CONSULTING AND NON-COMPETITION AGREEMENT
This Consulting and Non-Competition Agreement ("Agreement"), dated as
of July 1, 1996, is made between The Chalone Wine Group, Ltd., a California
corporation ("Chalone") and Richard H. Graff, an individual ("Graff").
BACKGROUND
Chalone is engaged in the business of growing grapes and producing wine
in California and the marketing and distribution of such wine throughout the
United States. Graff is experienced in the California wine industry.
Graff is a founding shareholder of Chalone and has significant
expertise and experience in the California wine industry. Chalone desires to
engage Graff to assist Chalone on an as needed part-time basis with wine
marketing and shareholder relations. During the term of this Agreement, Graff
has agreed not to compete with Chalone's business.
Now, therefore, in consideration of the foregoing Background and the
mutual agreements of the parties contained herein, Chalone hereby engages Graff,
and Graff hereby accepts an engagement with Chalone on the following terms:
1. Term. Chalone engages Graff, and Graff accepts an engagement with
Chalone for the period commencing July 1, 1996 and continuing through Graff's
lifetime, unless Graff's engagement is sooner terminated in accordance with this
Agreement. The obligations of Chalone and Graff set forth in Paragraph 7
(Confidentiality) and Paragraph 9 (Termination) will survive the termination of
Graff's engagement.
2. Duties. Graff will perform those marketing duties for Chalone,
consistent with his training and experience, as Chalone from time to time
directs (the "Work"). Chalone will endeavor to give Graff not less than two (2)
weeks notice before any assignment, and the time required of Graff will not
exceed two (2) days per month. Graff agrees that to the best of his ability and
experience he will at all times conscientiously perform all of the duties and
obligations required of him either expressly or implicitly under the terms of
this Agreement.
3. Compensation. Graff will receive Ten Thousand Dollars ($10,000) per
year over the first five (5) years of this Agreement ("Initial Term"). Graff
will receive Twelve Thousand Dollars ($12,000) per year over the subsequent five
(5) years of this Agreement ("Intermediate Term"). Graff will receive Fourteen
Thousand Dollars ($14,000) per year over the remaining term of this Agreement
("Final Term"). Graff will be paid on a quarterly basis on the last day of each
July, October, January, and April.
4. Employee Benefits. Graff will not be entitled to receive from
Chalone insurance, vacation and other benefits.
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5. Reimbursement of Business Expenses. Chalone will, in accordance with
Chalone's policy in effect from time to time, reimburse Graff for all reasonable
business expenses incurred by Graff in connection with the performance of his
duties under this Agreement, provided that they have been preapproved in writing
by Chalone.
6. Supply of Wine. Chalone shall reserve one barrel of wine made from
each grape variety grown on the vineyard located at 101 Stonewall Canyon Road,
Soledad, California ("Vineyard"), for Graff's personal use and not for resale.
Such wine shall include the Mourvedre Vin Gris so long as such grape variety is
grown on the Vineyard. In the case of any variety that Chalone intends to blend
with other wine, such barrel shall be bottled separately for Graff, and Graff
shall pay Chalone $12.00 per case, or as mutually agreed to by both Chalone and
Graff if such costs are higher, to cover Chalone's incidental bottling costs,
and Graff shall be responsible for providing the necessary labels at his own
expense. In the case of any variety that Chalone intends to bottle as a
separate, unblended lot, Graff shall be entitled to have twenty (20) cases
labeled for his personal use, and not for resale, except for the July Muscat and
the Viogner, of which Graff shall be entitled to five (5) cases each, and, as
above, Graff shall pay $12.00 per case, or as mutually agreed to by both Chalone
and Graff if such costs are higher, to cover Chalone's incidental bottling
costs, and Graff shall be responsible for providing the necessary labels.
Chalone agrees that it will bottle such wine for Graff under the Richard Graff
Vineyard label or under such other label as shall be mutually agreed to by Graff
and Chalone.
7. Confidentiality. Graff recognizes and acknowledges that Chalone' s
trade secrets and proprietary information and processes (including information
and materials received in confidence by Chalone from third parties), as they may
exist from time to time, are valuable, special and unique assets of Chalone's
business, access to and knowledge of which are essential to the performance of
Graff's duties hereunder. Graff will not, during or after the term of his
engagement with Chalone, in whole or in part, disclose such secrets, information
or processes to any person, firm, corporation, association or other entity for
any reason or purpose whatsoever, nor shall Graff make use of any such
information or property for his own purposes or for the benefit of any other
person under any circumstances during or after the term of his engagement. After
the term of his engagement these restrictions shall not apply to such secrets,
information and processes which are then in the public domain provided that
Graff was not responsible, directly or indirectly, for such secrets, information
or processes entering the public domain without Chalone's consent.
Graff acknowledges that all customer and client lists, files, records,
documents equipment or similar items relating to Chalone, whether prepared by
Graff or others, are and remain exclusively the property of Chalone and that all
such items will be returned to Chalone upon the termination of this Agreement.
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8. Agreement Not to Compete.
(a) Non-compete. During the term of this Agreement, Graff will
not without the prior written consent of Chalone, which may be withheld in its
sole discretion, directly or indirectly, individually or as an employee,
partner, officer, director or shareholder or in any other capacity whatsoever of
or for any person, firm, partnership or corporation, own, manage, operate, sell,
control or participate in the ownership, management, operation, sales or control
of, or be connected in any manner with, any business engaged in the growing of
grapes and the production, marketing, or sales of California or Washington wine
(the "Chalone Business").
This Agreement includes within its scope any business
or activity in the cities and counties of California, and any other states of
the United States, the District of Columbia and such foreign jurisdictions in
which Chalone has engaged in sales or otherwise conducted business or selling at
any time during the two years prior to the date hereof or during the term of
this Agreement. Graff acknowledges that the period of restrictions and the
geographical area to which the restrictions imposed in this Paragraph 8(a)
(Non-Compete) will apply are fair and reasonable and are reasonably required for
the protection of Chalone and that the definition of the Chalone Business used
herein accurately describes the business to which the restrictions are intended
to apply. Chalone acknowledges that Graff's sale of the Richard Graff Vineyard
wines that Graff has in his inventory as of the effective date of this Agreement
will not be construed as competition with the Chalone Business.
(b) Remedies. Graff acknowledges that any breach of the
covenants of this Paragraph 8(a) (Non-Compete) will result in immediate and
irreparable injury to Chalone and, accordingly, consents to the application of
injunctive relief and such other equitable remedies for the benefit of Chalone
as may be appropriate in the event such a breach occurs or is threatened. The
foregoing remedies shall be in addition to all other legal remedies to which
Chalone may be entitled hereunder, including, without limitation, monetary
damages.
9. Termination.
(a) For Cause. Chalone may terminate Graff's consulting
agreement at any time with "cause" effective immediately upon written notice to
Graff without prejudice to any other remedy which Chalone may be entitled under
law, in equity, or under this Agreement. As used in this Agreement, "cause" will
mean an intentional tort or material act of fraud or dishonesty against Chalone,
the commission of a felony involving dishonesty, moral turpitude or intentional
injury to a third party, the deliberate disregard of Chalone's policies in such
a manner as to cause material loss, damage or injury to the property, reputation
or employees of Chalone or any other material breach of this Agreement including
without limitation a breach of Paragraph 7 (Confidentiality) or Paragraph 8
(Agreement Not to Compete). Graff will receive compensation under Paragraph 3
(Compensation) until the date of termination. All other compensation from and
after the date of termination will cease, and Chalone will have no obligation to
pay any severance pay whatsoever. Graff will have no further obligations under
this Agreement except as set forth in Paragraph 7 (Confidentiality) and this
Paragraph 9 (Termination).
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(b) Voluntary Termination. In the event Graff terminates his engagement
of his own volition, prior to the termination date of this Agreement under
Paragraph 1, Graff will be subject to the same obligations as provided in
connection with a termination for "cause" under Paragraph 9(a).
10. Miscellaneous.
(a) Notices. Any and all notices permitted or required under
this Agreement must be in writing. Notices will be deemed given (i) when
delivered personally, (ii) one business day after having been sent by commercial
overnight courier with written verification of receipt, or (iii) five (5) days
after having been sent by registered or certified mail from a location on the
United States mainland, return receipt requested, postage prepaid or upon actual
receipt thereof, whichever first occurs at the addresses set forth below:
If to Chalone: The Chalone Wine Group, Ltd.
621 Airpark Road
Napa, California 94558
Phone: (707) 254-4200
Fax: (707) 254-4201
Attn.: W. Philip Woodward
If to Graff: Richard H. Graff
c/o Chalone Wine Group, Ltd.
621 Airpark Road
Napa, California 94558
Phone: (707) 254-4200
Fax: (707) 254-4201
(b) Amendments. This Agreement may not be changed or modified
in whole or in part except in writing signed by the party against whom
enforcement of the change or modification is sought.
(c) Successors and Assigns. This Agreement will not be
assignable by either Graff or Chalone, except that the rights and obligations of
Chalone under this Agreement will be assigned to and assumed by any corporation
which becomes the successor to Chalone as the result of the sale of
substantially all of the assets of, a merger or other corporate reorganization
and which continues the business of Chalone.
(d) Governing Law. This Agreement will be governed by and
interpreted according to the laws of the State of California without regard to
such state's conflicts law.
(e) No Waiver. The failure of either party to insist on strict
compliance with any of the terms of this
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Agreement will not be deemed to be a waiver of any term of this Agreement or of
that party's right to require strict compliance with the terms of this Agreement
in any other instance.
(f) Severability. If for any reason a court of competent
jurisdiction finds any provision of this Agreement, or the application thereof,
to be unenforceable, the remaining provisions of this Agreement will be
interpreted so as best to reasonably effect the intent of the parties. The
parties further agree to replace any such invalid or unenforceable provisions
with valid and enforceable provisions designed to achieve, to the extent
possible, the business purposes and intent of such unenforceable provisions.
(g) Attorney's Fees. In the event of any breach of this
Agreement that results in arbitration or litigation between the parties, the
prevailing party shall be entitled to its reasonable attorney's fees, expert
witness fees and costs of suit. The prevailing party shall be determined by the
court or arbitrator, as applicable, based upon an assessment of which party's
major arguments or positions taken in the proceedings could fairly be said to
have prevailed over the other party's major arguments or positions on major
disputed issues in the court's or arbitrator's decision.
(h) Counterparts. This Agreement may be executed in
counterparts. Any copy of this Agreement with the original signatures of all
parties appended shall constitute an original.
In Witness Whereof, this Agreement is made and effective as of the day
and year first above written.
GRAFF:
/s/ RICHARD H. GRAFF
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RICHARD H. GRAFF
Chalone:
THE CHALONE WINE GROUP, LTD.,
a California corporation
By: /s/ W. PHILIP WOODWARD
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Its: President