Oakcross Vineyards, LTD., Dennis D. Groth, Tax Matters Partner - Page 6

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               During 1983, Winery began selling some of its 1982 vintage             
          sauvignon blanc.  Once Winery had demonstrated that its wines               
          were salable, during December 1983, Bank of America granted                 
          Winery a $500,000 line of credit and an equipment loan of                   
          $200,000.   As a condition of granting the line of credit, Bank             
          of America required that (1) Vineyards and the Groths subordinate           
          all of the debts owed them by Winery, totaling $893,000, to                 
          Winery's obligations to the bank and (2) no payments on those               
          debts be made by Winery without the bank's consent.  Vineyards              
          accordingly executed a subordination agreement to induce Bank of            
          America to extend credit to Winery.  The bank also required                 
          cross-collateralization by Vineyards and personal guarantees by             
          the Groths of the loan.  During February 1985, Bank of America              
          increased Winery's line of credit to $1,000,000, and continued to           
          require Winery's debts to Vineyards to be subordinate to Winery's           
          obligations to the bank.  Vineyards subsequently executed                   
          subordination agreements dated November 14, 1985, and March 31,             
               During 1986, Winery was not achieving the sales goals                  
          expected by Bank of America, and the bank declined to raise                 
          Winery's line of credit to $1,500,000.  As a consequence, Winery            
          was put in a difficult financial position.  Winery sold some of             
          its 1984 and 1985 vintages in bulk, which fetched a lower price             
          than could have been obtained had the wine been bottled, but                
          which saved costs, as well as unused barrels.  During December              

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