) give the Collateral
Agent, the Agent and the Noteholders at least 30 days prior written notice of
any change in the locations set forth in Schedule 1. (f) Change in Name, Identity or Structure. It will give at least 30 days
prior written notice to the Collateral Agent, the Agent and the Noteholders of
(i) any change in its name, (ii) any change in its jurisdiction of
organization, (iii) any change in its registration as an organization (or any
new such registration); and (iv) any changes in its identity or structure in
any manner which might make any financing statement filed hereunder incorrect
or misleading; provided that it shall not change its jurisdiction of
organization to a jurisdiction outside of the United States. (g) Maintenance of Records. It will keep separate, accurate and complete
Books with respect to the Collateral, disclosing the Collateral Agents
security interest hereunder. 8




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(h) Invoicing of Sales. It will invoice all of its sales upon forms
customary in the industry and to maintain proof of delivery and customer
acceptance of goods. (i) Disposition of Collateral. It will not surrender or lose possession of
(other than to the Collateral Agent), sell, lease, rent, or otherwise dispose
of or transfer any of the Collateral or any right or interest therein, except
to the extent permitted by the Credit Agreement and the Amended and Restated
Note Agreement; provided that no such disposition or transfer of Instruments
shall be permitted while any Event of Default exists. (j) Liens. It will keep the Collateral free of all Liens except Permitted
Liens. (k) Expenses. It will pay all expenses of protecting, storing,
warehousing, insuring, handling and shipping the Collateral. (l) Leased Premises. At the Collateral Agents, the Agents or the
Noteholders request, it will obtain from each Person from whom it leases any
premises at which any Collateral is at any time present such collateral access,
subordination, waiver, consent and estoppel agreements as the Collateral Agent,
the Agent or the Noteholders may require, in form and substance satisfactory to
the Collateral Agent, the Agent and the Noteholders. (m) Rights to Payment. It will: (i) give only normal discounts, allowances and credits as to Accounts and
other Rights to Payment, in the ordinary course of business, according to
normal trade practices utilized by it in the past, and enforce all Accounts and
other Rights to Payment strictly in accordance with their terms, and take all
such action to such end as may from time to time be reasonably requested by the
Collateral Agent, the Agent or the Noteholders, except that it may grant any
extension of the time for payment or enter into any agreement to make a rebate
or otherwise to reduce the amount owing on or with respect to, or compromise or
settle for less than the full amount thereof, any Account or other Right to
Payment, in the ordinary course of business, according to normal trade
practices utilized by it in the past, and where the amount involved does not
exceed $750,000 or where the Account or Right to Payment does not exceed
$750,000 or would not be materially impaired; (ii) if any discount, allowance, credit, extension of time for payment,
agreement to make a rebate or otherwise to reduce the amount owing on, or
compromise or settle, an Account or other Right to Payment exists or occurs, or
if, to the knowledge of it, any dispute, setoff, claim, counterclaim or defense
exists or has been asserted or threatened with respect to an Account or other
Right to Payment, disclose such fact fully to the Collateral Agent, the Agent
and the Noteholders in the Books relating to such Account or other Right to
Payment and in connection with any invoice or report furnished by it to the
Collateral Agent, the Agent and the Noteholders relating to such Account or
other Right to Payment; (iii) if any Accounts arise from contracts with the United States or any
department, agency or instrumentality thereof, immediately notify the
Collateral Agent, the Agent and the Noteholders thereof and, upon the request
of the Collateral Agent, the Agent or the Noteholders, execute any documents
and instruments and take any other steps requested by the Collateral Agent, the
Agent or the Noteholders in order that all monies due and to become 9




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due thereunder shall be assigned to the Collateral Agent and notice
thereof given to the Federal authorities under the Federal Assignment of Claims
Act; (iv) in accordance with its sound business judgment perform and comply in
all material respects with its obligations in respect of the Accounts and other
Rights to Payment; (v) upon the request of the Collateral Agent, the Agent or the Noteholders
while an Event of Default exists, (a) at any time, notify all or any designated
portion of the account debtors and other obligors on the Rights to Payment of
the security interest hereunder, and (b) notify the account debtors and other
obligors on the Rights to Payment or any designated portion thereof that
payment shall be made directly to the Collateral Agent or to such other Person
or location as the Collateral Agent shall specify; and (vi) upon the occurrence of any Event of Default, establish such lockbox
or similar arrangements for the payment of the Accounts and other Rights to
Payment as the Collateral Agent, the Agent or the Noteholders shall reasonably
require. (n) Instruments, Chattel Paper, Etc. Upon the request of the Collateral
Agent, the Agent or the Noteholders it will (i) immediately deliver to the
Collateral Agent, or an agent designated by it, appropriately endorsed or
accompanied by appropriate instruments of transfer or assignment, all
Instruments and Chattel Paper and (iii) provide such notice, obtain such
acknowledgments and take all such other action, with respect to any Chattel
Paper as the Collateral Agent, the Agent or the Noteholders shall reasonably
specify. (o) Inventory. It will: (i) upon the request of the Collateral Agent (which, except upon the
occurrence and during the continuation of an Event of Default, shall not be
given more than once in any 12-month period), take a physical listing of the
Inventory and promptly deliver a copy of such physical listing to the
Collateral Agent; and (ii) not store any Inventory or Bulk Wine with a bailee, warehouseman or
similar Person or on premises leased to the Debtor, nor dispose of any
Inventory or Bulk Wine on a bill-and-hold, guaranteed sale, sale and return,
sale on approval, consignment or similar basis, nor acquire any Inventory or
Bulk Wine from any Person on any such basis, without in each case giving the
Agent prior written notice thereof. (p) Notices, Reports and Information. It will (i) notify the Collateral
Agent, the Agent and the Noteholders of any other modifications of or additions
to the information contained in Schedule 1; (ii) notify the Collateral Agent,
the Agent and the Noteholders of any material claim made or asserted against
the Collateral by any Person and of any change in the composition of the
Collateral (other than in the ordinary course of business) or other event which
could materially adversely affect the value of the Collateral or the Collateral
Agents Lien thereon; (iii) furnish to the Collateral Agent, the Agent and the
Noteholders such statements and schedules further identifying and describing
the Collateral and such other reports and other information in connection with
the Collateral as the Collateral Agent, the Agent or the Noteholders may
reasonably request, all in reasonable detail; and (iv) upon request of the 10




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Collateral Agent, the Agent or the Noteholders make such demands and
requests for information and reports as the Debtor is entitled to make in
respect of the Collateral. (q) Chattel Paper. It will not create any Chattel Paper without placing a
legend on the Chattel Paper acceptable to the Collateral Agent, the Agent and
the Noteholders indicating that the Collateral Agent has a security interest in
the Chattel Paper. It will give the Collateral Agent, the Agent and the
Noteholders immediate notice if it at any time holds or acquires an interest in
any Chattel Paper, including any Electronic Chattel Paper. SECTION 6 Rights to Payment. (a) Collection of Rights to Payment. Until the Collateral Agent exercises
its rights hereunder to collect Rights to Payment, the Debtor shall endeavor in
the first instance diligently to collect all amounts due or to become due on or
with respect to the Rights to Payment. At the request of the Collateral Agent,
the Agent or the Noteholders, upon and after the occurrence of any Event of
Default, and while such Event of Default is continuing, all remittances
received by the Debtor shall be held in trust for the Collateral Agent and, in
accordance with the Collateral Agents instructions, remitted to the Collateral
Agent or deposited to an account with the Collateral Agent in the form received
(with any necessary endorsements or instruments of assignment or transfer). (b) Instruments. At the request of the Collateral Agent, the Agent or the
Noteholders, upon and after the occurrence of any Event of Default and while
such Event of Default is continuing, the Collateral Agent shall be entitled to
receive all distributions and payments of any nature with respect to any
Instruments, and all such distributions or payments received by the Debtor
shall be held in trust for the Collateral Agent and, in accordance with the
Collateral Agents instructions, remitted to the Collateral Agent or deposited
to an account with the Collateral Agent in the form received (with any
necessary endorsements or instruments of assignment or transfer).
Additionally, the Collateral Agent shall have the right, upon the occurrence of
an Event of Default and while such Event of Default is continuing, following
prior written notice to the Debtor, to vote and to give consents, ratifications
and waivers with respect to any Instruments, and to exercise all rights of
conversion, exchange, subscription or any other rights, privileges or options
pertaining thereto, as if the Collateral Agent were the absolute owner thereof;
provided that the Collateral Agent shall have no duty to exercise any of the
foregoing rights afforded to it and shall not be responsible to the Debtor or
any other Person for any failure to do so or delay in doing so. SECTION 7 Authorization; Collateral Agent Appointed Attorney-in-Fact. The
Collateral Agent shall have the right to, in the name of the Debtor, or in the
name of the Collateral Agent or otherwise, without notice to or assent by the
Debtor, and the Debtor hereby constitutes and appoints the Collateral Agent
(and any of the Collateral Agents officers or employees or Collateral Agents
designated by the Collateral Agent) as such Debtors true and lawful
attorney-in-fact, with full power and authority to: (i) sign and file any of the financing statements which must be executed
or filed to perfect or continue perfected, maintain the priority of or provide
notice of the Collateral Agents security interest in the Collateral; 11




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(ii) take possession of and endorse any notes, acceptances, checks,
drafts, money orders or other forms of payment or security and collect any
Proceeds of any Collateral; (iii) sign and endorse any invoice or bill of lading relating to any of
the Collateral, warehouse or storage receipts, drafts against customers or
other obligors, assignments, notices of assignment, verifications and notices
to customers or other obligors; (iv) send requests for verification of Rights to Payment to the customers
or other obligors of the Debtor; (v) contact, or direct the Debtor to contact, all account debtors and
other obligors on the Rights to Payment and instruct such account debtors and
other obligors to make all payments directly to the Collateral Agent; (vi) assert, adjust, sue for, compromise or release any claims under any
policies of insurance; (vii) notify each Person maintaining lockbox or similar arrangements for
the payment of the Rights to Payment to remit all amounts representing
collections on the Rights to Payment directly to the Collateral Agent; (viii) ask, demand, collect, receive and give acquittances and receipts
for any and all Rights to Payment, enforce payment or any other rights in
respect of the Rights to Payment and other Collateral, grant consents, agree to
any amendments, modifications or waivers of the agreements and documents
governing the Rights to Payment and other Collateral, and otherwise file any
claims, take any action or institute, defend, settle or adjust any actions,
suits or proceedings with respect to the Collateral, as the Collateral Agent
may deem necessary or desirable to maintain, preserve and protect the
Collateral, to collect the Collateral or to enforce the rights of the
Collateral Agent with respect to the Collateral; (ix) execute any and all applications, documents, papers and instruments
necessary for the Collateral Agent to use the Debtors intellectual property
and grant or issue any non-exclusive license or sublicense with respect to any
such intellectual property, in each instance only as reasonably necessary to
enable the Collateral Agent to exercise its rights and remedies hereunder with
respect to the Collateral and/or disposition of the Collateral; (x) execute any and all endorsements, assignments or other documents and
instruments necessary to sell, lease, assign, convey or otherwise transfer
title in or dispose of the Collateral; and (xi) execute any and all such other documents and instruments, and do any
and all acts and things for and on behalf of the Debtor, which the Collateral
Agent may reasonably deem necessary or advisable to maintain, protect, realize
upon and preserve the Collateral and the Collateral Agents security interest
therein and to accomplish the purposes of this Agreement. The Collateral Agent agrees that, except upon and during the continuance of an
Event of Default, it shall not exercise the power of attorney, or any rights
granted to the Collateral Agent, pursuant to clauses (ii) through (xii). The
foregoing power of attorney is coupled with an interest and 12




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irrevocable so long as the Lenders have any Commitments or the Secured
Obligations have not been paid and performed in full. The Debtor hereby
ratifies, to the extent permitted by law, all that the Collateral Agent shall
lawfully and in good faith do or cause to be done by virtue of and in
compliance with this Section 7. SECTION 8 Collateral Agent Performance of Debtor Obligations. The
Collateral Agent, the Agent or the Noteholders may perform or pay any
obligation which the Debtor have agreed to perform or pay under this Agreement
upon notice to the Debtor, if the Debtor have failed to timely perform or pay
any such obligation, and the Debtor shall reimburse the Collateral Agent, the
Agent or the Noteholders, as the case may be, on demand for any amounts paid by
the Collateral Agent, the Agent or the Noteholders, as the case may be,
pursuant to this Section 8. SECTION 9 [Reserved.] SECTION 10 Remedies. (a) Remedies. Upon the occurrence of any Event of Default and while such
Event of Default is continuing, the Collateral Agent shall have, in addition to
all other rights and remedies granted to it in this Agreement, all rights and
remedies of a secured party under the UCC and other applicable laws. Without
limiting the generality of the foregoing, the Debtor agrees that: (i) The Collateral Agent may peaceably and without notice enter any
premises of the Debtor, take possession of any Collateral, remove or dispose of
all or part of the Collateral on any premises of the Debtor or elsewhere, and
otherwise collect, receive, appropriate and realize upon all or any part of the
Collateral, and demand, give receipt for, settle, renew, extend, exchange,
compromise, adjust, or sue for all or any part of the Collateral, as the
Collateral Agent may determine. (ii) The Collateral Agent may require the Debtor to assemble all or any
part of the Collateral and make it available to the Collateral Agent, at any
place and time designated by the Collateral Agent. (iii) The Collateral Agent may secure the appointment of a receiver of the
Collateral or any part thereof (to the extent and in the manner provided by
applicable law). (iv) The Collateral Agent may sell, resell, lease, use, assign, transfer
or otherwise dispose of any or all of the Collateral in its then condition or
following any commercially reasonable preparation or processing (utilizing in
connection therewith any of the Debtors assets, without charge or liability to
the Collateral Agent therefor) at public or private sale, by one or more
contracts, in one or more parcels, at the same or different times, for cash or
credit or for future delivery without assumption of any credit risk, all as the
Collateral Agent deems advisable; provided, however, that such Debtor shall be
credited with the net proceeds of sale only when such proceeds are finally
collected by the Collateral Agent. The Collateral Agent and each of the
Lenders shall have the right upon any such public sale, and, to the extent
permitted by law, upon any such private sale, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption, which
right or equity of redemption the Debtor 13




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hereby releases, to the extent permitted by law. The Collateral Agent
shall give the Debtor such notice of any public or private sale as may be
required by the UCC or other applicable law. (v) Neither the Collateral Agent, the Agent, any Noteholder nor any Lender
shall have any obligation to clean up or otherwise prepare the Collateral for
sale. The Collateral Agent has no obligation to attempt to satisfy the Secured
Obligations by collecting them from any other Person liable for them and the
Collateral Agent may release, modify or waive any Collateral provided by any
other Person to secure any of the Secured Obligations, all without affecting
the Collateral Agents, the Agents, any Noteholders or any Lenders rights
against the Debtor. The Debtor waives any right it may have to require the
Collateral Agent, the Agent, any Noteholder or any Lender to pursue any third
Person for any of the Secured Obligations. The Collateral Agent may comply
with any applicable state or federal law requirements in connection with a
disposition of the Collateral and compliance will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral. The
Collateral Agent may sell the Collateral without giving any warranties as to
the Collateral. The Collateral Agent may specifically disclaim any warranties
of title or the like. This procedure will not be considered adversely to
affect the commercial reasonableness of any sale of the Collateral. If the
Collateral Agent sells any of the Collateral upon credit, the Debtor will be
credited only with payments actually made by the purchaser, received by the
Collateral Agent and applied to the indebtedness of the purchaser. In the
event the purchaser fails to pay for the Collateral, the Collateral Agent may
resell the Collateral and the Debtor shall be credited with the proceeds of the
sale. (b) License. For the purpose of enabling the Collateral Agent to exercise
its rights and remedies under this Section 10 or otherwise in connection with
this Agreement, the Debtor hereby grants to the Collateral Agent an
irrevocable, non-exclusive and assignable license (exercisable without payment
or royalty or other compensation to the Debtor) to use, license or sublicense
any of the Debtors intellectual property (including, without limitation, the
Debtors trademarks). (c) Proceeds Account. To the extent that any of the Secured Obligations
may be contingent, unmatured or unliquidated (including with respect to undrawn
amounts under the Letters of Credit) at such time as there may exist an Event
of Default, the Collateral Agent may, at its election, (i) retain the proceeds
of any sale, collection, disposition or other realization upon the Collateral
(or any portion thereof) in a special purpose non-interest-bearing restricted
deposit account (the Proceeds Account) created and maintained by the
Collateral Agent for such purpose (which Proceeds Account shall be included
within the Collateral hereunder) until such time as the Collateral Agent may
elect to apply such proceeds to the Secured Obligations, and the Debtor agrees
that such retention of such proceeds by the Collateral Agent shall not be
deemed strict foreclosure with respect thereto; (ii) in any manner elected by
the Collateral Agent, estimate the liquidated amount of any such contingent,
unmatured or unliquidated claims and apply the proceeds of the Collateral
against such amount; or (iii) otherwise proceed in any manner permitted by
applicable law. The Debtor agrees that the Proceeds Account shall be a blocked
account and that upon the irrevocable deposit of funds into the Proceeds
Account, the Debtor shall not have any right of withdrawal with respect to such
funds. Accordingly, the Debtor irrevocably waives until the termination of
this Agreement in accordance with Section 22 the right to make any withdrawal
from the Proceeds Account and the right to instruct the Collateral Agent to
honor drafts against the Proceeds Account. In furtherance of the provisions 14




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of this Section 10(c), the Debtor hereby grants to the Collateral Agent,
as additional security for the Secured Obligations, a security interest in any
and all Proceeds Accounts, whether now existing or hereafter arising and
wherever located. (d) Application of Proceeds. Subject to subsection (c), the cash proceeds
actually received from the sale or other disposition or collection of
Collateral, and any other amounts received in respect of the Collateral, shall
be applied as provided in the Intercreditor Agreement. Any surplus thereof
which exists after payment and performance in full of the Secured Obligations
shall be promptly paid over to the Debtor or otherwise disposed of in
accordance with the Intercreditor Agreement, the UCC or other applicable law.
The Debtor shall remain liable to the Collateral Agent, the Agent, the
Noteholders and the Lenders for any deficiency which exists after any sale or
other disposition or collection of Collateral. SECTION 11 Certain Waivers. The Debtor waives, to the fullest extent
permitted by law, (i) any right of redemption with respect to the Collateral,
whether before or after sale hereunder, and all rights, if any, of marshalling
of the Collateral or other collateral or security for the Secured Obligations;
(ii) any right to require the Collateral Agent, the Agent, the Noteholders or
the Lenders (a) to proceed against any Person, (b) to exhaust any other
collateral or security for any of the Secured Obligations, (c) to pursue any
remedy in the Collateral Agents, the Agents, any Noteholders or any of the
Lenders power, or (d) to make or give any presentments, demands for
performance, notices of nonperformance, protests, notices of protests or
notices of dishonor in connection with any of the Collateral; and (iii) all
claims, damages, and demands against the Collateral Agent, the Agent, the
Noteholders or the Lenders arising out of the repossession, retention, sale or
application of the proceeds of any sale of the Collateral. SECTION 12 Notices. All notices or other communications hereunder shall
be given in the manner and to the addresses specified in the Intercreditor
Agreement. All such notices and other communications shall be deemed to be
delivered when a record (within the meaning of the UCC) has been (i) delivered
by hand; (ii) sent by mail, upon the earlier of the date of receipt or five
Business Days after deposit in the mail, first class (or air mail, with respect
to communications sent to or from the United States); (iii) sent by facsimile
transmission, or (iv) sent by email. SECTION 13 No Waiver; Cumulative Remedies. No failure on the part of the
Collateral Agent, the Agent, any Noteholder or any Lender to exercise, and no
delay in exercising, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, remedy, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights and remedies under this Agreement are cumulative and not exclusive of
any rights, remedies, powers and privileges that may otherwise be available to
the Collateral Agent, the Agent, any Noteholder or any Lender. SECTION 14 Costs and Expenses; Indemnification; Other Charges. (a) Costs and Expenses. The Debtor agrees to pay on demand: 15




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(i) the reasonable out-of-pocket costs and expenses of the Collateral
Agent and any of its Affiliates, and the reasonable fees and disbursements of
counsel to the Collateral Agent (including allocated costs of internal
counsel), in connection with the negotiation, preparation, execution, delivery
and administration of this Agreement, and any amendments, modifications or
waivers of the terms thereof, and the custody of the Collateral; (ii) all title, appraisal (including the allocated costs of internal
appraisal services), survey, audit, consulting, search, recording, filing and
similar fees, costs and expenses incurred or sustained by the Collateral Agent
or any of its Affiliates in connection with this Agreement or the Collateral;
and (iii) all costs and expenses of the Collateral Agent and its Affiliates
and the fees and disbursements of counsel (including the allocated costs of
internal counsel), in connection with the enforcement or attempted enforcement
of, and preservation of any rights or interests under, this Agreement, any
out-of-court workout or other refinancing or restructuring or in any bankruptcy
case, and the protection, sale or collection of, or other realization upon, any
of the Collateral, including all expenses of taking, collecting, holding,
sorting, handling, preparing for sale, selling, or the like, and other such
expenses of sales and collections of Collateral, and any and all losses, costs
and expenses sustained by the Collateral Agent as a result of any failure by
the Debtor to perform or observe its obligations contained herein. (b) Indemnification. The Debtor hereby agrees to indemnify the Collateral
Agent, any Affiliate thereof, and their respective directors, officers,
employees, agents, counsel and other advisors (each an Indemnified Person)
against, and hold each of them harmless from, any and all liabilities,
obligations, losses, claims, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever, including
the reasonable fees and disbursements of counsel to an Indemnified Person
(including allocated costs of internal counsel), which may be imposed on,
incurred by, or asserted against any Indemnified Person, in any way relating to
or arising out of this Agreement or the transactions contemplated hereby or any
action taken or omitted to be taken by it hereunder (the Indemnified
Liabilities); provided that the Debtor shall not be liable to any Indemnified
Person for any portion of such Indemnified Liabilities to the extent they are
found by a final decision of a court of competent jurisdiction to have resulted
from such Indemnified Persons gross negligence or willful misconduct. If and
to the extent that the foregoing indemnification is for any reason held
unenforceable, the Debtor agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. (c) Other Charges. The Debtor agrees to indemnify the Collateral Agent,
the Agent, each Noteholder and each Lender against and hold each of them
harmless from any and all present and future stamp, transfer, documentary and
other such taxes, levies, fees, assessments and other charges made by any
jurisdiction by reason of the execution, delivery, performance and enforcement
of this Agreement. (d) Interest. Any amounts payable to the Collateral Agent, the Agent, any
Noteholder or any Lender under this Section 14 or otherwise under this
Agreement if not paid within 10 calendar days after demand shall thereafter
bear interest until paid in full, at the rate of interest set forth in Section
4.02 of the Credit Agreement. 16




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SECTION 15 Binding Effect. This Agreement shall be binding upon, inure to
the benefit of and be enforceable by the Debtor, the Collateral Agent, the
Agent, each Noteholder and each Lender and their respective successors and
assigns and shall bind any Person who becomes bound as a debtor to this
Agreement. SECTION 16 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, EXCEPT AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND TO THE EXTENT THE VALIDITY OR
PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR THE REMEDIES HEREUNDER, IN
RESPECT OF ANY COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN
NEW YORK. SECTION 17 Entire Agreement; Amendment. This Agreement and the
Intercreditor Agreement contains the entire agreement of the parties with
respect to the subject matter hereof and shall not be amended except by the
written agreement of the parties hereto or as provided in the Intercreditor
Agreement. SECTION 18 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed so modified, it shall be ineffective and invalid only
to the extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such
provision in any other jurisdiction. SECTION 19 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement. SECTION 20 Incorporation of Provisions of the Credit Agreement. To the
extent the Credit Agreement contains provisions of general applicability to the
Loan Documents, including any such provisions contained in Article XIII
thereof, such provisions are incorporated herein by this reference. SECTION 21 No Inconsistent Requirements. The Debtor acknowledges that
this Agreement, the Credit Agreement, the other Loan Documents, the Amended and
Restated Note Agreement and the other Loan Documents (as defined in the Amended
and Restated Note Agreement) may contain covenants and other terms and
provisions variously stated regarding the same or similar matters, and agrees
that all such covenants, terms and provisions are cumulative and all shall be
performed and satisfied in accordance with their respective terms. SECTION 22 Termination. Upon the termination of the Commitments of the
Lenders, the surrender of the Letters of Credit and payment and performance in
full of all Secured Obligations, the security interests created by this
Agreement shall terminate and the 17




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Collateral Agent shall promptly execute and deliver to the Debtor such
documents and instruments reasonably requested by the Debtor as shall be
necessary to evidence termination of all security interests given by the Debtor
to the Collateral Agent hereunder. SECTION 23 Acknowledgments. The Debtor hereby acknowledges and agrees for
the benefit of the Collateral Agent, for itself and on behalf of and for the
ratable benefit of the Agent, the Lenders and the Noteholders, that the
Original Security Agreement, as amended and restated by this Agreement: (i) is
and shall continue to be in full force and effect, without offset or
counterclaim; (ii) is and shall continue to be valid and enforceable; and (iii)
is not and shall not be impaired or affected in any respect by the execution
and delivery of this Agreement or by the execution and delivery of, or the
consummation of the transactions contemplated by, the Credit Agreement and the
Loan Documents, the execution of which shall not be deemed a satisfaction,
cancellation, or novation of any obligation or any obligations of the Debtor
under the Original Security Agreement or any other Loan Document (as defined in
the Existing Credit Agreement). The Debtor hereby restates, reaffirms and
continues the security interest in the existing Collateral created pursuant to
the Original Security Agreement (as amended and restated by this Agreement). [Signatures follow.] 18




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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
as of the date first above written. THE DEBTOREdna Valley Vineyard,A Joint VentureBy
    
    The Chalone Wine Group Ltd.,Managing Joint VenturerBy
    
    /s/ Thomas B. SelfridgeName: Thomas B. SelfridgeTitle: President and CEOTHE COLLATERAL AGENTCooperatieve Centrale Raiffeisen-BoerenleenbankB.A., Rabobank International, New York Branch,as Collateral AgentBy
    
    /s/ John McHughName: John McHughTitle: Vice PresidentBy
    
    /s/ Rebecca MorrowName: Rebecca MorrowTitle: Executive Director
 19




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SCHEDULE 1
to the Security Agreement  1.
    
    Locations of Chief Executive Office and other Locations, including of
Collateral  a.
    
    Chief Executive Office and Principal Place of Business:621 Airpark Road
Napa, California 94558b.
    
    Other locations where Debtors conducts business or Collateral is kept:2585 Biddle Ranch Road,
San Luis Obispo, CA 93401Locations of Books Pertaining to Rights to Payment  2.
    
    Jurisdiction of Organization.  Edna Valley Vineyard     California  3.
    
    Trade Names and Trade Styles; Other Corporate, Trade or Fictitious Names; Etc.  Edna Valley Vineyard  4.
    
    Inventory Stored with Warehousemen or on Leased Premises, Etc.  Henry Wine Group
531 Getty Court
Suite A
Benecia, CA 94510  Tiger Mountain Warehouse
19817 89th Ave. South
Kent, WA 98301 S-1.




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Biagi Warehouse
787 Airpark Road
Napa, CA 94558  5.
    
    Patents, Copyrights, Trademarks, Etc,  Trademarks: EDNA VALLEY  6.
    
    Leased Equipment  General office equipment leases  7.
    
    Deposit Accounts  Wells Fargo Bank  8.
    
    Investment Property  None  9.
    
    Instruments and Chattel Property  None  10.
    
    Commercial Tort Claims  None  11.
    
    Letter of Credit Rights  None S-2.