SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1998
OR
/ / Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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COMMISSION FILE NUMBER 0-24708
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AMCON DISTRIBUTING COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of Incorporation)
10228 "L" Street
Omaha, NE 68127
(Address of principal executive offices)
(Zip Code)
47-0702918
(I.R.S. Employer Identification No.)
(402) 331-3727
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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The Registrant had 2,479,903 shares of its $.01 par value common stock
outstanding as of July 31, 1998.
Form 10-Q
3rd Quarter
INDEX
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PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
---------------------
Consolidated balance sheets at June 30, 1998
and at September 30, 1997 3
Consolidated statements of income for the three and
nine-month periods ended June 30, 1998 and June 30, 1997 4
Consolidated statements of cash flows for the
nine-month periods ended June 30, 1998 and June 30, 1997 5
Notes to unaudited financial statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMCON Distributing Company
Consolidated Balance Sheets
June 30, 1998 and September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
June 30, September 30,
1998 1997
----------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 35,572 $ 26,973
Marketable securities - 127,786
Accounts receivable, less allowance
for doubtful accounts of $462,340
and $206,249 15,052,414 10,788,979
Note and interest receivable from officer - 130,795
Inventories 19,923,952 7,183,245
Deferred income taxes 119,017 119,017
Other 224,303 84,616
------------ ------------
Total current assets 35,355,258 18,461,411
Fixed assets, net 4,702,994 3,608,891
Investments 508,375 560,250
Other assets 2,815,151 866,749
------------ ------------
$ 43,381,778 $ 23,497,301
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 9,834,937 $ 4,764,816
Accrued expenses 1,343,977 906,282
Accrued wages, salaries and bonuses 532,256 719,962
Income taxes payable 976,257 579,802
Current portion of long-term debt 1,665,972 332,338
------------ ------------
Total current liabilities 14,353,399 7,303,200
------------ ------------
Deferred income taxes 173,671 195,458
Other 428,148 -
Long-term debt, less current portion 19,497,139 8,790,524
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000
shares authorized, none outstanding - -
Common stock, $.01 par value, 15,000,000
shares authorized and 2,480,000 shares
issued and outstanding at June 30, 1998;
5,000,000 shares authorized and 2,450,000
issued and outstanding at September 30, 1997 24,800 24,500
Additional paid-in capital 2,271,278 2,213,828
Unrealized gain on investments available-
for-sale, net of $150,197 and $171,985 tax 207,416 237,503
Retained earnings 6,426,242 4,732,603
------------ ------------
8,929,736 7,208,434
Less treasury stock, 97 shares, at cost (315) (315)
------------ ------------
Total shareholders' equity 8,929,421 7,208,119
------------ ------------
$ 43,381,778 $ 23,497,301
============ ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
AMCON Distributing Company
Consolidated Statements of Income
for the three and nine months ended June 30, 1998 and 1997
(Unaudited)
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the three months For the nine months
ended June 30 ended June 30
------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Sales (including excise taxes
of $13.9 million and $10.4 million,
and $37.7 million and $30.1
million, respectively) $77,650,819 $47,374,291 $211,545,387 $128,769,820
Cost of sales 69,312,856 42,488,887 188,629,189 114,822,001
----------- ----------- ------------ ------------
Gross profit 8,337,963 4,885,404 22,916,198 13,947,819
Selling, general and
administrative expenses 6,463,812 3,852,715 18,133,338 11,453,601
Depreciation and amortization 265,327 225,818 797,039 636,527
----------- ----------- ------------ ------------
6,729,139 4,078,533 18,930,377 12,090,128
----------- ----------- ------------ ------------
Income from operations 1,608,824 806,871 3,985,821 1,857,691
Other expense (income):
Interest expense 454,595 218,289 1,410,052 610,155
Other expense (income), net (81,796) (88,415) (221,078) (1,308,342)
----------- ----------- ------------ ------------
372,799 129,874 1,188,974 (698,187)
----------- ----------- ------------ ------------
Income before income taxes 1,236,025 676,997 2,796,847 2,555,878
Income tax expense 482,405 277,569 1,103,207 1,047,910
----------- ----------- ------------ ------------
Net income $ 753,620 $ 399,428 $ 1,693,640 $ 1,507,968
=========== =========== ============ ============
Earnings share
Basic $ 0.31 $ 0.16 $ 0.69 $ 0.62
=========== =========== ============ ============
Diluted $ 0.29 $ 0.16 $ 0.67 $ 0.62
=========== =========== ============ ============
Weighted average shares
outstanding:
Basic 2,452,540 2,445,903 2,450,782 2,445,903
=========== =========== ============ ===========
Diluted 2,571,660 2,449,728 2,532,464 2,449,930
=========== =========== ============ ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
AMCON Distributing Company
Consolidated Statements of Cash Flows
for the nine months ended June 30, 1998 and 1997
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,693,640 $ 1,507,968
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 797,039 636,527
Gain on sales of fixed assets and securities (45,076) (100,166)
Gain on sale of Denver beer distributorship - (1,102,205)
Proceeds from sale of trading securities 157,206 92,548
Deferred income taxes 87,411 -
Changes in assets and liabilities, net of
effects from acquisitions:
Accounts receivable (1,034,574) (840,207)
Inventories (6,096,911) (2,106,073)
Other current assets (23,956) 132,263
Other assets (203,696) (32,497)
Accounts payable 3,065,383 1,920,959
Accrued expenses and accrued wages,
salaries, and bonuses (190,864) (285,751)
Income taxes payable 396,455 8,324
----------- -----------
Net cash used in operating activities (1,397,943) (168,310)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (711,044) (635,910)
Purchases of water bottling company assets - (499,109)
Purchase of assets of Marcus Distributors, Inc. (2,664,916) -
Purchase of Food For Health Co., Inc. net
of cash acquired (4,454,338) -
Proceeds from sales of fixed assets 60,341 160,789
Proceeds from sales of available-for-sale securities - 33,967
Proceeds from sale of Denver beer distributorship - 2,371,994
----------- -----------
Net cash (used in) provided by investing activities (7,769,957) 1,431,731
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 4,500,000 363,961
Net (payments) proceeds on bank credit agreement 5,010,364 (154,310)
Payments on long-term and subordinated debt (336,865) (268,823)
Proceeds from issuance of common stock 3,000 -
Redemption of preferred stock - (1,200,000)
----------- -----------
Net cash provided by (used in) financing activities 9,176,499 (1,259,172)
----------- -----------
Net increase in cash 8,599 4,249
Cash, beginning of period 26,973 21,497
----------- -----------
Cash, end of period $ 35,572 $ 25,746
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
AMCON Distributing Company
Notes to Financial Statements
June 30, 1998 and 1997
- ----------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying unaudited financial statements of AMCON Distributing Company
and subsidiary (the "Company") have been prepared on the same basis as the
audited financial statements for the year ended September 30, 1997, and, in
the opinion of management, contain all adjustments necessary to fairly present
the financial information included therein. Such adjustments consist of
normal recurring items. It is suggested that these financial statements be
read in conjunction with the audited financial statements and notes thereto,
for the fiscal year ended September 30, 1997, which are included in the
Company's Annual Report to Stockholders filed with Form 10-K. Results for the
interim period are not necessarily indicative of results to be expected for
the entire year.
2. EARNINGS PER SHARE:
Earnings per share was computed as presented below in accordance with
Statement of Accounting Standards No. 128, Earnings Per Share. Prior year
amounts have been restated to conform to the new standard. Basic earnings per
share is calculated by dividing net income by the weighted average common
shares outstanding for each period. Diluted earnings per share is calculated
by dividing net income by the sum of the weighted average common shares
outstanding and the weighted average dilutive options, using the treasury
stock method.
<TABLE>
<CAPTION>
For the three months For the three months
ended June 30, 1998 ended June 30, 1997
----------------------- -----------------------
Basic Diluted Basic Diluted
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1. Weighted average common
shares outstanding 2,452,637 2,452,637 2,450,000 2,450,000
2. Weighted average treasury
shares (97) (97) (4,097) (4,097)
3. Weighted average of net
additional shares outstanding
assuming dilutive options and
warrants exercised and proceeds
used to purchase treasury stock - 119,120 - 3,825
--------- --------- --------- ---------
4. Weighted average number of
shares outstanding 2,452,540 2,571,660 2,445,903 2,449,728
========= ========= ========= =========
5. Net income $ 753,620 $ 753,620 $ 399,428 $ 399,428
========= ========= ========= =========
6. Earnings per share $ 0.31 $ 0.29 $ 0.16 $ 0.16
========= ========= ========= =========
<PAGE>
<CAPTION>
For the nine months For the nine months
ended June 30, 1998 ended June 30, 1997
----------------------- -----------------------
Basic Diluted Basic Diluted
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1. Weighted average common
shares outstanding 2,450,879 2,450,879 2,450,000 2,450,000
2. Weighted average treasury
shares (97) (97) (4,097) (4,097)
3. Weighted average of net
additional shares outstanding
assuming dilutive options and
warrants exercised and proceeds
used to purchase treasury stock - 81,682 - 4,027
---------- --------- ---------- ----------
4. Weighted average number of
shares outstanding 2,450,782 2,532,464 2,445,903 2,449,930
========== ========== ========== ==========
5. Net income $1,693,640 $1,693,640 $1,507,968 $1,507,968
========== ========== ========== ==========
6. Earnings per share $ 0.69 $ 0.67 $ 0.62 $ 0.62
========== ========== ========== ==========
</TABLE>
3. PURCHASE OF DISTRIBUTORSHIP ASSETS:
On October 10, 1997, the Company purchased certain inventory and fixed assets
from Marcus Distributors, Inc. ("Marcus") of St. Louis, Missouri for $2.7
million in cash and warrants to acquire 30,000 shares of the Company's common
stock at an exercise price of $0.10 per share. In addition, the Company
entered into a five year lease agreement with Marcus to lease a distribution
facility in St. Louis, Missouri. The acquisition was funded through
borrowings on the Company's then existing revolving credit facility, which was
increased in October 1997 to accommodate the purchase.
4. PURCHASE OF STOCK OF FOOD FOR HEALTH COMPANY, INC.:
On November 10, 1997, the Company purchased all of the outstanding stock of
Food For Health Company, Inc. ("FFH"), a distributor of health and natural
foods based in Phoenix, Arizona, for $4.4 million in cash. The acquisition
was funded by a $4.5 million five year term loan from a bank. The loan bears
interest at LIBOR plus 1.75% and requires monthly payments of accrued interest
with monthly principal payments of $85,096 plus accrued interest beginning in
August 1998. The loan is collateralized by the common stock of FFH and a
personal guarantee from the Chairman of the Company. The assets and
liabilities assumed as a result of the acquisition are as follows:
Fair value of assets............... $10,189,108
Cash paid.......................... (4,400,000)
-----------
Liabilities assumed................ $ 5,789,108
===========
Based on a preliminary allocation of the purchase price, goodwill is estimated
to be $1.5 million and will be amortized over 25 years.
5. LONG-TERM DEBT:
In March 1998, the Company refinanced its Revolving Credit Facility with a new
bank (the "Facility") in order to obtain more favorable lending terms to
support operations and to finance any future acquisitions. The Facility
increased the Company's borrowing limit to $20 million and decreased the
interest rate on the New Facility to LIBOR plus 1.75%. The Facility also
provided for an additional $10 million facility to be collateralized by
specific inventory and a $1.5 million facility to be used for transportation
equipment purchases. As of June 30, 1998, the Company had borrowed
approximately $13.1 million under the Facility.
In March 1998, FFH refinanced its Revolving Credit Facility with a new bank
(the "FFH Facility") in order to obtain more favorable lending terms to
support operations. The borrowings under the FFH Facility are secured by the
assets of FFH and are guaranteed by the Company. The FFH Facility established
a borrowing limit of $5 million and decreased the interest rate on the FFH
Facility to LIBOR plus 1.75%. As of June 30, 1998, FFH had borrowed
approximately $2.9 million under the FFH Facility.
In November 1997, the Company borrowed $4.5 million from a bank to finance the
purchase of the common stock of FFH. The loan bears interest at LIBOR plus
1.75% and requires monthly payments of accrued interest with monthly principal
payments of $85,096 plus accrued interest beginning in August 1998.
6. NEW ACCOUNTING PRONOUNCEMENTS:
Comprehensive income: Effective in the year ending September 1999, the
Company will adopt SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income will differ from net income due to unrealized gains or
losses on marketable securities, which are disclosed in the Consolidated
Statement of Changes in Stockholders' Equity.
Business segments: Effective at September 30, 1999, the Company will adopt
SFAS No. 131 "Disclosure about Segments of an Enterprise and Related
Information." The Company is currently reviewing the requirements of this
statement, but believes that is will change the extent of its current business
segment disclosure. SFAS No. 131 affects only the presentation of segment
information in the Notes to Consolidated Financial Statements and will not
affect the Company's Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Comparison of the three-month and nine-month periods ended June 30, 1998 and
June 30, 1997
Sales for the three months ended June 30, 1998 increased 63.9% to $77.7
million, compared to $47.4 million for the same period in prior fiscal year.
Sales attributable to the new St. Louis distribution center and Food For
Health Company, Inc. ("FFH"), a distributor of health foods and related
products, were $19.7 million, of which $9.0 million related to cigarette
sales. Sales from the core distribution business increased by $10.6 million
during the third quarter as compared to the prior year as follows: Cigarette
sales increased approximately $4.1 million over the prior year due to price
increases and approximately $4.8 million due to increased volume to current
and new customers. Tobacco sales increased $645,000, food service sales
increased $297,000, candy and snacks sales increased $401,000, beverage sales
increased $135,000, sales from health and beauty care products increased
$99,000 and all other product sales increased by $224,000 due to increase in
the demand for such products from the customer base.
Sales for the nine months ended June 30, 1998 increased 64.3% to $211.5
million compared to $128.8 million for the nine months ended June 30, 1997.
Sales attributable to the new St. Louis distribution center and to FFH were
$56.9 million, of which $27.1 million related to cigarette sales. Sales from
the core distribution business increased by $25.9 million during the nine
months ended June 30, 1998 as compared to the prior year as follows:
Cigarette sales increased approximately $9.5 million over the prior year due
to price increases and approximately $11.6 million due to increased volume to
current and new customers. Tobacco sales increased $1.8 million, food service
sales increased $886,000, candy and snacks sales increased $1.3 million, sales
from health and beauty care products increased $656,000 and all other product
sales increased by $678,000 due to increase in the demand for such products
from the customer base. There were no sales of beer products during the nine
months ended June 30, 1998 due to the sale of the Denver beer distributorship
in October 1996. This accounted for a $538,000 decrease in sales of beer
products as compared to the prior year.
Gross profit increased 70.7% to $8.3 million for the three months ended June
30, 1998 from $4.9 million over the same period during the prior year. Gross
profit as a percent of sales increased to 10.7% for the quarter ended June 30,
1998 compared to 10.3% for the quarter ended June 30, 1997. The increase in
gross profit was primarily attributable to the new St. Louis distribution
center and FFH, which accounted for $2.6 million of the increase in gross
profit for the quarter. Price increases from tobacco manufacturers contributed
an additional $570,000 to gross profit during the quarter as compared to the
prior year. These increases offset a reduction in purchase discounts from
tobacco manufacturers of $133,000 for the quarter. The increase in profit
margin percentage for the third quarter was primarily attributable to the
addition of FFH. The average profit margin percentage for health food products
is considerably higher than the products sold by the core distribution business.
Gross profit increased 64.3% to $22.9 million for the nine months ended March
31, 1998 from $13.9 million over the same period during the prior year. Gross
profit as a percent of sales remained level at 10.8% for the nine months ended
June 30, 1998 compared to 10.8% to the nine months ended June 30, 1997. The
increase in gross profit was primarily attributable to the new St. Louis
distribution center and FFH, which accounted for $7.3 million of the increase
in gross profit for the nine months. Tobacco price increases during the
nine months ended June 30, 1998 accounted for an additional $930,000 in gross
profit as compared to the prior year and offset a decrease of $502,000 in
purchase discounts received from tobacco manufacturers, as compared to the
prior year. Gross margin percentage remained constant year over year, but was
impacted primarily by two factors. FFH's profit margin added approximately
1.6% to the Company's profit margin percentage. A corresponding decrease in
gross profit margin percentage was attributable to the large increase in
cigarette sales, principally in the St.Louis market and a reduction in
purchase discounts received from manufacturers. Cigarettes have historically,
and continue to have, a lower profit margin percentage than the Company's
other products. Therefore, a large increase in cigarette sales adversely
affects the profit margin percentage. Purchase discount programs vary by
manufacturer. Although all of the purchase discount programs offered by
manufacturers are computed on a cents-per-carton-sold basis, the programs vary
on the criteria necessary for meeting the higher purchase discount brackets,
such as, market share by cigarette category. Therefore, it is possible to
have increased sales in certain product categories, but receive less purchase
discounts.
Sales of the Company's private label cigarettes have continued to decline
since 1993 when cigarette manufacturers substantially reduced the price of
premium brand cigarettes. Management anticipates that the volume of private
label cigarettes could continue to decline by as much as 30% to 35%. If such
a decline is realized, gross profit from private label cigarette sales could
decrease annually by $200,000 to $300,000 in fiscal 1998 and 1999.
Total operating expense, which includes selling, general and administrative
expenses and depreciation and amortization, increased 65.0% or $2.7 million to
$6.7 million for the quarter ended June 30, 1998 compared to the same period
in fiscal 1997. The increase was primarily due to expenses associated with the
new St. Louis distribution center and FFH which accounted for $2.4 million in
operating expenses. As a percentage of sales, total operating expense
increased to 8.7% from 8.6% during the same period in the prior year. The
slight increase was due to operating costs at FFH being higher as a percentage
of sales than the core distribution business. This increase offset
efficiencies gained through increased volume in the core distribution
business.
For the nine month period ended June 30, 1998, total operating expense
increased 56.5% or $6.8 million to $18.9 million, compared to the same period
in the prior year. The increase was primarily due to expenses associated with
the new St. Louis distribution center and FFH which accounted for $6.6 million
in operating expenses. As a percentage of sales, total operating expense
decreased to 8.9% from 9.4% during the same period in the prior year. The
decrease in operating expenses as a percentage of sales is due to efficiencies
gained through increased volume in the core distribution business which were
partially offset by the proportionately higher operating costs incurred by FFH
during the period.
As a result of the above, income from operations for the quarter ended June
30, 1998 increased $802,000 to $1,609,000. Income from operations for the
nine month period ended June 30, 1998 increased $2.1 million to $4.0 million.
Interest expense for the three months ended June 30, 1998 increased 108.3%, or
$236,000, over the same period in the prior year. Interest expense for the
nine month period ended June 30, 1998 increased 131.1%, or $800,000, compared
to the nine month period ended June 30, 1997. The increase was primarily due
to interest expense associated with FFH's revolving credit facility, which
accounted for $73,000 and $179,000 of interest expense during the three and
nine month periods ended June 30, 1998, respectively and a $3.9 million and
$6.0 million increase in the average amount borrowed under the Company's
revolving credit facility with a bank (the "Facility") during the three and
nine month periods ended June 30, 1998, respectively. The Facility was
utilized to finance the acquisition of the new St. Louis distribution center,
the expansion of the Bismarck, ND distribution center and to finance an
increase in inventory during the period. In addition, the Company borrowed
$4.5 million in November 1997 to finance the acquisition of FFH.
Other income of $82,000 for the three months ended June 30, 1998 consisted
primarily of royalty payments associated with the sale of the Denver non-
alcoholic beverage business, rent income and gains on sales of fixed assets.
Other income of $221,000 for the nine months ended June 30, 1998 was generated
from gains on the sale of marketable securities and fixed assets, royalty
payments associated with the sale of the Denver non-alcoholic beverage
business, and rent and interest income. Other income of $1.3 million for the
nine months ended June 30, 1997 was generated primarily by the gain associated
with the sale of the Denver beer distributorship of $1.1 million.
As a result of the above factors, net income during the three months ended
June 30, 1998 was $753,620 compared to $399,428 for the three months ended
June 30, 1997. Net income during the nine months ended June 30, 1998 was
$1,693,640 compared to $1,507,968 for the nine months ended June 30, 1997.
As described in Management's Discussion and Analysis in the Company's Annual
Report to Shareholders for the Fiscal Year Ended September 30, 1997, the
Company's operating income is subject to a number of factors which are beyond
the control of management, such as changes in manufacturers' cigarette pricing
which affects the market for generic and private label cigarettes. The
Company continues to remain dependent on cigarette sales which now represent
approximately 63% of its revenue (66% in fiscal 1997). Net income remains
heavily dependent on sales of the Company's private label cigarettes and
volume discounts received in connection with such sales. The Company continues
to evaluate various steps it may take to improve net income in future periods,
including acquisitions of distributing companies such as the new St. Louis
distribution center and FFH which were purchased in the first quarter and
continued sales of assets that are no longer essential to its primary business
activities, such as, investments and certain real estate. An analysis of such
assets held at June 30, 1998 is as follows:
ESTIMATE OF GAIN
-------------------------------
June 30, September 30,
DESCRIPTION OF ASSET 1998 1997
-------------------- ------------ -------------
Investments (available-for-sale) $357,000 $409,000
Condominium & furnishings 500,000 480,000
Investments at June 30, 1998 and September 30, 1997 consisted of 83,000 shares
of Cayman Water Company Limited (CWC), a public company which is listed on
NASDAQ. The Company's basis in the securities is $151,000 and the fair market
value of the securities was $508,000 and $560,000 on June 30, 1998 and
September 30, 1997, respectively. The fair market value of the securities on
July 31, 1998 was $540,000.
The condominium and furnishings consist of a condominium in the Cayman Islands
which is used in furtherance of the Company's business marketing strategies.
The costs and benefits associated with retaining the condominium are being
evaluated in relation to the current business strategies of the Company.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended June 30, 1998, the Company utilized cash flow in
operating activities to finance increases in inventory in all branches to
support an increase in business, primarily during the summer months. Cash was
utilized in investing activities during the nine month period ended June 30,
1998 to purchase the assets of Marcus Distributors, Inc. in St. Louis, MO in
October 1997 and the stock of FFH in November 1997 for $2.7 million and $4.5
million respectively. Cash was provided in financing activities through
increases in the Facility and from a term note to finance the purchase of FFH.
The Company had working capital of approximately $21.0 million as of June 30,
1998 compared to $11.2 million as of September 30, 1997. The Company's debt
to equity ratio was 3.86 at June 30, 1998 compared to 2.26 at September 30,
1997.
In March 1998, the Company refinanced its Revolving Credit Facility with a new
bank (the "Facility") in order to obtain more favorable lending terms to
support operations and to finance any future acquisitions. The Facility
increased the Company's borrowing limit to $20 million and decreased the
interest rate on the new Facility to LIBOR plus 1.75%. The Facility also
provided for an additional $10 million facility collateralized by specific
inventory and a $1.5 million facility to be used for transportation equipment
purchases. As of June 30, 1998, the Company had borrowed approximately $13.1
million under the Facility.
In March 1998, the FFH refinanced its Revolving Credit Facility with a new
bank (the "FFH Facility") in order to obtain more favorable lending terms to
support operations. The borrowings under the FFH Facility are secured by the
assets of FFH and are guaranteed by the Company. The FFH Facility established
a borrowing limit of $5 million and decreased the interest rate on the FFH
Facility to LIBOR plus 1.75%. As of June 30, 1998, FFH had borrowed
approximately $2.9 million under the FFH Facility.
In November 1997, the Company borrowed $4.5 million from a bank to finance the
purchase of the common stock of FFH. The loan bears interest at LIBOR plus
1.75% and requires monthly payments of accrued interest with monthly principal
payments of $85,096 plus accrued interest beginning in August 1998.
The Company also maintains a $1,250,000 non-revolving line of credit used to
finance the purchase of trucks and delivery equipment. Advances against the
non-revolving line of credit were $584,000 through June 30, 1998. The amount
available on the non-revolving line of credit was $666,000 at June 30, 1998.
The line of credit is secured by a first lien on the delivery vehicles
purchased with the loan proceeds.
The Company believes that funds generated from operations, supplemented as
necessary with funds available under the Facility, the FFH Facility and the
non-revolving line of credit, will provide sufficient liquidity to cover its
debt service and any reasonably foreseeable future working capital and capital
expenditure requirements.
CONCERNING FORWARD LOOKING STATEMENTS
This Quarterly Report, including the Management's Discussion and Analysis and
other sections, contains forward looking statements that are subject to risks
and uncertainties and which reflect management's current beliefs and estimates
of future economic circumstances, industry conditions, company performance and
financial results. Forward looking statements include information concerning
the possible or assumed future results of operations of the Company and those
statements preceded by, followed by or include the words "future," "position,"
"anticipate(s)," "expect," "believe(s)," "see," "plan," "further improve,"
"outlook," "should" or similar expressions. For these statements, we claim
the protection of the safe harbor for forward looking statements contained in
the Private Securities Litigation Reform Act of 1995. You should understand
that the following important factors, in addition to those discussed elsewhere
in this document, could affect the future results of the Company and could
cause those results to differ materially from those expressed in our forward
looking statements: changing market conditions with regard to cigarettes and
the demand for the Company's products, domestic regulatory risks, competitive
and other risks over which the Company has little or no control. Any changes
in such factors could result in significantly different results.
Consequently, future results may differ from management's expectations.
Moreover, past financial performance should not be considered a reliable
indicator of future performance.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The information required by this item will not be applicable to the Company
before its Annual Report on Form 10-K for the year ending September 30, 1998.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
2.1 Stock Purchase Agreement dated November 3, 1997, between the
Company and FFH Holdings, Inc. (incorporated by reference to
Exhibit 2.1 of the Company's Current Report on Form 8-K filed on
November 25, 1997)
3.1 Restated Certificate of Incorporation of the Company, as amended
March 19, 1998 (incorporated by reference to Exhibit 3.1 of the
Company's Quarterly Report on Form 10-Q filed on May 11, 1998)
3.3 Bylaws of the Company (incorporated by reference to Exhibit 3.2
of the Company's Registration Statement on Form S-1 (Registration
No. 33-82848) filed on August 15, 1994)
4.1 Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.1 of the Company's Registration Statement on Form S-1
(Registration No. 33-82848) filed on August 15, 1994)
10.1 Grant of Exclusive Manufacturing Rights, dated October 1, 1993,
between the Company and Famous Value Brands, a division of Philip
Morris Incorporated, including Private Label Manufacturing
Agreement and Amended and Restated Trademark License Agreement
(incorporated by reference to Exhibit 10.1 of Amendment No. 1 to
the Company's Registration Statement on Form S-1 (Registration
No. 33-82848) filed on November 8, 1994)
10.3 Loan Agreement, dated November 10, 1997, between the Company and
LaSalle National Bank (incorporated by reference to Exhibit 10.1
of the Company's Current Report on Form 8-K filed on November 25,
1997)
10.4 Amended Loan Agreement, dated February 25, 1998, between the Company
and LaSalle National Bank (incorporated by reference to Exhibit 10.5
of the Company's Quarterly Report on Form 10-Q filed on May 11, 1998)
10.5 Note, dated November 10, 1997, between the Company and LaSalle
National Bank (incorporated by reference to Exhibit 10.2 of the
Company's Current Report on Form 8-K filed on November 25, 1997)
10.6 First Allonge to Note, dated February 25, 1998, between the Company
and LaSalle National Bank (incorporated by reference to Exhibit 10.7
of the Company's Quarterly Report on Form 10-Q filed on May 11, 1998)
10.7 Loan and Security Agreement, dated February 25, 1998, between the
Company and LaSalle National Bank (incorporated by reference to
Exhibit 10.8 of the Company's Quarterly Report on Form 10-Q filed on
May 11, 1998)
10.8 Promissory Note, dated February 25, 1998, between the Company and
LaSalle National Bank (incorporated by reference to Exhibit 10.9 of
the Company's Quarterly Report on Form 10-Q filed on May 11, 1998)
10.9 Loan and Security Agreement, dated February 25, 1998, between Food
For Health Co., Inc. and LaSalle National Bank (incorporated by
reference to Exhibit 10.10 of the Company's Quarterly Report on
Form 10-Q filed on May 11, 1998)
10.10 Promissory Note, dated February 25, 1998, between Food For Health
Co., Inc. and LaSalle National Bank (incorporated by reference to
Exhibit 10.11 of the Company's Quarterly Report on Form 10-Q filed
on May 11, 1998)
10.11 Unconditional Guarantee, dated February 25, 1998, between the
Company and LaSalle National Bank (incorporated by reference to
Exhibit 10.12 of the Company's Quarterly Report on Form 10-Q filed
on May 11, 1998)
10.12 AMCON Distributing Company 1994 Stock Option Plan (incorporated
by reference to Exhibit 10.7 of the Company's Registration
Statement on Form S-1 (Registration No. 33-82848) filed on August
15, 1994)
10.13 AMCON Distributing Company Profit Sharing Plan (incorporated by
reference to Exhibit 10.8 of Amendment No. 1 to the Company's
Registration Statement on Form S-1 (Registration No. 33-82848)
filed on November 8, 1994)
10.14 Employment Agreement, dated May 22, 1998, between the Company and
William F. Wright
10.15 Employment Agreement, dated May 22, 1998, between the Company and
Kathleen M. Evans
10.16 Employment Agreement, dated May 22, 1998, between the Food For
Health Co., Inc. and Jerry Fleming
11.1 Statement re: computation of per share earnings (incorporated by
reference to footnote 2 to the financial statements included in
Item 1 herein)
27.0 Financial Data Schedules
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended June 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
AMCON DISTRIBUTING COMPANY
(registrant)
Date: August 6, 1998 Kathleen M. Evans
----------------- -------------------------
Kathleen M. Evans
President and
Principal Executive Officer
Date: August 6, 1998 Michael D. James
----------------- -------------------------
Michael D. James
Treasurer & CFO and
Principal Financial and
Accounting Officer
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of January 1, 1998 by and between AMCON Distributing
Company, a Delaware corporation (the "Company"), and Wm. F. Wright
("Executive").
The Company and Executive desire to enter into an Employment Agreement
(the "Agreement"). Accordingly, the Company and Executive agree as follows:
Section 1. Effective Date; Position; Term.
(a) This Agreement shall become effective on the date first set forth above
(the "Effective Date"). The Company shall employ Executive as Chairman of the
Board of Directors for a term (the "Employment Period") commencing on January
1, 1998 and continuing until December 31, 1999, unless sooner terminated
pursuant to Section 9 hereof, provided that the Employment Period
automatically shall be extended for an additional one-year period on December
31, 1998 and each December 31 thereafter, unless either the Company or
Executive delivers to the other a notice of nonextension at least ninety (90)
days prior to the scheduled automatic renewal date.
(b) The Board of Directors of the Company (the "Board"), in its discretion,
may modify the termination date of this Agreement and the effective renewal
dates hereof to coincide with the fiscal year of the Company. In that case,
January 1 and December 31 in the preceding sentence and wherever herein used
in the same context shall refer to the first and last day of the Company's
fiscal year. Such modification shall not cause the acceleration of the
termination date (including any automatic extension of that date) to any
earlier date.
(c) Notwithstanding the foregoing subsection (a), in the event that a Change
of Control occurs, the Employment Period automatically shall be extended
through the December 31 immediately following the second anniversary of the
effective date of the Change of Control. The Employment Period automatically
shall be extended for an additional one-year period on such December 31 and
each December 31 thereafter, unless either the Company or Executive delivers
to the other a notice of nonextension at least ninety (90) days prior to the
scheduled automatic renewal date. For purposes of this subsection (c), a
"Change of Control" shall have occurred if:
(i) any person, as such term is used in Section 13(d) and 14(d) of the
Exchange Act, other than Executive, becomes the beneficial owner (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing twenty percent (20%) or more of the combined
voting power of the Company's then outstanding securities;
(ii) during any period of not more than twenty-four (24) months,
individuals who at the beginning of such period constitute the Board, and any
new director whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof;
(iii) the Company's stockholders approve a merger or consolidation of
the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity ) more than sixty percent (60%) of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than twenty percent
(20%) of the combined voting power of the Company's then outstanding
securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of its assets (or any transaction having a
similar effect).
Section 2. Position and Duties. During the Employment Period:
(a) Executive shall have the responsibilities, duties and authority normally
commensurate with the position of Chairman of the Board and Chief Executive
Officer. Such responsibilities and duties shall include overseeing the
performance of the president of the Company and of the chief executive
officers of all operating divisions and Subsidiaries (as defined below) of the
Company, strategic planning, mergers and acquisitions, maintaining the
Company's relationship with its stockholders, and (in coordination with the
efforts of the Chief Financial Officer) maintaining the Company's relationship
with the financial and investment community.
(b) Executive shall report to the Board and Executive shall perform
faithfully the executive duties assigned to him by the Board to the best of
his ability in a diligent, trustworthy, businesslike and efficient manner and
will devote his sufficient time and attention to the business and affairs of
the Company and its Subsidiaries and Affiliates in order to accomplish the
foregoing; provided, however, that Executive may serve as a director of other
corporations, as a consultant to other corporations, and on civic or
charitable boards or committees.
(c) For purposes of this Agreement, "Subsidiary" shall mean any corporation
or other entity of which securities having a majority of the voting power in
electing directors or comparable management are, at the time of determination,
owned by the Company, directly or through one or more Subsidiaries.
(d) For purposes of this Agreement, "Affiliate" of any particular person
means any other person controlling, controlled by or under common control with
such particular person.
Section 3. Base Salary.
As compensation for his services hereunder, the Company shall pay to Executive
during the Employment Period a base salary (the "Base Salary") in the amount
of Three Hundred Fifty Thousand Dollars ($350,000) per year. Base Salary
shall be payable in accordance with the Company's customary pay practices for
executive compensation. Executive's Base Salary shall be reviewed at least
annually and may be increased at the discretion of the Board. The term "Base
Salary" as used in this Agreement shall refer to such annual salary as
increased. In addition, the Company shall provide Executive with an
automobile allowance in an amount to be determined by the Compensation
Committee of the Board.
Section 4. Bonus.
In addition to the Base Salary, Executive shall be eligible to receive an
annual bonus based on Executive's performance and the Company's operating
results during such year payable at such time or times during or following
each year as shall be determined by the Compensation Committee of the Board in
its sole discretion. The Compensation Committee, in its sole discretion, may
establish plans or formulas from time to time to be used in the determination
of management bonuses.
Section 5. Participation in Employee Benefit Plans.
Executive will be entitled to participate in all Company salaried employee
benefit plans and programs (whether now or hereinafter in effect), subject to
the terms and conditions of each such employee benefit plan or program and to
the extent commensurate with his position as a key executive officer of the
Company.
Section 6. Other Benefits.
(a) Vacation. As of the first day of each calendar year in the Employment
Period, Executive shall be entitled to a maximum of four weeks' paid vacation
for such year.
(b) Insurance. The Company shall provide Executive with (i) health,
hospitalization, dental and major medical insurance (including dependent
coverage), (ii) disability insurance providing benefits of sixty percent (60%)
of Base Salary but in any event a minimum benefit of $100,000 per year,
payments to begin no later than six months after the occurrence of a Total and
Permanent Disability (as defined below), (iii) split dollar life insurance in
a total face amount equal to $1,500,000, and (iv) whole life insurance in the
face amount of $100,000.
Section 7. Business Expenses.
The Company shall reimburse Executive for all reasonable expenses incurred by
him in the course of performing his duties under this Agreement which are
consistent with the Company's policies in effect from time to time with
respect to travel, entertainment and other business expenses, subject to the
Company's requirements with respect to reporting and documentation of such
expenses.
Section 8. Stock Options and Option Shares.
Executive shall be eligible to participate in the Company's 1994 Stock Option
Plan or such other similar plan as may be in effect from time to time.
Section 9. Termination of Employment.
(a) Events of Involuntary Termination and Severance Payments.
(i) In the event that during the Employment Period Executive should
become Totally and Permanently Disabled, the Company (acting by resolution of
the Board) may elect to terminate the Employment Period by written notice to
Executive and Executive shall be entitled to receive full compensation
pursuant to Section 3 at his then Base Salary rate for a period of six (6)
months following the date of such notice.
(ii) In the event of Executive's death during the Employment Period, his
personal representative shall be entitled to receive any compensation pursuant
to Sections 3, 4 and 6(a) which is accrued and unpaid as of the date of his
death plus six (6) months of salary.
(iii) In the event that during the Employment Period Executive should
commit Serious Misconduct (as defined in subsection 9(c)(ii) below), the
Company (acting by resolution of the Board) may elect to terminate the
Employment Period by providing written notice to Executive. In such case,
Executive shall be entitled to receive any compensation pursuant to Sections
3, 4 and 6(a) which is accrued and unpaid as of the Termination Date (as
defined in subsection 9(c)(iii) below).
(iv) In the event that the Company delivers to Executive a notice of
nonextension no later than ninety (90) days prior to a scheduled automatic
renewal date, Executive shall be entitled to receive certain payments (the
"Severance Payments") following termination of employment in an aggregate
amount equal to his current Base Salary plus an amount, as set by the Board,
that is equal to or greater than Executive's previous year's bonus, so long as
the total amount payable does not exceed 299% of Executive's then current
Base Salary. The Severance Payments shall be paid in twelve (12) monthly
installments at the end of each of the twelve (12) calendar months immediately
following the month in which the Termination Date occurs.
(v) In the event that during the Employment Period Executive is
discharged for any reason other than those circumstances as described in
Section 9 subsections (i) - (iv), Executive shall be entitled to receive
Severance Payments in an amount that is the greater of (A) the compensation
due under Sections 3 and 6(a) for that portion of the Employment Period
remaining between the Termination Date and the scheduled automatic renewal
date, plus an amount, as set by the Board, equal to or greater than
Executive's previous year's bonus or (B) Executive's then current annual Base
Salary plus an amount, as set by the Board, equal to or greater than
Executive's previous year's bonus. The total amount payable under either (A)
or (B) may not exceed 299% of Executive's then current Base Salary.
If the amount of Severance Payment due is the amount provided in (A) in the
preceding paragraph, a monthly payment amount shall be derived by dividing the
total amount due by the months remaining in the Employment Period. Payment is
to be made at the end of each calendar month, beginning with the month
immediately following the month in which the Termination Date occurs and
continuing until the scheduled automatic renewal date of the Employment
Period.
If the amount of Severance Payment due is the amount provided in (B) in the
preceding paragraph, payment shall be made in twelve (12) monthly installments
at the end of each of the twelve (12) calendar months immediately following
the month in which the Termination date occurs.
(b) Events of Voluntary Termination.
(i) In the event that Executive delivers to the Company a notice of
nonextension at least ninety (90) days prior to the scheduled automatic
renewal date, Executive shall be entitled to receive all compensation pursuant
to Sections 3, 4 and 6(a) that is accrued and unpaid as of the Termination
Date.
(ii) In the event that during the Employment Period Executive resigns,
other than as described in subsection (i) above, Executive shall be entitled
to that portion of compensation pursuant to Sections 3 and 6(a) that is
accrued and unpaid as of the Termination Date, and any amount of bonus that
was accrued in the prior year but has not been paid as of the Termination
Date. Any bonus which would otherwise be payable for the year in which the
Termination Date occurs shall be forfeited.
(c) Definition of Certain Terms.
(i) "Totally and Permanently Disabled" means such physical or mental
condition of Executive as is determined by the Board in its sole discretion to
be expected to continue indefinitely and which renders him incapable of
performing any substantial portion of the services contemplated hereby (as
confirmed by competent medical evidence).
(ii) "Serious Misconduct" means embezzlement or misappropriation of
corporate funds, other acts of dishonesty, significant activities materially
harmful to the reputation of the Company, commission of a felony, willful
refusal to perform or substantial disregard of the duties properly assigned by
the Board, significant violation on any statutory or common law duty of
loyalty to the Company or a material violation of Section 11 or 12 below.
(iii) "Termination Date" means the date on which Executive's employment
with the Company and its Subsidiaries is terminated, whether on account of
death, disability, resignation or discharge.
(d) Effect of Breach of Noncompetition Provisions. In the event Executive
breaches or otherwise fails to comply with the provisions of Section 11 or 12
below, then, in addition to any other remedies provided herein or at law or in
equity, the Company shall not have any further obligation to make any
additional Severance Payments. Termination of such Severance Payments
pursuant to the preceding sentence shall not relieve Executive's obligations
pursuant to Section 11 or 12 below.
(e) Effect of Breach of Monetary Obligations. In the event that the Company
breaches or otherwise fails to fulfill any of its monetary obligations under
this Agreement for whatever reason, Executive shall not be bound by Section 12
below. The event described in the preceding sentence shall not relieve
Executive's obligations under Section 11.
Section 10. Assignment and Succession.
(a) The rights and obligations of the Company under this Agreement shall
inure to the benefit of and be binding upon its respective successors and
assigns, and Executive's rights and obligations hereunder shall inure to the
benefit of and be binding upon his successors and permitted assigns, whether
so expressed or not.
(b) Executive acknowledges that the services to be rendered by him hereunder
are unique and personal. Accordingly, Executive may not pledge or assign any
of his rights or delegate any of his duties or obligations under this
Agreement without the express prior written consent of the Company.
(c) The Company may not assign its interest in or obligations under this
Agreement without the prior written consent of Executive.
Section 11. Confidential Information.
Executive acknowledges that the information, observations and data obtained by
him during the course of his performance under this Agreement concerning the
business or affairs of the Company and its Subsidiaries is the property of the
Company or such Subsidiary, as the case may be. Therefore, during the
Employment Period and at all times thereafter, Executive will not directly or
indirectly use, divulge, furnish or make accessible to any unauthorized person
or use for his own account any confidential or proprietary information or
trade secrets of the Company or any of its Subsidiaries without the Board's
prior written consent except and to the extent required by law (and upon
prompt written notice of such requirement to the Company and such Subsidiary)
or any of such information, observations or data without the Board's prior
written consent unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other than as a
result of Executive's acts or omissions to act. In the event Executive shall
be required by law to make any disclosure as set forth above, Executive shall
promptly notify the Company and such Subsidiary in writing of the basis for
and the extent of the required disclosure and shall cooperate with the Company
and such Subsidiary to preserve in full the confidentiality of all
intellectual property, trade secrets, confidential information and other
proprietary rights of the Company and such Subsidiary. Executive agrees to
deliver to the Company at the termination of his employment, or at any other
time upon written request by the Company, all memoranda, notes, plans,
records, reports and other documents relating to the business of the Company
and its Subsidiaries which he may then possess or have under his control.
Section 12. Covenant Not To Compete.
(a) Executive agrees that during the Employment Period, and for one year
after the Termination Date (the "Noncompete Period"), he will neither directly
nor indirectly engage in, have any interest in, own, manage, operate, control,
be connected with as a stockholder, joint venture, officer, employee, partner
or consultant or invest or participate in a business competing with any of the
businesses then conducted (or, to the knowledge of Executive, planned to be
conducted within one year) by the Company or any of its successors or then
Subsidiaries, within any geographical area in which the Company or its
Subsidiaries engage or plan within one year to engage in any such businesses.
During the Noncompete Period, Executive shall not directly or indirectly
through another entity:
(i) Induce or attempt to induce any employee of the Company or any
Subsidiary to leave the employ of the Company or such Subsidiary, or in any
way interfere with the relationship between the Company or any Subsidiary and
any employee thereof, or
(ii) Induce or attempt to induce any customer, supplier, licensee or
other business relation of the Company or any Subsidiary to cease doing
business with the Company or such Subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or business
relation and the Company or any Subsidiary.
(b) Nothing contained in this Section 12 shall prevent Executive from owning
an interest in any corporation or other business entity, whether public or
private, provided such corporation or other business entity is not competing
directly or indirectly with the Company or its subsidiaries as described in
Section 12. Nothing contained herein shall prevent Executive from serving as
a paid consultant to other companies or serving as a member of the Board of
Directors of other corporations.
(c) If, under the circumstances existing at the time of enforcement of this
Section 12, the period, scope of geographic area described in this Section 12
shall be found or held by a court of competent jurisdiction to be
unreasonable, the parties hereto agree that the maximum period, scope or
geographic area reasonable under the circumstances shall be substituted for
the stated period, scope or geographic area.
(d) The parties hereto agree that, in the event of the breach of Section 11
or this Section 12 by Executive, monetary damages alone would not be an
adequate remedy to the Company and its Subsidiaries for the injury that would
result from such breach, and that the Company and its Subsidiaries shall be
entitled, at any time after such breach, to immediately obtain injunctive
relief prohibiting any further breach of this Agreement. Executive further
agrees that any such injunctive relief obtained by the Company of any of its
Subsidiaries shall be in addition to monetary damages.
Section 13. Remedies.
The parties hereto will be entitled to enforce their respective rights under
this Agreement specifically to recover damages by reason of any breach of this
Agreement and to exercise all other rights existing in their favor. The
parties hereto acknowledge and agree that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any party
hereto (and any original stockholder to the extent named as a third-party
beneficiary) may, in its sole discretion, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive relief
(without posting bond or other security) in order to enforce or prevent any
violation of the provisions of this Agreement.
Section 14. Attorney's Fees.
In the event any legal action is commenced by either party hereto, the
prevailing party shall be entitled to recover reasonable attorney's fees as
established by the court of jurisdiction, together with all cost of
litigation.
Section 15. Deferral of Payments.
Notwithstanding anything herein to the contrary, the Company may defer any
payment due under this Agreement to the earliest date upon which the payment
can be made and deducted by the Company in light of the provisions of Section
162(m) of the Internal Revenue Code.
Section 16. Entire Agreement.
This Agreement represents the entire agreement between the parties relating to
the subject matters covered hereby and shall supersede any prior
understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any
way and shall not be amended or waived except in writing signed by the parties
hereto.
Section 17. Notices.
Any notice or request required or permitted to be given hereunder shall be in
writing and will be deemed to have been given:
(a) When delivered personally, sent by telecopy (with hard copy to follow) or
overnight express courier; or
(b) Five (5) days following mailing by certified or registered mail, postage
prepaid and return receipt requested, to the addresses below unless another
address is specified by such party in writing:
To the Company: AMCON Distributing Company
10228 L Street
Omaha, NE 68127
Attention: Chairman
Telephone: (402) 331-3727
Telecopy: (402) 331-4834
With a copy to: Kutak Rock
1650 Farnam Street
Omaha, NE 68102
Attention: Steven W. Seline, Esq.
Telephone: (402) 346-6000
Telecopy: (402) 346-1148
To Executive: Wm. F. Wright
1431 Stratford Court
Del Mar, CA 92014
Section 18. Headings.
The article and section headings herein are for convenience of reference only
and shall not define or limit the provisions hereof.
Section 19. Applicable Law.
The corporate law of the State of Delaware will govern all questions
concerning the relative rights of the Company and its stockholders. All other
questions concerning the construction, validity and interpretation of this
Agreement shall be governed by the internal laws of the State of Nebraska.
Section 20. Severability.
Whenever possible, each provision of this Agreement will be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held prohibited by, invalid or unenforceable in
any respect under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
Section 21. Amendments and Waivers.
Any provision of this Agreement may be amended or waived only with the prior
written consent of the Company and Executive.
Section 22. No Strict Construction.
The language used in this Agreement will be deemed to be the language chosen
by the parties hereto to express their mutual intent, and no rule of strict
construction will be applied against any party hereto.
Section 23. Counterparts.
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and all of which taken together constitute one and
the same agreement.
Section 24. Executive Representations.
Executive hereby represents and warrants to the Company that (i) the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which Executive
is a party or by which he is bound, (ii) Executive is not a party to or bound
by any employment agreement, noncompete agreement or confidentiality
agreement with any other person or entity and (iii) upon the execution and
delivery of this Agreement by the Company, this Agreement shall be the valid
and binding obligation of Executive, enforceable in accordance with its terms.
Section 25. Survival.
Sections 8,11 and 12 shall survive and continue in full force in accordance
with their terms notwithstanding any termination of the Employment Period.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its
duly authorized officer and Executive has signed this Agreement as of the date
first written above.
AMCON DISTRIBUTING COMPANY
By: Kathleen M. Evans
------------------------
President
William F. Wright
-------------------------
William F. Wright
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of January 1, 1998 by and between AMCON Distributing
Company, a Delaware corporation (the "Company"), and Kathleen M. Evans
("Executive").
The Company and Executive desire to enter into an Employment Agreement
(the "Agreement"). Accordingly, the Company and Executive agree as follows:
Section 1. Effective Date; Position; Term.
(a) This Agreement shall become effective on the date first set forth above
(the "Effective Date"). The Company shall employ Executive as President of
the Company for a term (the "Employment Period") commencing on January 1, 1998
and continuing until December 31, 1999, unless sooner terminated pursuant to
Section 9 hereof, provided that the Employment Period shall automatically be
extended for an additional one-year period on December 31, 1998 and each
December 31 thereafter, unless either the Company or Executive delivers to the
other a notice of nonextension at least ninety (90) days prior to the
scheduled automatic renewal date.
(b) The Board of Directors of the Company (the "Board") in its discretion,
may modify the termination date of this Agreement and the effective renewal
dates hereof to coincide with the fiscal year of the Company. In that case,
January 1 and December 31 in the preceding sentence and wherever herein used
in the same context shall refer to the first and last day of the Company's
fiscal year. Such modification shall not cause the acceleration of the
termination date (including any automatic extension of that date) to any
earlier date.
(c) Notwithstanding the foregoing subsection (a), in the event that a Change
of Control occurs, the Employment Period automatically shall be extended
through the December 31 immediately following the second anniversary of the
effective date of the Change of Control. The Employment Period automatically
shall be extended for an additional one-year period on such December 31 and
each December 31 thereafter, unless either the Company or Executive delivers
to the other a notice of nonextension at least ninety (90) days prior to the
scheduled automatic renewal date. For purposes of this subsection (c), a
"Change of Control" shall have occurred if:
(i) any person, as such term is used in Section 13(d) and 14(d) of the
Exchange Act, other than Wm. F. Wright, becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty percent (20%) or more of the
combined voting power of the Company's then outstanding securities;
(ii) during any period of not more than twenty-four (24) months,
individuals who at the beginning of such period constitute the Board, and any
new director whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof;
(iii) the Company's stockholders approve a merger or consolidation of
the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity ) more than sixty percent (60%) of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than twenty percent
(20%) of the combined voting power of the Company's then outstanding
securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of its assets (or any transaction having a
similar effect).
Section 2. Position and Duties. During the Employment Period:
(a) Executive shall have the responsibilities, duties and authority normally
commensurate with the position of President. Such responsibilities and duties
shall include day-to-day responsibility for the operations of the current
business of the Company and the operations of any other business unit,
division or Subsidiary (as defined below) which the Board may assign to
Executive.
(b) Executive shall report to the Chairman of the Board of the Company and
Executive shall perform faithfully the executive duties assigned to her by the
Board to the best of her ability in a diligent, trustworthy, businesslike and
efficient manner and will devote her full business time and attention to the
business and affairs of the Company and its Subsidiaries and Affiliates;
provided, however, that Executive may serve as a director of other
corporations, as a consultant to other corporations, and on civic or
charitable boards or committees.
(c) For purposes of this Agreement, "Subsidiary" shall mean any corporation
or other entity of which securities having a majority of the voting power in
electing directors or comparable management are, at the time of
determination, owned by the Company, directly or through one or more
Subsidiaries.
(d) For purposes of this Agreement, "Affiliate" of any particular person
means any other person controlling, controlled by or under common control with
such particular person.
Section 3. Base Salary.
As compensation for her services hereunder, the Company shall pay to Executive
during the Employment Period a base salary (the "Base Salary") in the amount
of Two Hundred Seventy-Five Thousand Dollars ($275,000) per year. Base Salary
shall be payable in accordance with the Company's customary pay practices for
executive compensation. Executive's Base Salary shall be reviewed at least
annually and may be increased at the discretion of the Board. The term "Base
Salary" as used in this Agreement shall refer to such annual salary as
increased. In addition, the Company shall provide Executive with an
automobile allowance in an amount to be determined by the Compensation
Committee of the Board.
Section 4. Bonus.
In addition to the Base Salary, Executive shall be eligible to receive an
annual bonus based on Executive's performance and the Company's operating
results during such year payable at such time or times during or following
each year as shall be determined by the Compensation Committee of the Board in
its sole discretion. The Compensation Committee, in its sole discretion, may
establish plans or formulas from time to time to be used in the determination
of management bonuses.
Section 5. Participation in Employee Benefit Plans.
Executive will be entitled to participate in all Company salaried employee
benefit plans and programs (whether now or hereinafter in effect), subject to
the terms and conditions of each such employee benefit plan or program and to
the extent commensurate with her position as a key executive officer of the
Company.
Section 6. Other Benefits.
(a) Vacation. As of the first day of each calendar year in the Employment
Period, Executive shall be entitled to a maximum of four weeks' paid vacation
for such year.
(b) Insurance. The Company shall provide Executive with (i) health,
hospitalization, dental and major medical insurance (including dependent
coverage), (ii) disability insurance providing benefits of sixty percent (60%)
of Base Salary but in any event a minimum benefit of $100,000 per year,
payments to begin no later than six months after the occurrence of a Total and
Permanent Disability (as defined below), (iii) split dollar life insurance in
a total face amount equal to $250,000, and (iv) whole life insurance in the
face amount of $100,000.
Section 7. Business Expenses.
The Company shall reimburse Executive for all reasonable expenses incurred by
her in the course of performing her duties under this Agreement which are
consistent with the Company's policies in effect from time to time with
respect to travel, entertainment and other business expenses, subject to the
Company's requirements with respect to reporting and documentation of such
expenses.
Section 8. Stock Options and Option Shares.
Executive shall be eligible to participate in the Company's 1994 Stock Option
Plan or such other similar plan as may be in effect from time to time.
Section 9. Termination of Employment.
(a) Events of Termination and Severance Payments.
(i) In the event that during the Employment Period Executive should
become Totally and Permanently Disabled, the Company (acting by resolution of
the Board) may elect to terminate the Employment Period by written notice to
Executive and Executive shall be entitled to receive full compensation
pursuant to Section 3(a) at her then Base Salary rate for a period of six (6)
months following the date of such notice.
(ii) In the event of Executive's death during the Employment Period, her
personal representative shall be entitled to receive any compensation pursuant
to Sections 3 and 4 which is accrued and unpaid as of the date of her death
plus six (6) months of salary.
(iii) In the event that during the Employment Period Executive should
commit Serious Misconduct (as defined in subsection 9(c)(ii) below), the
Company (acting by resolution of the Board) may elect to terminate the
Employment Period by providing written notice to Executive. In such case,
Executive shall be entitled to receive any compensation pursuant to Sections
3, 4 and 6(a) which is accrued and unpaid as of the Termination Date (as
defined in subsection 9(c)(iii) below).
(iv) In the event that the Company delivers to Executive a notice of
nonextension no later than ninety (90) days prior to a scheduled automatic
renewal date, Executive shall be entitled to receive certain payments (the
"Severance Payments") following termination of employment in an aggregate
amount equal to his current Base Salary plus an amount, as set by the Board,
that is equal to or greater than Executive's previous year's bonus, so long as
the total amount payable does not exceed 299% of Executive's then current
Base Salary. The Severance Payments shall be paid in twelve (12) monthly
installments at the end of each of the twelve (12) calendar months immediately
following the month in which the Termination Date occurs.
(v) In the event that during the Employment Period Executive is
discharged for any reason other than those circumstances as described in
Section 9 subsections (i) - (iv), Executive shall be entitled to receive
Severance Payments in an amount that is the greater of (A) the compensation
due under Sections 3 and 6(a) for that portion of the Employment Period
remaining between the Termination Date and the scheduled automatic renewal
date, plus an amount, as set by the Board, equal to or greater than
Executive's previous year's bonus or (B) Executive's then current annual Base
Salary plus an amount, as set by the Board, equal to or greater than
Executive's previous year's bonus. The total amount payable under either (A)
or (B) may not exceed 299% of Executive's then current Base Salary.
If the amount of Severance Payment due is the amount provided in (A) in the
preceding paragraph, a monthly payment amount shall be derived by dividing the
total amount due by the months remaining in the Employment Period. Payment is
to be made at the end of each calendar month, beginning with the month
immediately following the month in which the Termination Date occurs and
continuing until the scheduled automatic renewal date of the Employment
Period.
If the amount of Severance Payment due is the amount provided in (B) in the
preceding paragraph, payment shall be made in twelve (12) monthly installments
at the end of each of the twelve (12) calendar months immediately following
the month in which the Termination date occurs.
(b) Events of Voluntary Termination.
(i) In the event that Executive delivers to the Company a notice of
nonextension at least ninety (90) days prior to the scheduled automatic
renewal date, Executive shall be entitled to receive all compensation pursuant
to Sections 3, 4 and 6(a) that is accrued and unpaid as of the Termination
Date.
(ii) In the event that during the Employment Period Executive resigns,
other than as described in subsection (i) above, Executive shall be entitled
to that portion of compensation pursuant to Sections 3 and 6(a) that is
accrued and unpaid as of the Termination Date, and any amount of bonus that
was accrued in the prior year but has not been paid as of the Termination
Date. Any bonus which would otherwise be payable for the year in which the
Termination Date occurs shall be forfeited.
(c) Definition of Certain Terms.
(i) "Totally and Permanently Disabled" means such physical or mental
condition of Executive as is determined by the Board in its sole discretion to
be expected to continue indefinitely and which renders him incapable of
performing any substantial portion of the services contemplated hereby (as
confirmed by competent medical evidence).
(ii) "Serious Misconduct" means embezzlement or misappropriation of
corporate funds, other acts of dishonesty, significant activities materially
harmful to the reputation of the Company, commission of a felony, willful
refusal to perform or substantial disregard of the duties properly assigned by
the Board, significant violation on any statutory or common law duty of
loyalty to the Company or a material violation of Section 11 or 12 below.
(iii) "Termination Date" means the date on which Executive's employment
with the Company and its Subsidiaries is terminated, whether on account of
death, disability, resignation or discharge.
(d) Effect of Breach of Noncompetition Provisions. In the event Executive
breaches or otherwise fails to comply with the provisions of Section 11 or 12
below, then, in addition to any other remedies provided herein or at law or in
equity, the Company shall not have any further obligation to make any
additional Severance Payments. Termination of such Severance Payments
pursuant to the preceding sentence shall not relieve Executive's obligations
pursuant to Section 11 or 12 below.
(e) Effect of Breach of Monetary Obligations. In the event that the Company
breaches or otherwise fails to fulfill any of its monetary obligations under
this Agreement for whatever reason, Executive shall not be bound by Section 12
below. The event described in the preceding sentence shall not relieve
Executive's obligations under Section 11.
Section 10. Assignment and Succession.
(a) The rights and obligations of the Company under this Agreement shall
inure to the benefit of and be binding upon its respective successors and
assigns, and Executive's rights and obligations hereunder shall inure to the
benefit of and be binding upon her successors and permitted assigns, whether
so expressed or not.
(b) Executive acknowledges that the services to be rendered by her hereunder
are unique and personal. Accordingly, Executive may not pledge or assign any
of her rights or delegate any of her duties or obligations under this
Agreement without the express prior written consent of the Company.
(c) The Company may not assign its interest in or obligations under this
Agreement without the prior written consent of Executive.
Section 11. Confidential Information.
Executive acknowledges that the information, observations and data obtained by
her during the course of her performance under this Agreement concerning the
business or affairs of the Company and its Subsidiaries is the property of the
Company or such Subsidiary, as the case may be. Therefore, during the
Employment Period and at all times thereafter, Executive will not directly or
indirectly use, divulge, furnish or make accessible to any unauthorized person
or use for her own account any confidential or proprietary information or
trade secrets of the Company or any of its Subsidiaries without the Board's
prior written consent except and to the extent required by law (and upon
prompt written notice of such requirement to the Company and such Subsidiary)
or any of such information, observations or data without the Board's prior
written consent unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other than as a
result of Executive's acts or omissions to act. In the event Executive shall
be required by law to make any disclosure as set forth above, Executive shall
promptly notify the Company and such Subsidiary in writing of the basis for
and the extent of the required disclosure and shall cooperate with the Company
and such Subsidiary to preserve in full the confidentiality of all
intellectual property, trade secrets, confidential information and other
proprietary rights of the Company and such Subsidiary. Executive agrees to
deliver to the Company at the termination of her employment, or at any other
time upon written request by the Company, all memoranda, notes, plans,
records, reports and other documents relating to the business of the Company
and its Subsidiaries which she may then possess or have under her control.
Section 12. Covenant Not To Compete.
(a) Executive agrees that during the Employment Period, and for one year
after the Termination Date (the "Noncompete Period"), she will neither
directly nor indirectly engage in, have any interest in, own, manage, operate,
control, be connected with as a stockholder, joint venture, officer, employee,
partner or consultant or invest or participate in a business competing with
any of the businesses then conducted (or, to the knowledge of Executive,
planned to be conducted within one year) by the Company or any of its
successors or then Subsidiaries, within any geographical area in which the
Company or its Subsidiaries engage or plan within one year to engage in any
such businesses. During the Noncompete Period, Executive shall not directly
or indirectly through another entity:
(i) Induce or attempt to induce any employee of the Company or any
Subsidiary to leave the employ of the Company or such Subsidiary, or in any
way interfere with the relationship between the Company or any Subsidiary and
any employee thereof, or
(ii) Induce or attempt to induce any customer, supplier, licensee or
other business relation of the Company or any Subsidiary to cease doing
business with the Company or such Subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or business
relation and the Company or any Subsidiary.
(b) Nothing contained in this Section 12 shall prevent Executive from owning
an interest in any corporation or other business entity, whether public or
private, provided such corporation or other business entity is not competing
directly or indirectly with the Company or its subsidiaries as described in
Section 12. Nothing contained herein shall prevent Executive from serving as
a paid consultant to other companies or serving as a member of the Board of
Directors of other corporations.
(c) If, under the circumstances existing at the time of enforcement of this
Section 12, the period, scope of geographic area described in this Section 12
shall be found or held by a court of competent jurisdiction to be
unreasonable, the parties hereto agree that the maximum period, scope or
geographic area reasonable under the circumstances shall be substituted for
the stated period, scope or geographic area.
(d) The parties hereto agree that, in the event of the breach of Section 11
or this Section 12 by Executive, monetary damages alone would not be an
adequate remedy to the Company and its Subsidiaries for the injury that would
result from such breach, and that the Company and its Subsidiaries shall be
entitled, at any time after such breach, to immediately obtain injunctive
relief prohibiting any further breach of this Agreement. Executive further
agrees that any such injunctive relief obtained by the Company of any of its
Subsidiaries shall be in addition to monetary damages.
Section 13. Remedies.
The parties hereto will be entitled to enforce their respective rights under
this Agreement specifically to recover damages by reason of any breach of this
Agreement and to exercise all other rights existing in their favor. The
parties hereto acknowledge and agree that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any party
hereto (and any original stockholder to the extent named as a third-party
beneficiary) may, in its sole discretion, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive relief
(without posting bond or other security) in order to enforce or prevent any
violation of the provisions of this Agreement.
Section 14. Attorney's Fees.
In the event any legal action is commenced by either party hereto, the
prevailing party shall be entitled to recover reasonable attorney's fees as
established by the court of jurisdiction, together with all cost of
litigation.
Section 15. Deferral of Payments.
Notwithstanding anything herein to the contrary, the Company may defer any
payment due under this Agreement to the earliest date upon which the payment
can be made and deducted by the Company in light of the provisions of Section
162(m) of the Internal Revenue Code.
Section 16. Entire Agreement.
This Agreement represents the entire agreement between the parties relating to
the subject matters covered hereby and shall supersede any prior
understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any
way and shall not be amended or waived except in writing signed by the parties
hereto.
Section 17. Notices.
Any notice or request required or permitted to be given hereunder shall be in
writing and will be deemed to have been given:
(a) When delivered personally, sent by telecopy (with hard copy to follow)
or overnight express courier; or
(b) Five (5) days following mailing by certified or registered mail, postage
prepaid and return receipt requested, to the addresses below unless another
address is specified by such party in writing:
To the Company: Wm. F. Wright, Chairman
AMCON Distributing Company
1431 Stratford Court
Del Mar, CA 92014
Telephone: (619) 793-7711
Telecopy: (619) 793-1994
With a copy to: Kutak Rock
1650 Farnam Street
Omaha, NE 68102
Attention: Steven W. Seline, Esq.
Telephone: (402) 346-6000
Telecopy: (402) 346-1148
To Executive: Kathleen M. Evans
15701 North 47th Street
Omaha, NE 68152
Section 18. Headings.
The article and section headings herein are for convenience of reference only
and shall not define or limit the provisions hereof.
Section 19. Applicable Law.
The corporate law of the State of Delaware will govern all questions
concerning the relative rights of the Company and its stockholders. All other
questions concerning the construction, validity and interpretation of this
Agreement shall be governed by the internal laws of the State of Nebraska.
Section 20. Severability.
Whenever possible, each provision of this Agreement will be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held prohibited by, invalid or unenforceable in
any respect under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
Section 21. Amendments and Waivers.
Any provision of this Agreement may be amended or waived only with the prior
written consent of the Company and Executive.
Section 22. No Strict Construction.
The language used in this Agreement will be deemed to be the language chosen
by the parties hereto to express their mutual intent, and no rule of strict
construction will be applied against any party hereto.
Section 23. Counterparts.
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and all of which taken together constitute one and
the same agreement.
Section 24. Executive Representations.
Executive hereby represents and warrants to the Company that (i) the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which Executive
is a party or by which she is bound, (ii) Executive is not a party to or bound
by any employment agreement, noncompete agreement or confidentiality agreement
with any other person or entity and (iii) upon the execution and delivery of
this Agreement by the Company, this Agreement shall be the valid and binding
obligation of Executive, enforceable in accordance with its terms.
Section 25. Survival.
Sections 8,11 and 12 shall survive and continue in full force in accordance
with their terms notwithstanding any termination of the Employment Period.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its
duly authorized officer and Executive has signed this Agreement as of the date
first written above.
AMCON DISTRIBUTING COMPANY
By: William F. Wright
-------------------------
Wm. F. Wright, Chairman
Kathleen M. Evans
-------------------------
Kathleen M. Evans
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of January 1, 1998 by and between Food for
Health Company, Inc., an Arizona corporation (the "Company"), and Jerry
Fleming ("Executive").
The Company and Executive desire to enter into an Employment Agreement
(the "Agreement"). Accordingly, the Company and Executive agree as follows:
Section 1. Effective Date; Position; Term.
(a) This Agreement shall become effective on the date first set forth above
(the "Effective Date"). The Company shall employ Executive as President and
Chief Executive Officer of the Company for a term (the "Employment Period")
commencing on January 1, 1998 and continuing until December 31, 1999, unless
sooner terminated pursuant to Section 9 hereof, provided that the Employment
Period shall automatically be extended for an additional one-year period on
December 31, 1998 and each December 31 thereafter, unless either the Company
or Executive delivers to the other a notice of nonextension at least ninety
(90) days prior to the scheduled automatic renewal date.
(b) The Board of Directors of the Company (the "Board") in its discretion,
may modify the termination date of this Agreement and the effective renewal
dates hereof to coincide with the fiscal year of the Company. In that case,
January 1 and December 31 in the preceding sentence and wherever herein used
in the same context shall refer to the first and last day of the Company's
fiscal year. Such modification shall not cause the acceleration of the
termination date (including any automatic extension of that date) to any
earlier date.
(c) Notwithstanding the foregoing subsection (a), in the event that a Change
of Control occurs, the Employment Period automatically shall be extended
through the December 31 immediately following the second anniversary of the
effective date of the Change of Control. The Employment Period automatically
shall be extended for an additional one-year period on such December 31 and
each December 31 thereafter, unless either the Company or Executive delivers
to the other a notice of nonextension at least ninety (90) days prior to the
scheduled automatic renewal date. For purposes of this subsection (c), a
"Change of Control" shall have occurred if:
(i) all or substantially all, or a majority of the outstanding stock of
the Company and/or assets are sold; or
(ii) any person, as such term is used in Section 13(d) and 14(d) of the
Exchange Act, other than Wm. F. Wright, becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of AMCON Distributing Company ("AMCON") representing twenty percent
(20%) or more of the combined voting power of AMCON's then outstanding
securities;
(iii) during any period of not more than twenty-four (24) months,
individuals who at the beginning of such period constitute the Board, and any
new director whose election by the Board or nomination for election by AMCON's
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved, cease
for any reason to constitute at least a majority thereof;
(iv) AMCON's stockholders approve a merger or consolidation of AMCON
with any other corporation, other than (A) a merger or consolidation which
would result in the voting securities of the AMCON outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity ) more than
sixty percent (60%) of the combined voting power of the voting securities of
AMCON or such surviving entity outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected to implement a
recapitalization of the AMCON (or similar transaction) in which no person
acquires more than twenty percent (20%) of the combined voting power of
AMCON's then outstanding securities; or
(v) the stockholders of AMCON approve a plan of complete liquidation of
AMCON or an agreement for the sale or disposition by AMCON of all or
substantially all of its assets (or any transaction having a similar effect).
Section 2. Position and Duties. During the Employment Period:
(a) Executive shall have the responsibilities, duties and authority normally
commensurate with the position of President and Chief Executive Officer. Such
responsibilities and duties shall include day-to-day responsibility for the
operations of the current business of the Company and the operations of any
other business unit, division or Subsidiary which the Board may assign to
Executive, strategic planning, and mergers and acquisitions.
(b) Executive shall report to the Chairman of the Board and Executive shall
perform faithfully the executive duties assigned to him by the Board to the
best of his ability in a diligent, trustworthy, businesslike and efficient
manner and will devote his full business time and attention to the business
and affairs of the Company and its Subsidiaries and Affiliates; provided,
however, that Executive may serve as a director of other corporations, as a
consultant to other corporations, and on civic or charitable boards or
committees.
(c) For purposes of this Agreement, "Subsidiary" shall mean any corporation
or other entity of which securities having a majority of the voting power in
electing directors or comparable management are, at the time of determination,
owned by the Company, directly or through one or more Subsidiaries.
(d) For purposes of this Agreement, "Affiliate" of any particular person
means any other person controlling, controlled by or under common control with
such particular person.
Section 3. Base Salary.
As compensation for his services hereunder, the Company shall pay to Executive
during the Employment Period a base salary (the "Base Salary") in the amount
of One Hundred Seventy-Five Thousand Dollars ($175,000) per year. Base Salary
shall be payable in accordance with the Company's customary pay practices for
executive compensation. Executive's Base Salary shall be reviewed at least
annually and may be increased at the discretion of the Board. The term "Base
Salary" as used in this Agreement shall refer to such annual salary as
increased. In addition, the Company shall provide Executive with an
automobile allowance in an amount to be determined by the Compensation
Committee of the Board.
Section 4. Bonus.
In addition to the Base Salary, Executive shall be eligible to receive an
annual bonus based on Executive's performance and the Company's operating
results during such year payable at such time or times during or following
each year as shall be determined by the Compensation Committee of the Board in
its sole discretion. The Compensation Committee, in its sole discretion, may
establish plans or formulas from time to time to be used in the determination
of management bonuses.
Section 5. Participation in Employee Benefit Plans.
Executive will be entitled to participate in all Company salaried employee
benefit plans and programs (whether now or hereinafter in effect), subject to
the terms and conditions of each such employee benefit plan or program and to
the extent commensurate with his position as a key executive officer of the
Company.
Section 6. Other Benefits.
(a) Vacation. As of the first day of each calendar year in the Employment
Period, Executive shall be entitled to a maximum of four weeks' paid vacation
for such year.
(b) Insurance. The Company shall provide Executive with (i) health,
hospitalization, dental and major medical insurance (including dependent
coverage), (ii) disability insurance providing benefits of sixty percent (60%)
of Base Salary but in any event a minimum benefit of $100,000 per year,
payments to begin no later than six months after the occurrence of a Total and
Permanent Disability (as defined below), and (iii) whole life insurance in the
face amount of $100,000.
Section 7. Business Expenses.
The Company shall reimburse Executive for all reasonable expenses incurred by
him in the course of performing his duties under this Agreement which are
consistent with the Company's policies in effect from time to time with
respect to travel, entertainment and other business expenses, subject to the
Company's requirements with respect to reporting and documentation of such
expenses.
Section 8. Stock Options and Option Shares.
Executive shall be eligible to participate in the Company's 1994 Stock Option
Plan or such other similar plan as may be in effect from time to time.
Section 9. Termination of Employment.
(a) Events of Termination and Severance Payments.
(i) In the event that during the Employment Period Executive should
become Totally and Permanently Disabled, the Company (acting by resolution of
the Board) may elect to terminate the Employment Period by written notice to
Executive and Executive shall be entitled to receive full compensation
pursuant to Section 3(a) at his then Base Salary rate for a period of six (6)
months following the date of such notice.
(ii) In the event of Executive's death during the Employment Period,
his personal representative shall be entitled to receive any compensation
pursuant to Sections 3 and 4 which is accrued and unpaid as of the date of his
death plus six (6) months of salary.
(iii) In the event that during the Employment Period Executive should
commit Serious Misconduct (as defined in subsection 9(b)(ii) below), the
Company (acting by resolution of the Board) may elect to terminate the
Employment Period by written notice to Executive. In such case, Executive
shall be entitled to receive any compensation pursuant to Sections 3, 4 and
6(a) which is accrued and unpaid as of the Termination Date (as defined in
subsection 9(c)(iii) below).
(iv) In the event that the Company delivers to Executive a notice of
nonextension no later than ninety (90) days prior to a scheduled automatic
renewal date, Executive shall be entitled to receive certain payments (the
"Severance Payments") following termination of employment in an aggregate
amount equal to his current Base Salary plus an amount, as set by the Board,
that is equal to or greater than Executive's previous year's bonus, so long as
the total amount payable does not exceed 299% of Executive's then current
Base Salary. The Severance Payments shall be paid in twelve (12) monthly
installments at the end of each of the twelve (12) calendar months immediately
following the month in which the Termination Date occurs.
(v) In the event that during the Employment Period Executive is
discharged for any reason other than those circumstances as described in
Section 9 subsections (i) - (iv), Executive shall be entitled to receive
Severance Payments in an amount that is the greater of (A) the compensation
due under Sections 3 and 6(a) for that portion of the Employment Period
remaining between the Termination Date and the scheduled automatic renewal
date, plus an amount, as set by the Board, equal to or greater than
Executive's previous year's bonus or (B) Executive's then current annual Base
Salary plus an amount, as set by the Board, equal to or greater than
Executive's previous year's bonus. The total amount payable under either (A)
or (B) may not exceed 299% of Executive's then current Base Salary.
If the amount of Severance Payment due is the amount provided in (A) in the
preceding paragraph, a monthly payment amount shall be derived by dividing the
total amount due by the months remaining in the Employment Period. Payment is
to be made at the end of each calendar month, beginning with the month
immediately following the month in which the Termination Date occurs and
continuing until the scheduled automatic renewal date of the Employment
Period.
If the amount of Severance Payment due is the amount provided in (B) in the
preceding paragraph, payment shall be made in twelve (12) monthly installments
at the end of each of the twelve (12) calendar months immediately following
the month in which the Termination Date occurs.
(b) Events of Voluntary Termination.
(i) In the event that Executive delivers to the Company a notice of
nonextension at least ninety (90) days prior to the scheduled automatic
renewal date, Executive shall be entitled to receive all compensation pursuant
to Sections 3, 4 and 6(a) that is accrued and unpaid as of the Termination
Date.
(ii) In the event that during the Employment Period Executive resigns,
other than as described in subsection (i) above, Executive shall be entitled
to that portion of compensation pursuant to Sections 3 and 6(a) that is
accrued and unpaid as of the Termination Date, and any amount of bonus that
was accrued in the prior year but has not been paid as of the Termination
Date. Any bonus which would otherwise be payable for the year in which the
Termination Date occurs shall be forfeited.
(c) Definition of Certain Terms.
(i) "Totally and Permanently Disabled" means such physical or mental
condition of Executive as is determined by the Board in its sole discretion to
be expected to continue indefinitely and which renders him incapable of
performing any substantial portion of the services contemplated hereby (as
confirmed by competent medical evidence).
(ii) "Serious Misconduct" means embezzlement or misappropriation of
corporate funds, other acts of dishonesty, significant activities materially
harmful to the reputation of the Company, commission of a felony, willful
refusal to perform or substantial disregard of the duties properly assigned by
the Board, significant violation on any statutory or common law duty of
loyalty to the Company or a material violation of Section 11 or 12 below.
(iii) "Termination Date" means the date on which Executive's employment
with the Company and its Subsidiaries is terminated, whether on account of
death, disability, resignation or discharge.
(d) Effect of Breach of Noncompetition Provisions. In the event Executive
breaches or otherwise fails to comply with the provisions of Section 11 or 12
below, then, in addition to any other remedies provided herein or at law or in
equity, the Company shall not have any further obligation to make any
additional Severance Payments. Termination of such Severance Payments
pursuant to the preceding sentence shall not relieve Executive's obligations
pursuant to Section 11 or 12 below.
(e) Effect of Breach of Monetary Obligations. In the event that the Company
breaches or otherwise fails to fulfill any of its monetary obligations under
this Agreement for whatever reason, Executive shall not be bound by Section 12
below. The event described in the preceding sentence shall not relieve
Executive's obligations under Section 11.
Section 10. Assignment and Succession.
(a) The rights and obligations of the Company under this Agreement shall
inure to the benefit of and be binding upon its respective successors and
assigns, and Executive's rights and obligations hereunder shall inure to the
benefit of and be binding upon his successors and permitted assigns, whether
so expressed or not.
(b) Executive acknowledges that the services to be rendered by him hereunder
are unique and personal. Accordingly, Executive may not pledge or assign any
of his rights or delegate any of his duties or obligations under this
Agreement without the express prior written consent of the Company.
(c) The Company may not assign its interest in or obligations under this
Agreement without the prior written consent of Executive.
Section 11. Confidential Information.
Executive acknowledges that the information, observations and data obtained by
him during the course of his performance under this Agreement concerning the
business or affairs of the Company and its Subsidiaries is the property of the
Company or such Subsidiary, as the case may be. Therefore, during the
Employment Period and at all times thereafter, Executive will not directly or
indirectly use, divulge, furnish or make accessible to any unauthorized person
or use for his own account any confidential or proprietary information or
trade secrets of the Company or any of its Subsidiaries without the Board's
prior written consent except and to the extent required by law (and upon
prompt written notice of such requirement to the Company and such Subsidiary)
or any of such information, observations or data without the Board's prior
written consent unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other than as a
result of Executive's acts or omissions to act. In the event Executive shall
be required by law to make any disclosure as set forth above, Executive shall
promptly notify the Company and such Subsidiary in writing of the basis for
and the extent of the required disclosure and shall cooperate with the Company
and such Subsidiary to preserve in full the confidentiality of all
intellectual property, trade secrets, confidential information and other
proprietary rights of the Company and such Subsidiary. Executive agrees to
deliver to the Company at the termination of his employment, or at any other
time upon written request by the Company, all memoranda, notes, plans,
records, reports and other documents relating to the business of the Company
and its Subsidiaries which he may then possess or have under his control.
Section 12. Covenant Not To Compete.
(a) Executive agrees that during the Employment Period, and for one year
after the Termination Date (the "Noncompete Period"), he will neither directly
nor indirectly engage in, have any interest in, own, manage, operate, control,
be connected with as a stockholder, joint venture, officer, employee, partner
or consultant or invest or participate in a business competing with any of the
businesses then conducted (or, to the knowledge of Executive, planned to be
conducted within one year) by the Company or any of its successors or then
Subsidiaries, within any geographical area in which the Company or its
Subsidiaries engage or plan within one year to engage in any such businesses.
During the Noncompete Period, Executive shall not directly or indirectly
through another entity:
(i) Induce or attempt to induce any employee of the Company or any
Subsidiary to leave the employ of the Company or such Subsidiary, or in any
way interfere with the relationship between the Company or any Subsidiary and
any employee thereof, or
(ii) Induce or attempt to induce any customer, supplier, licensee or
other business relation of the Company or any Subsidiary to cease doing
business with the Company or such Subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or business
relation and the Company or any Subsidiary.
(b) Nothing contained in this Section 12 shall prevent Executive from owning
an interest in any corporation or other business entity, whether public or
private, provided such corporation or other business entity is not competing
directly or indirectly with the Company or its subsidiaries as described in
Section 12. Nothing contained herein shall prevent Executive from serving as
a paid consultant to other companies or serving as a member of the Board of
Directors of other corporations.
(c) If, under the circumstances existing at the time of enforcement of this
Section 12, the period, scope of geographic area described in this Section 12
shall be found or held by a court of competent jurisdiction to be
unreasonable, the parties hereto agree that the maximum period, scope or
geographic area reasonable under the circumstances shall be substituted for
the stated period, scope or geographic area.
(d) The parties hereto agree that, in the event of the breach of Section 11
or this Section 12 by Executive, monetary damages alone would not be an
adequate remedy to the Company and its Subsidiaries for the injury that would
result from such breach, and that the Company and its Subsidiaries shall be
entitled, at any time after such breach, to immediately obtain injunctive
relief prohibiting any further breach of this Agreement. Executive further
agrees that any such injunctive relief obtained by the Company of any of its
Subsidiaries shall be in addition to monetary damages.
Section 13. Remedies.
The parties hereto will be entitled to enforce their respective rights under
this Agreement specifically to recover damages by reason of any breach of this
Agreement and to exercise all other rights existing in their favor. The
parties hereto acknowledge and agree that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any party
hereto (and any original stockholder to the extent named as a third-party
beneficiary) may, in its sole discretion, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive relief
(without posting bond or other security) in order to enforce or prevent any
violation of the provisions of this Agreement.
Section 14. Attorney's Fees.
In the event any legal action is commenced by either party hereto, the
prevailing party shall be entitled to recover reasonable attorney's fees as
established by the court of jurisdiction, together with all cost of
litigation.
Section 15. Deferral of Payments.
Notwithstanding anything herein to the contrary, the Company may defer any
payment due under this Agreement to the earliest date upon which the payment
can be made and deducted by the Company in light of the provisions of Section
162(m) of the Internal Revenue Code.
Section 16. Entire Agreement.
This Agreement represents the entire agreement between the parties relating to
the subject matters covered hereby and shall supersede any prior
understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any
way and shall not be amended or waived except in writing signed by the parties
hereto.
Section 17. Notices.
Any notice or request required or permitted to be given hereunder shall be in
writing and will be deemed to have been given:
(a) When delivered personally, sent by telecopy (with hard copy to follow) or
overnight express courier; or
(b) Five (5) days following mailing by certified or registered mail, postage
prepaid and return receipt requested, to the addresses below unless another
address is specified by such party in writing:
To the Company: Wm. F. Wright, Chairman
Food For Health Company, Inc.
1431 Stratford Court
Del Mar, CA 92014
Telephone: (619) 793-7711
Telecopy: (619) 793-1994
With a copy to: Lewis & Roca
40 North Central Avenue
Phoenix, AZ 85004-4429
Attention: Scott DeWald, Esq.
Telephone: (602) 262-5333
Telecopy: (602) 262-5747
To Executive: Jerry Fleming
3323 North 112th Avenue
Avondale, AZ 85323
Section 18. Headings.
The article and section headings herein are for convenience of reference only
and shall not define or limit the provisions hereof.
Section 19. Applicable Law.
The corporate law of the State of Delaware will govern all questions
concerning the relative rights of the Company and its stockholders. All other
questions concerning the construction, validity and interpretation of this
Agreement shall be governed by the internal laws of the State of Nebraska.
Section 20. Severability.
Whenever possible, each provision of this Agreement will be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held prohibited by, invalid or unenforceable in
any respect under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
Section 21. Amendments and Waivers.
Any provision of this Agreement may be amended or waived only with the prior
written consent of the Company and Executive.
Section 22. No Strict Construction.
The language used in this Agreement will be deemed to be the language chosen
by the parties hereto to express their mutual intent, and no rule of strict
construction will be applied against any party hereto.
Section 23. Counterparts.
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and all of which taken together constitute one and
the same agreement.
Section 24. Executive Representations.
Executive hereby represents and warrants to the Company that (i) the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which Executive
is a party or by which he is bound, (ii) Executive is not a party to or bound
by any employment agreement, noncompete agreement or confidentiality agreement
with any other person or entity and (iii) upon the execution and delivery of
this Agreement by the Company, this Agreement shall be the valid and binding
obligation of Executive, enforceable in accordance with its terms.
Section 25. Survival.
Sections 8,11 and 12 shall survive and continue in full force in accordance
with their terms notwithstanding any termination of the Employment Period.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its
duly authorized officer and Executive has signed this Agreement as of the date
first written above.
FOOD FOR HEALTH COMPANY, INC.
By: William F. Wright
--------------------------
Wm. F. Wright, Chairman
Jerry Fleming
--------------------------
Jerry Fleming
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet at June 30, 1998 and the Statement of Income for the Nine Months
Ended June 30, 1998 (Unaudited) and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 36
<SECURITIES> 0
<RECEIVABLES> 15,515
<ALLOWANCES> 462
<INVENTORY> 19,924
<CURRENT-ASSETS> 35,355
<PP&E> 10,327
<DEPRECIATION> 5,624
<TOTAL-ASSETS> 43,382
<CURRENT-LIABILITIES> 14,353
<BONDS> 19,497
0
0
<COMMON> 25
<OTHER-SE> 8,905
<TOTAL-LIABILITY-AND-EQUITY> 43,382
<SALES> 211,545
<TOTAL-REVENUES> 211,545
<CGS> 188,629
<TOTAL-COSTS> 188,629
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,410
<INCOME-PRETAX> 2,797
<INCOME-TAX> 1,103
<INCOME-CONTINUING> 1,694
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,694
<EPS-PRIMARY> .69
<EPS-DILUTED> .67
</TABLE>
