KENCO Restaurants, Inc. et al. - Page 3

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                                  FINDINGS OF FACT                                    
          Introduction                                                                
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts, with accompanying exhibits, is                    
          incorporated herein by this reference.  At the time of the filing           
          of the petitions in these cases, the principal places of business           
          of all petitioners were in Ohio.                                            
          The Commonly Owned Group                                                    
               Petitioners are members of a commonly owned group of                   
          14 corporations (the group).  Except for one member of the group,           
          BKK Management, Inc. (BKK), each member of the group either owns            
          and operates one or more Taco Bell restaurants or owns the real             
          estate on which another member of the group operates a Taco Bell            
          restaurant.  BKK provides management and administrative support             
          services to the other 13 members of the group.  During the years            
          at issue, each member of the group was owned in equal shares by             
          George L. Kentris (G. Kentris), Michael N. Kentris (M. Kentris),            
          and Kenneth J. Baerwaldt (Baerwaldt), either individually or                
          together with their spouses.  Messrs. G. Kentris, M. Kentris, and           
          Baerwaldt were also the directors and managing officers of each             
          member of the group (collectively, the owner-managers).                     
          BKK Management, Inc.                                                        
               BKK was established as a “cost company”, to provide                    
          management and administrative support services to the other                 
          members of the group (the purchasing members) at cost.  Among the           




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