ABC Beverage Corp., f.k.a. Beverage America, Inc. - Page 6

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               Second, Cadbury had the contractual right to disapprove any            
          sale of Bottlers’ franchise rights.  Cadbury insisted the                   
          franchise rights be sold only to Coke or Pepsi so that Cadbury              
          products would be placed in Coke or Pepsi vending machines.                 
               Third, buying the bottling facilities would cause friction             
          with Bottlers’ limited partners.  Around 1989, Bottlers replaced            
          some of its original LBO financing by selling equity interests in           
          a limited partnership to approximately 50 independent investors.            
          The limited partners and the management group had different views           
          on how to run Bottlers.  The limited partners wanted an early               
          high return, while the management group emphasized long-term                
          growth.  These divergent views led to many heated communications,           
          threats, and a proxy fight.                                                 
               The management group decided, given these internal and                 
          external business reasons, that it was best to lease the                    
          facilities rather than own them outright.  The management group             
          wanted a third party to buy the bottling facilities from CPA7,              
          assume the lease, and then renegotiate the lease to remove the              
          rent escalators.                                                            
          A Buyer                                                                     
               Bottlers identified G&K Properties, Inc. (G&K) as a                    
          potential buyer that would lease the facilities to Bottlers on              
          renegotiated (and more favorable) terms.  G&K was an unrelated              
          Iowa real estate development company with which Bottlers had                

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Last modified: May 25, 2011