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Vineyards sold grapes to Winery at market value. Winery
made no payments to Vineyards during 1982 or 1983 for grape
purchases because funds were not available. Vineyards sold
grapes to Winery during 1983 because Mr. Groth believed that
Winery would eventually become successful. During March 1984,
Winery made its first payment to Vineyards for 1982 sauvignon
blanc grapes used in wine being sold at that time. That payment,
and subsequent payments to Vineyards, were made with funds
provided by Winery's line of credit from Bank of America, and the
bank consented to the March 1984 payment. In deciding whether to
approve the payment, the bank considered whether the wines made
from the grapes purchased from Vineyards had been released for
sale, and Vineyards would be paid 6 months after a wine's
release. At that time, Winery customarily released its sauvignon
blanc after 1 year, its chardonnay after 2 years and its cabernet
sauvignon after 3 years. Winery also produced relatively small
quantities of a reserve cabernet sauvignon that was released 1
year after the estate cabernet was released. A subsequent
vintage was not released until the prior one had been sold.
By addenda to subordination agreements dated November 14,
1985, and March 31, 1986, that were executed by it, Vineyards
consented to receive payments from Winery only for those grapes
that had been made into wine that had been released for sale by
Winery for a minimum of 7 months. Vineyards acknowledged,
however, that payments were allowed only to the extent they did
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