Amendment-joint Venture Agreement

EXHIBIT 10.56


SECOND AMENDMENT TO


JOINT VENTURE AGREEMENT


OF


EDNA VALLEY VINEYARD


THIS SECOND AMENDMENT (the "Amendment") is made and entered into as of this ___ day of June, 2002, by and between Paragon Vineyard Co., Inc., a Nevada corporation ("Paragon"), and The Chalone Wine Group, Ltd., a California corporation ("Chalone").


RECITALS


A. Paragon and Chalone entered into a Joint Venture Agreement on April 18, 1980, pursuant to which the parties established the Edna Valley Vineyard Joint Venture. The original Joint Venture Agreement was amended and restated as of January 1, 1991 (hereinafter, the "1991 Joint Venture Agreement"). The 1991 Joint Venture Agreement was amended by the parties pursuant to an amendment dated December 27, 1996 (hereinafter, the "1996 Amendment"). The 1991 Joint Venture Agreement, as amended by the 1996 Amendment, and as amended herein, is referred to hereinafter as the "Joint Venture Agreement," and the joint venture established thereby is referred to hereinafter as the "Joint Venture."


B. Paragon and Chalone desire to amend the Joint Venture Agreement in those respects specified herein, and only in those respects specified herein.


IN CONSIDERATION of the foregoing and the mutual covenants set forth herein, Paragon and Chalone agree as follows:


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1. AMENDMENTS TO ARTICLE V OF THE JOINT VENTURE AGREEMENT
(SUPPLY OF GRAPES BY PARAGON TO THE JOINT VENTURE)


Article V of the Joint Venture Agreement is hereby amended in the following respects and in the following respects only.


Section 5.1(a) is hereby amended in its entirety to read as follows: "(a) Paragon and the Joint Venture shall, concurrently with the execution of this Amendment, enter into the Second Amended and Restated Grape Purchase Agreement (the "Amended Grape Purchase Agreement"), substantially in the form attached hereto as EXHIBIT A. The Joint Venture may, upon Review Committee approval, purchase and resell, or vint as bulk wine, a portion of the grapes required to be purchased by the Joint Venture from Paragon."


2. AMENDMENTS TO ARTICLE VII OF THE JOINT VENTURE AGREEMENT
(DISTRIBUTIONS; ALLOCATION OF INCOME AND LOSS)


Article VII of the Joint Venture Agreement is hereby amended in the following respects and in the following respects only.


Section 7.3 is hereby added to Article VII to read in its entirety as follows:


"7.3 DISTRIBUTIONS


For purposes of covering the estimated taxes of each of the Joint Venture Partners in connection with the Joint Venture, by December 15 of each year, the Joint Venture shall distribute to the Joint Venture Partners cash in the aggregate amount of fifty percent (50%) of the projected earnings of the Joint Venture for that year as reasonably determined by the Managing Joint Venture Partner. In addition, by April 15 of the following year, the Joint Venture shall distribute to the Joint Venture Partners an additional amount of cash sufficient to bring the aggregate amount of distributions made to sixty-seven percent (67%) of the actual earnings of the Joint Venture for the previous year; PROVIDED, HOWEVER, that if by April 15 the Joint Venture has not


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yet determined actual earnings for the previous year, a good faith estimate shall be paid and the Joint Venture shall adjust the foregoing cash distributions totaling sixty-seven percent (67%) to reflect actual earnings once determined.


If the adjustment requires additional distributions to the Joint Venture Partners, the Joint Venture shall make such additional distributions as soon as practically possible. If the aggregate distributions made exceed 67% of actual earnings, the Joint Venture may subtract the overpayment from subsequent distributions to be made to the Joint Venture Partners. In certain years, the Joint Venture Partners may agree to reduce or increase the 67% provided for above.


The Joint Venture computation of profits shall be made according to generally accepted accounting principles and shall be audited by the Company's accountants.


3. AMENDMENTS TO ARTICLE VIII OF THE JOINT VENTURE AGREEMENT
(MANAGEMENT OF THE JOINT VENTURE)


Article VIII of the Joint Venture Agreement is herby amended in the following respects and in the following respects only.


Section 8.3(d) is hereby amended in its entirety to read as follows:


"(d) The Managing Director of the Committee shall be Thomas B. Selfridge, so long as Mr. Selfridge serves as a director of Chalone and so long as Chalone remains ...