CHALONE WINE GROUP LTD
EXHIBIT 10.74
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<TYPE>EX-10.74
<SEQUENCE>10
<FILENAME>f03009exv10w74.htm
<DESCRIPTION>EXHIBIT 10.74
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<P align="right" style="font-size: 10pt"><B>Exhibit&nbsp;10.74</B>



<P align="center" style="font-size: 10pt"><B>CHALONE WINE GROUP, LTD.</B>



<P align="center" style="font-size: 10pt"><B>CHANGE OF CONTROL SEVERANCE AGREEMENT</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Change of Control Severance Agreement (the &#147;Agreement&#148;) is made and
entered into by and between <B>Alan Drage </B>(the &#147;Employee&#148;) and Chalone Wine Group,
Ltd. (the &#147;Company&#148;), effective as of the latest date set forth by the
signatures of the parties hereto below (the &#147;Effective Date&#148;).


<P align="center" style="font-size: 10pt">R E C I T A L S



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control.
The Board of Directors of the Company (the &#147;Board&#148;) recognizes that such
consideration can be a distraction to the Employee and can cause the Employee
to consider alternative employment opportunities. The Board has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication and objectivity of the
Employee, notwithstanding the possibility, threat or occurrence of a Change of
Control (as defined below) of the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;The Board believes that it is in the best interests of the Company and
its shareholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its shareholders.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;The Board believes that it is imperative to provide the Employee with
severance benefits upon the Employee&#146;s termination of employment following a
Change of Control that provides the Employee with enhanced financial security
and provides incentive and encouragement to the Employee to remain with the
Company notwithstanding the possibility of a Change of Control.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;Certain capitalized terms used in the Agreement are defined in Section
6 below.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The parties hereto agree as follows:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;Term of Agreement. This Agreement shall terminate upon the date that
all obligations of the parties hereto with respect to this Agreement have been
satisfied.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;At-Will Employment. The Company and the Employee acknowledge that the
Employee&#146;s employment is and shall continue to be &#147;at-will,&#148; as defined under
applicable law. If the Employee&#146;s employment terminates for any lawful reason,
including (without limitation) any termination prior to a Change of Control,
the Employee shall not be entitled to any contractual payments, benefits,
damages, awards or compensation other than as provided by this Agreement, or


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<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">as may otherwise be available in accordance with the Company&#146;s established
employee plans or pursuant to other written agreements with the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;Change of Control Severance Benefits.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Involuntary Termination other than for Cause, Death or Disability or
Voluntary Termination for Good Reason Following A Change of Control. If,
within twelve (12)&nbsp;months following a Change of Control, Employee&#146;s employment
is terminated involuntarily by the Company other than for Cause, death or
Disability or by the Employee pursuant to a Voluntary Termination for Good
Reason, then the Company shall provide the Employee with the benefits as set
forth below:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Cash Award. On the date of such involuntary termination by the
Company other than for Cause, death or Disability or on Employee&#146;s Voluntary
Termination for Good Reason, Employee shall be entitled to receive a lump sum
payment in the amount of one hundred percent (100%) of Employee&#146;s annual base
salary as in effect immediately prior to such termination, in addition to any
other earned but unpaid base salary or vacation pay due through the date of
such termination. The foregoing payment shall replace and be in lieu of any
other severance benefit to which Employee would otherwise be entitled following
a Change of Control.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;Acceleration of Equity Awards. On the date such involuntary
termination by the Company other than for Cause, death or Disability or on
Employee&#146;s Voluntary Termination for Good Reason occurs, (AA)&nbsp;the outstanding
and unvested options to purchase the common stock of the Company granted under
any equity plan of the Company, (BB)&nbsp;any restricted stock and (CC)&nbsp;any other
equity awards then held by Employee shall be accelerated in full, and
thereafter all such options, restricted stock and other equity awards shall be
immediately vested and exercisable for such period of time following
termination as provided for by the specific agreements governing each such
award.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;Benefits Continuation. For the period beginning on the date of such
involuntary termination by the Company other than for Cause, death or
Disability or Employee&#146;s Voluntary Termination for Good Reason occurs and
ending on the earlier of (AA)&nbsp;the date which is one (1)&nbsp;year following the date
of such termination or (BB)&nbsp;the date upon which Employee commences receiving
generally comparable medical benefits and life insurance coverage through
employment elsewhere, the Company shall pay for and provide Employee and
Employee&#146;s dependents with the same medical benefits and life insurance
coverage to which Employee would have been entitled had Employee remained
continuously employed by the Company during such period. At the termination of
the benefits coverage due to the occurrence of the event described in
subsection (AA)&nbsp;of this paragraph (iii), Employee and Employee&#146;s dependents
shall be entitled to continuation coverage pursuant to Section&nbsp;4980B of the
Internal Revenue Code of 1986, as amended (the &#147;Code&#148;), Sections&nbsp;601-608 of the
Employee Retirement Income Security Act of 1974, as amended, and under any
other applicable law, to the extent required by such laws, as if Employee had
terminated employment with the Company on the date such benefits coverage
terminates.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Voluntary Resignation; Termination For Cause. If the Employee&#146;s
employment terminates by reason of the Employee&#146;s voluntary resignation (and is
not a Voluntary Termination for Good Reason), or if the Employee is terminated
for Cause, then the Employee shall not be entitled to receive severance or
other benefits except for those (if any) as may then be established
under the Company&#146;s then existing severance and benefits plans or pursuant
to other written agreements with the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Disability; Death. If the Employee&#146;s employment with the Company
terminates as a result of the Employee&#146;s Disability, or if the Employee&#146;s
employment is terminated due to the death of the Employee, then the Employee
shall not be entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company&#146;s then existing severance
and benefits plans or pursuant to other written agreements with the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Termination Apart from Change of Control. In the event the Employee&#146;s
employment is terminated for any reason not related to a Change of Control
prior to the occurrence of a Change of Control, or for any reason after the
twelve (12)&nbsp;month period following a Change of Control, then the Employee shall
be entitled to receive severance and any other benefits only as may then be
established under the Company&#146;s existing severance and benefits plans or
pursuant to other written agreements with the Company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Cause. &#147;Cause&#148; shall mean (i)&nbsp;an act of personal dishonesty taken by
the Employee in connection with his responsibilities as an employee and
intended to result in substantial personal enrichment of the Employee, (ii)&nbsp;the
Employee&#146;s conviction of, or plea of guilty or no contest to, any felony, (iii)
a willful act by the Employee which constitutes gross misconduct and which is
injurious to the Company, (iv)&nbsp;following delivery to the Employee of a written
demand for performance from the Company which describes the basis for the
Company&#146;s reasonable belief that the Employee has not substantially performed
his duties, continued violations by the Employee of the Employee&#146;s obligations
to the Company that are demonstrably willful and deliberate on the Employee&#146;s
part.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Change of Control. &#147;Change of Control&#148; means the occurrence of any of
the following events:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;Any &#147;person&#148; (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) becoming the &#147;beneficial owner&#148;
(as defined in Rule&nbsp;13d-3 under said Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the total
voting power represented by the Company&#146;s then outstanding voting securities;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;A change in the composition of the Board of Directors of the Company
occurring within a thirty-six (36)&nbsp;month period, as a result of which fewer
than a majority of the directors are Incumbent Directors. &#147;Incumbent
Directors&#148; shall mean directors who either


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<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">(A)&nbsp;are directors of the Company as of the date hereof, or (B)&nbsp;are elected, or nominated for election, to the Board
of Directors of the Company with the affirmative votes of at least a majority
of the Incumbent Directors at the time of such election or nomination (but
shall not include an individual not otherwise an Incumbent Director whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company); or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;The approval by shareholders of the Company of a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the approval by
the shareholders of the Company of a plan of complete liquidation of the
Company or an agreement for the sale or disposition by Company of all or
substantially all the Company&#146;s assets.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Disability. &#147;Disability&#148; shall mean that the Employee has been unable
to perform his Company duties as the result of his incapacity due to physical
or mental illness, and such inability, at least 26&nbsp;weeks after its
commencement, is determined to be total and permanent by a physician selected
by the Company or its insurers and acceptable to the Employee or the Employee&#146;s
legal representative (such Agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after at
least thirty (30)&nbsp;days&#146; written notice by the Company of its intention to
terminate the Employee&#146;s employment. In the event that the Employee resumes
the performance of substantially all of his duties hereunder before the
termination of his employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Voluntary Termination for Good Reason. &#147;Voluntary Termination for
Good Reason&#148; shall mean the Employee voluntarily resigns after the occurrence
of any of the following (i)&nbsp;without the Employee&#146;s express written consent, a
material reduction of the Employee&#146;s duties, title, authority or
responsibilities; provided, however, that a reduction in duties, title,
authority or responsibilities solely by virtue of the Company being acquired
and made part of a larger entity (e.g., when the Chief Financial Officer of the
Company remains as such following a Change of Control and is not made the Chief
Financial Officer of the acquiring corporation) shall not by itself constitute
grounds for a &#147;Voluntary Termination for Good Reason;&#148; (ii)&nbsp;without the
Employee&#146;s express written consent a reduction in the base salary of the
Employee greater than ten percent (10%); (iii)&nbsp;the relocation of the Employee
to a facility or a location more than forty-five (45)&nbsp;miles from the Employee&#146;s
then present location of employment; (iv)&nbsp;the failure of the Company to obtain
the assumption of this agreement by any successors contemplated in Section 7(a)
below.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;Successors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Company&#146;s Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company&#146;s business and/or assets
shall assume the obligations under this Agreement


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<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">and agree expressly to perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
&#147;Company&#148; shall include any successor to the Company&#146;s business and/or assets
which executes and delivers the assumption agreement described in this Section
7(a) or which becomes bound by the terms of this Agreement by operation of law.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Employee&#146;s Successors. The terms of this Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee&#146;s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;Notice.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;General. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or one day following mailing via Federal Express or
similar overnight courier service. In the case of the Employee, mailed notices
shall be addressed to the Employee at the Employee&#146;s home address that the
Company has on file for the Employee. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Notice of Termination. Any termination by the Company for Cause or by
the Employee pursuant to a Voluntary Termination for Good Reason shall be
communicated by a notice of termination to the other party hereto given in
accordance with Section 8(a) of this Agreement. Such notice shall indicate the
specific termination provision in this Agreement relied upon, shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the termination
date (which shall be not more than thirty (30)&nbsp;days after the giving of such
notice). The failure by the Employee to include in the notice any fact or
circumstance that contributes to a showing of Voluntary Termination for Good
Reason shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his rights
hereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;Confidentiality; Non-Solicitation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Confidentiality. While the Employee is employed by the Company, and
thereafter while the Employee receives severance benefits hereunder, the
Employee shall not directly or indirectly disclose or make available to any
person, firm, corporation, association or other entity for any reason or
purpose whatsoever, any Confidential Information (as defined below). Upon
termination of the Employee&#146;s employment with the Company, all Confidential
Information in the Employee&#146;s possession that is in written or other tangible
form (together with all copies or duplicates thereof, including computer files)
shall be returned to the Company and shall not be retained by the Employee or
furnished to any third party, in any form except as provided herein; <I>provided,
however</I>, that the Employee shall not be obligated to treat as confidential, or
return to the Company copies of any Confidential Information that (i)&nbsp;was
publicly known at the time of disclosure to the Employee, (ii)&nbsp;becomes publicly
known or available thereafter other than by any means in violation of this


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<P align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Agreement or any other duty owed to the Company by any person or entity, or
(iii)&nbsp;is lawfully disclosed by the Employee by a third party. For purposes of
this Agreement, the term &#147;Confidential Information&#148; shall mean information
disclosed to the Employee or known by the Employee as a consequence of or
through his or her relationship with the Company, about the customers,
employees, business methods, public relations methods, organization, procedures
or finances, including, without limitation, information of or relating to
customer lists, of the Company and its affiliates.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Non-Solicitation. In addition to each Employee&#146;s obligations under
the Proprietary Information Agreement, the Employee shall not for a period of
one (1)&nbsp;year following the Employee&#146;s termination of employment for any reason,
either on the Employee&#146;s own account or jointly with or as a manager, agent,
officer, employee, consultant, partner, joint venturer, owner or shareholder or
otherwise on behalf of any other person, firm or corporation, directly or
indirectly solicit or attempt to solicit away from the Company any of its
officers or key employees; <I>provided, however</I>, that a general advertisement to
which an employee of the Company responds shall in no event be deemed to result
in a breach of this Section&nbsp;9(b).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Survival of Provisions. The provisions of this Section&nbsp;9 shall
survive the termination or expiration of the applicable Employee&#146;s employment
with the Company and shall be fully enforceable thereafter. If it is
determined by a court of competent jurisdiction in any state that any
restriction in this Section&nbsp;9 is excessive in duration or scope or is
unreasonable or unenforceable under the laws of that state, it is the intention
of the parties that such restriction may be modified or amended by the court to
render it enforceable to the maximum extent permitted by the law of that state.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;Arbitration and Equitable Relief.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Except as provided in Section 10(d) below, the Employee and the
Company agree that to the extent permitted by law, any dispute or controversy
arising out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach, or termination
thereof will be settled by arbitration to be held in the County of Napa,
California, in accordance with the National Rules for the Resolution of
Employment Disputes then in effect of the American Arbitration Association (the
&#147;Rules&#148;). The arbitrator may grant injunctions or other relief in such dispute
or controversy. The decision of the arbitrator will be final, conclusive and
binding on the parties to the arbitration. Judgment may be entered on the
arbitrator&#146;s decision in any court having jurisdiction.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The arbitrator will apply California law to the merits of any dispute
or claim, without reference to rules of conflict of law. The Employee hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in California for any action or proceeding arising from or relating to
this Agreement and/or relating to any arbitration in which the parties are
participants.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Company will pay the direct costs and expenses of the arbitration.
The Company and the Employee are responsible for any attorneys&#146; fees incurred
in connection with enforcing this Agreement.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Company and the Employee may apply to any court of competent
jurisdiction for a temporary restraining order, preliminary injunction, or
other interim or conservatory relief, as necessary to enforce the provisions of
this Agreement, without breach of this arbitration agreement and without
abridgement of the powers of the arbitrator.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Employee understands that nothing in this Section&nbsp;10 modifies the
Employee&#146;s &#147;at-will&#148; employment status with the Company. Either the Company
the Employee can terminate the employment relationship at any time, with or
without cause.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THE EMPLOYEE HAS READ AND UNDERSTOOD THIS SECTION 10, WHICH DISCUSSES
ARBITRATION. THE EMPLOYEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, THE
EMPLOYEE AGREES TO THE EXTENT PERMITTED BY LAW, TO SUBMIT ANY FUTURE CLAIMS
ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE
INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH, OR TERMINATION
THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A
WAIVER OF THE EMPLOYEE&#146;S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF
ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EXECUTIVE RELATIONSHIP,
INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF
THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED;
NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR
INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH
CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL
STATUTE, INCLUDING, BUT NOT LIMITED TO, THE AMERICANS WITH DISABILITIES ACT OF
1990, THE FAIR LABOR STANDARDS ACT, AND ANY LAW OF ANY STATE; AND


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS
RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;Miscellaneous Provisions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of
the same condition or provision at another time.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Whole Agreement. No agreements, representations or understandings
(whether oral or written and whether express or implied) which are not
expressly set forth in this Agreement have been made or entered into by either
party with respect to the subject matter hereof. This Agreement and the
Proprietary Information Agreement represent the entire understanding of the
parties hereto with respect to the subject matter hereof and supersedes all
prior arrangements and understandings regarding same.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will constitute
one and the same instrument.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
set forth below.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>CHALONE WINE GROUP, LTD.</B></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Tom Selfridge<BR>
<HR align="left" size="1" noshade width="65%"></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Title: President and CEO</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Date: August&nbsp;22, 2004</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>ALAN DRAGE</B></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">/s/ Alan Drage</TD>
</TR>

<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><HR align="left" size="1" noshade width="65%"></TD>
</TR>

<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Signature</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Alan Drage</TD>
</TR>

<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><HR align="left" size="1" noshade width="65%"></TD>
</TR>

<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Print Name</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Date: August&nbsp;22, 2004</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">-8-
</DIV>


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