**Exhibit 10.74**
**CHALONE WINE GROUP, LTD.**
**CHANGE OF CONTROL SEVERANCE AGREEMENT**
     This Change of Control Severance Agreement (the “Agreement”) is made andentered into by and between **Alan Drage**(the “Employee”) and Chalone Wine Group,Ltd. (the “Company”), effective as of the latest date set forth by thesignatures of the parties hereto below (the “Effective Date”).
R E C I T A L S
     A. It is expected that the Company from time to time will consider thepossibility of an acquisition by another company or other change of control.The Board of Directors of the Company (the “Board”) recognizes that suchconsideration can be a distraction to the Employee and can cause the Employeeto consider alternative employment opportunities. The Board has determinedthat it is in the best interests of the Company and its shareholders to assurethat the Company will have the continued dedication and objectivity of theEmployee, notwithstanding the possibility, threat or occurrence of a Change ofControl (as defined below) of the Company.
     B. The Board believes that it is in the best interests of the Company andits shareholders to provide the Employee with an incentive to continue hisemployment and to motivate the Employee to maximize the value of the Companyupon a Change of Control for the benefit of its shareholders.
     C. The Board believes that it is imperative to provide the Employee withseverance benefits upon the Employee’s termination of employment following aChange of Control that provides the Employee with enhanced financial securityand provides incentive and encouragement to the Employee to remain with theCompany notwithstanding the possibility of a Change of Control.
     D. Certain capitalized terms used in the Agreement are defined in Section6 below.
     The parties hereto agree as follows:
     1. Term of Agreement. This Agreement shall terminate upon the date thatall obligations of the parties hereto with respect to this Agreement have beensatisfied.
     2. At-Will Employment. The Company and the Employee acknowledge that theEmployee’s employment is and shall continue to be “at-will,” as defined underapplicable law. If the Employee’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
 

 

as may otherwise be available in accordance with the Company’s establishedemployee plans or pursuant to other written agreements with the Company.
     3. Change of Control Severance Benefits.
          (a) Involuntary Termination other than for Cause, Death or Disability orVoluntary Termination for Good Reason Following A Change of Control. If,within twelve (12) months following a Change of Control, Employee’s employmentis terminated involuntarily by the Company other than for Cause, death orDisability or by the Employee pursuant to a Voluntary Termination for GoodReason, then the Company shall provide the Employee with the benefits as setforth below:
               (i) Cash Award. On the date of such involuntary termination by theCompany other than for Cause, death or Disability or on Employee’s VoluntaryTermination for Good Reason, Employee shall be entitled to receive a lump sumpayment in the amount of one hundred percent (100%) of Employee’s annual basesalary as in effect immediately prior to such termination, in addition to anyother earned but unpaid base salary or vacation pay due through the date ofsuch termination. The foregoing payment shall replace and be in lieu of anyother severance benefit to which Employee would otherwise be entitled followinga Change of Control.
               (ii) Acceleration of Equity Awards. On the date such involuntarytermination by the Company other than for Cause, death or Disability or onEmployee’s Voluntary Termination for Good Reason occurs, (AA) the outstandingand unvested options to purchase the common stock of the Company granted underany equity plan of the Company, (BB) any restricted stock and (CC) any otherequity awards then held by Employee shall be accelerated in full, andthereafter all such options, restricted stock and other equity awards shall beimmediately vested and exercisable for such period of time followingtermination as provided for by the specific agreements governing each suchaward.
               (iii) Benefits Continuation. For the period beginning on the date of suchinvoluntary termination by the Company other than for Cause, death orDisability or Employee’s Voluntary Termination for Good Reason occurs andending on the earlier of (AA) the date which is one (1) year following the dateof such termination or (BB) the date upon which Employee commences receivinggenerally comparable medical benefits and life insurance coverage throughemployment elsewhere, the Company shall pay for and provide Employee andEmployee’s dependents with the same medical benefits and life insurancecoverage to which Employee would have been entitled had Employee remainedcontinuously employed by the Company during such period. At the termination ofthe benefits coverage due to the occurrence of the event described insubsection (AA) of this paragraph (iii), Employee and Employee’s dependentsshall be entitled to continuation coverage pursuant to Section 4980B of theInternal Revenue Code of 1986, as amended (the “Code”), Sections 601-608 of theEmployee Retirement Income Security Act of 1974, as amended, and under anyother applicable law, to the extent required by such laws, as if Employee hadterminated employment with the Company on the date such benefits coverageterminates.
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          (b) Voluntary Resignation; Termination For Cause. If the Employee’semployment terminates by reason of the Employee’s voluntary resignation (and isnot a Voluntary Termination for Good Reason), or if the Employee is terminatedfor Cause, then the Employee shall not be entitled to receive severance orother benefits except for those (if any) as may then be establishedunder the Company’s then existing severance and benefits plans or pursuantto other written agreements with the Company.
          (c) Disability; Death. If the Employee’s employment with the Companyterminates as a result of the Employee’s Disability, or if the Employee’semployment is terminated due to the death of the Employee, then the Employeeshall not be entitled to receive severance or other benefits except for those(if any) as may then be established under the Company’s then existing severanceand benefits plans or pursuant to other written agreements with the Company.
          (d) Termination Apart from Change of Control. In the event the Employee’semployment is terminated for any reason not related to a Change of Controlprior to the occurrence of a Change of Control, or for any reason after thetwelve (12) month period following a Change of Control, then the Employee shallbe entitled to receive severance and any other benefits only as may then beestablished under the Company’s existing severance and benefits plans orpursuant to other written agreements with the Company.
     6. Definition of Terms. The following terms referred to in this Agreementshall have the following meanings:
          (a) Cause. “Cause” shall mean (i) an act of personal dishonesty taken bythe Employee in connection with his responsibilities as an employee andintended to result in substantial personal enrichment of the Employee, (ii) theEmployee’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 isinjurious to the Company, (iv) following delivery to the Employee of a writtendemand for performance from the Company which describes the basis for theCompany’s reasonable belief that the Employee has not substantially performedhis duties, continued violations by the Employee of the Employee’s obligationsto the Company that are demonstrably willful and deliberate on the Employee’spart.
          (b) Change of Control. “Change of Control” means the occurrence of any ofthe following events:
                    (1) Any “person” (as such term is used in Sections 13(d) and 14(d) of theSecurities Exchange Act of 1934, as amended) becoming the “beneficial owner”(as defined in Rule 13d-3 under said Act), directly or indirectly, ofsecurities of the Company representing fifty percent (50%) or more of the totalvoting power represented by the Company’s then outstanding voting securities;
                    (2) A change in the composition of the Board of Directors of the Companyoccurring within a thirty-six (36) month period, as a result of which fewerthan a majority of the directors are Incumbent Directors. “IncumbentDirectors” shall mean directors who either
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(A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Boardof Directors of the Company with the affirmative votes of at least a majorityof the Incumbent Directors at the time of such election or nomination (butshall not include an individual not otherwise an Incumbent Director whoseelection or nomination is in connection with an actual or threatened proxycontest relating to the election of directors to the Company); or
                    (3) The approval by shareholders of the Company of a merger orconsolidation of the Company with any other corporation, other than a merger orconsolidation which would result in the voting securities of the Companyoutstanding immediately prior thereto continuing to represent (either byremaining outstanding or by being converted into voting securities of thesurviving entity) at least fifty percent (50%) of the total voting powerrepresented by the voting securities of the Company or such surviving entityoutstanding immediately after such merger or consolidation, or the approval bythe shareholders of the Company of a plan of complete liquidation of theCompany or an agreement for the sale or disposition by Company of all orsubstantially all the Company’s assets.
          (c) Disability. “Disability” shall mean that the Employee has been unableto perform his Company duties as the result of his incapacity due to physicalor mental illness, and such inability, at least 26 weeks after itscommencement, is determined to be total and permanent by a physician selectedby the Company or its insurers and acceptable to the Employee or the Employee’slegal representative (such Agreement as to acceptability not to be unreasonablywithheld). Termination resulting from Disability may only be effected after atleast thirty (30) days’ written notice by the Company of its intention toterminate the Employee’s employment. In the event that the Employee resumesthe performance of substantially all of his duties hereunder before thetermination of his employment becomes effective, the notice of intent toterminate shall automatically be deemed to have been revoked.
          (d) Voluntary Termination for Good Reason. “Voluntary Termination forGood Reason” shall mean the Employee voluntarily resigns after the occurrenceof any of the following (i) without the Employee’s express written consent, amaterial reduction of the Employee’s duties, title, authority orresponsibilities; provided, however, that a reduction in duties, title,authority or responsibilities solely by virtue of the Company being acquiredand made part of a larger entity (e.g., when the Chief Financial Officer of theCompany remains as such following a Change of Control and is not made the ChiefFinancial Officer of the acquiring corporation) shall not by itself constitutegrounds for a “Voluntary Termination for Good Reason;” (ii) without theEmployee’s express written consent a reduction in the base salary of theEmployee greater than ten percent (10%); (iii) the relocation of the Employeeto a facility or a location more than forty-five (45) miles from the Employee’sthen present location of employment; (iv) the failure of the Company to obtainthe assumption of this agreement by any successors contemplated in Section 7(a)below.
     7. Successors.
          (a) Company’s Successors. Any successor to the Company (whether direct orindirect and whether by purchase, merger, consolidation, liquidation orotherwise) to all or substantially all of the Company’s business and/or assetsshall assume the obligations under this Agreement
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and agree expressly to perform the obligations under this Agreement in the same manner and to the sameextent as the Company would be required to perform such obligations in theabsence of a succession. For all purposes under this Agreement, the term“Company” shall include any successor to the Company’s business and/or assetswhich executes and delivers the assumption agreement described in this Section7(a) or which becomes bound by the terms of this Agreement by operation of law.
          (b) Employee’s Successors. The terms of this Agreement and all rights ofthe Employee hereunder shall inure to the benefit of, and be enforceable by,the Employee’s personal or legal representatives, executors, administrators,successors, heirs, distributees, devisees and legatees.
     8. Notice.
          (a) General. Notices and all other communications contemplated by thisAgreement shall be in writing and shall be deemed to have been duly given whenpersonally delivered or one day following mailing via Federal Express orsimilar overnight courier service. In the case of the Employee, mailed noticesshall be addressed to the Employee at the Employee’s home address that theCompany has on file for the Employee. In the case of the Company, mailednotices shall be addressed to its corporate headquarters, and all notices shallbe directed to the attention of its Secretary.
          (b) Notice of Termination. Any termination by the Company for Cause or bythe Employee pursuant to a Voluntary Termination for Good Reason shall becommunicated by a notice of termination to the other party hereto given inaccordance with Section 8(a) of this Agreement. Such notice shall indicate thespecific termination provision in this Agreement relied upon, shall set forthin reasonable detail the facts and circumstances claimed to provide a basis fortermination under the provision so indicated, and shall specify the terminationdate (which shall be not more than thirty (30) days after the giving of suchnotice). The failure by the Employee to include in the notice any fact orcircumstance that contributes to a showing of Voluntary Termination for GoodReason shall not waive any right of the Employee hereunder or preclude theEmployee from asserting such fact or circumstance in enforcing his rightshereunder.
     9. Confidentiality; Non-Solicitation.
          (a) Confidentiality. While the Employee is employed by the Company, andthereafter while the Employee receives severance benefits hereunder, theEmployee shall not directly or indirectly disclose or make available to anyperson, firm, corporation, association or other entity for any reason orpurpose whatsoever, any Confidential Information (as defined below). Upontermination of the Employee’s employment with the Company, all ConfidentialInformation in the Employee’s possession that is in written or other tangibleform (together with all copies or duplicates thereof, including computer files)shall be returned to the Company and shall not be retained by the Employee orfurnished to any third party, in any form except as provided herein; *provided,however*, that the Employee shall not be obligated to treat as confidential, orreturn to the Company copies of any Confidential Information that (i) waspublicly known at the time of disclosure to the Employee, (ii) becomes publiclyknown or available thereafter other than by any means in violation of this
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Agreement or any other duty owed to the Company by any person or entity, or(iii) is lawfully disclosed by the Employee by a third party. For purposes ofthis Agreement, the term “Confidential Information” shall mean informationdisclosed to the Employee or known by the Employee as a consequence of orthrough his or her relationship with the Company, about the customers,employees, business methods, public relations methods, organization, proceduresor finances, including, without limitation, information of or relating tocustomer lists, of the Company and its affiliates.
          (b) Non-Solicitation. In addition to each Employee’s obligations underthe Proprietary Information Agreement, the Employee shall not for a period ofone (1) year following the Employee’s termination of employment for any reason,either on the Employee’s own account or jointly with or as a manager, agent,officer, employee, consultant, partner, joint venturer, owner or shareholder orotherwise on behalf of any other person, firm or corporation, directly orindirectly solicit or attempt to solicit away from the Company any of itsofficers or key employees; *provided, however*, that a general advertisement towhich an employee of the Company responds shall in no event be deemed to resultin a breach of this Section 9(b).
          (c) Survival of Provisions. The provisions of this Section 9 shallsurvive the termination or expiration of the applicable Employee’s employmentwith the Company and shall be fully enforceable thereafter. If it isdetermined by a court of competent jurisdiction in any state that anyrestriction in this Section 9 is excessive in duration or scope or isunreasonable or unenforceable under the laws of that state, it is the intentionof the parties that such restriction may be modified or amended by the court torender it enforceable to the maximum extent permitted by the law of that state.
     10. Arbitration and Equitable Relief.
          (a) Except as provided in Section 10(d) below, the Employee and theCompany agree that to the extent permitted by law, any dispute or controversyarising out of, relating to, or in connection with this Agreement, or theinterpretation, validity, construction, performance, breach, or terminationthereof will be settled by arbitration to be held in the County of Napa,California, in accordance with the National Rules for the Resolution ofEmployment Disputes then in effect of the American Arbitration Association (the“Rules”). The arbitrator may grant injunctions or other relief in such disputeor controversy. The decision of the arbitrator will be final, conclusive andbinding on the parties to the arbitration. Judgment may be entered on thearbitrator’s decision in any court having jurisdiction.
          (b) The arbitrator will apply California law to the merits of any disputeor claim, without reference to rules of conflict of law. The Employee herebyexpressly consent to the personal jurisdiction of the state and federal courtslocated in California for any action or proceeding arising from or relating tothis Agreement and/or relating to any arbitration in which the parties areparticipants.
          (a) The Company will pay the direct costs and expenses of the arbitration.The Company and the Employee are responsible for any attorneys’ fees incurredin connection with enforcing this Agreement.
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          (b) The Company and the Employee may apply to any court of competentjurisdiction for a temporary restraining order, preliminary injunction, orother interim or conservatory relief, as necessary to enforce the provisions ofthis Agreement, without breach of this arbitration agreement and withoutabridgement of the powers of the arbitrator.
     The Employee understands that nothing in this Section 10 modifies theEmployee’s “at-will” employment status with the Company. Either the Companythe Employee can terminate the employment relationship at any time, with orwithout cause.
     THE EMPLOYEE HAS READ AND UNDERSTOOD THIS SECTION 10, WHICH DISCUSSESARBITRATION. THE EMPLOYEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, THEEMPLOYEE AGREES TO THE EXTENT PERMITTED BY LAW, TO SUBMIT ANY FUTURE CLAIMSARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THEINTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH, OR TERMINATIONTHEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES AWAIVER OF THE EMPLOYEE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OFALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EXECUTIVE RELATIONSHIP,INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:
               (i) EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OFTHE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED;NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT ORINTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITHCONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION;
               (ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPALSTATUTE, INCLUDING, BUT NOT LIMITED TO, THE AMERICANS WITH DISABILITIES ACT OF1990, THE FAIR LABOR STANDARDS ACT, AND ANY LAW OF ANY STATE; AND
               (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONSRELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
     11. Miscellaneous Provisions.
          (a) Waiver. No provision of this Agreement shall be modified, waived ordischarged unless the modification, waiver or discharge is agreed to in writingand signed by the Employee and by an authorized officer of the Company (otherthan the Employee). No waiver by either party of any breach of, or ofcompliance with, any condition or provision of this Agreement by the otherparty shall be considered a waiver of any other condition or provision or ofthe same condition or provision at another time.
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          (b) Whole Agreement. No agreements, representations or understandings(whether oral or written and whether express or implied) which are notexpressly set forth in this Agreement have been made or entered into by eitherparty with respect to the subject matter hereof. This Agreement and theProprietary Information Agreement represent the entire understanding of theparties hereto with respect to the subject matter hereof and supersedes allprior arrangements and understandings regarding same.
          (c) Choice of Law. The validity, interpretation, construction andperformance of this Agreement shall be governed by the laws of the State ofCalifornia.
          (d) Severability. The invalidity or unenforceability of any provision orprovisions of this Agreement shall not affect the validity or enforceability ofany other provision hereof, which shall remain in full force and effect.
          (e) Counterparts. This Agreement may be executed in counterparts, each ofwhich shall be deemed an original, but all of which together will constituteone and the same instrument.
     IN WITNESS WHEREOF, each of the parties has executed this Agreement, inthe case of the Company by its duly authorized officer, as of the day and yearset forth below.       **CHALONE WINE GROUP, LTD.**      By: /s/ Tom Selfridge