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Business Organizations Keyed to Allen
Cookies Food Products v. Lakes Warehouse
Citation:
430 N.W.2d 447 (Iowa 1988).Facts
In 1975, L.D. Cook founded Cookies to produce and distribute barbeque sauce. At that time, Cook convinced 35 individuals to purchase Cookies stock, including Herrig. In 1976, Cookies’ board of directors approached Herrig about the idea of distributing Cookie’s products through his companies, Speed (auto parts business) and Lakes (auto parts distributor). In May 1977, Cookies formalized the arrangement and sales soared from only $20,000 in 1976 to $2,400,000 in 1985.
In 1981, Cook decided to sell his interest in Cookies. Herrig offered to purchase Cook’s 8,100 shares and any other’s shares for $10 per share. Herrig ultimately spent $140,000 to become majority shareholder (53%) of Cookies. After acquiring majority control, Herrig replaced four of the five directors. The board thereafter (1) expanded the exclusive distributorship agreement, (2) approved a royalty fee for a taco sauce Herrig developed, (3) authorized payment of a consultant fee to Herrig, and (4) compensated Lakes for certain warehousing fees.
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