ABC Beverage Corp., f.k.a. Beverage America, Inc. - Page 7

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          previously worked.  G&K was interested in expanding its real                
          estate holdings by buying the facilities.  G&K and Bottlers                 
          drafted a letter of intent formalizing G&K’s intent to purchase             
          the bottling facilities for approximately $18 million.  G&K had             
          identified a life insurance company in Davenport, Iowa, as a                
          potential source of financing but needed time to work out the               
               While G&K was obtaining the necessary financing, the                   
          management group worked on avoiding the rent escalators in the              
          CPA7 lease and approached CPA7 regarding a sale.  Initially CPA7            
          requested $22 million for the bottling facilities, but Bottlers             
          and CPA7 ultimately agreed on a $17.8 million price.  To lock in            
          the $17.8 million price tag and avoid further rent escalators,              
          the management group found a short-term, interim solution to give           
          G&K the time it needed to obtain the financing.  The management             
          group decided to create a third-party company to own the assets             
          temporarily until G&K’s financing came through.                             
               Neither Bottlers nor CPA7 appraised the underlying                     
          facilities during their negotiations.  Instead, the lease                   
          payments drove the price, which was based on the present value of           
          the future stream of payments.  Bottlers recognized that this               
          price included a premium over fair market value because of the              
          unfavorable lease terms.  The management group knew it needed to            

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Last modified: May 25, 2011