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From October 1974 until May 1975, one of Dutchess' principal
customers, to which it sold processed apples, was Entenmann's
Bakery, located in Bay Shore, New York. Dutchess did not grow
its own apples. It purchased apples from United Apple Co.,
Agway, Inc. (Agway), located in Syracuse, New York, and local
independent growers. Agway was a primary supplier to Dutchess.
Dutchess was undercapitalized and could purchase apples from
Agway only on credit. Agway required Glenn Peterson and the
other officers of Dutchess to sign a continuing guarantee under
which each officer was jointly and severally liable for the debts
of Dutchess to Agway, in an amount not to exceed $300,000.
Petitioner signed the "Continuing Guarantee" on October 22, 1974.
Dutchess also obtained financing from First National City Bank of
New York, in the amount of $25,000, and from Citibank Eastern of
Albany, New York, in the amount of $200,000, based on personal
guarantees from John Peterson.
Dutchess drew down on the line of credit extended by Agway,
to the extent of $75,810 as of January 1975. In February 1975,
Dutchess made a repayment of $25,000 to Agway. In April 1975, by
which time Dutchess was indebted to Agway for approximately
$140,000, Dutchess provided Agway with a check for $15,000, and
2(...continued)
shareholder/officer/employees" of Dutchess. The brief also
states that in September and October 1975, petitioner was a one-
third shareholder.
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