UNITED STATES
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 March 31, 2011
OR
£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-15589
(Exact name of registrant as specified in its charter)
Delaware |
|
47-0702918 |
(State or other jurisdiction |
|
(I.R.S. Employer |
of incorporation or organization) |
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Identification No.) |
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|
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7405 Irvington Road, Omaha NE |
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68122 |
(Address of principal executive offices) |
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(Zip code) |
Registrants telephone number, including area code: (402) 331-3727
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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes £ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o |
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Accelerated filer o |
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|
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Non-accelerated filer o |
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Smaller reporting company x |
(Do not check if a smaller reporting company) |
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|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes £ No x
The Registrant had 590,232 shares of its $.01 par value common stock outstanding as of April 18, 2011.
Form 10-Q
2nd Quarter
PART I FINANCIAL INFORMATION
AMCON Distributing Company and Subsidiaries
Condensed Consolidated Balance Sheets
March 31, 2011 and September 30, 2010
|
|
March |
|
September |
| ||
|
|
(Unaudited) |
|
|
| ||
ASSETS |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash |
|
$ |
398,982 |
|
$ |
356,735 |
|
Accounts receivable, less allowance for doubtful accounts of $0.8 million and $1.6 million at March 2011 and September 2010, respectively |
|
24,800,880 |
|
27,903,689 |
| ||
Inventories, net |
|
33,939,682 |
|
35,005,957 |
| ||
Deferred income taxes |
|
1,518,492 |
|
1,905,974 |
| ||
Prepaid and other current assets |
|
4,154,742 |
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3,013,485 |
| ||
Total current assets |
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64,812,778 |
|
68,185,840 |
| ||
|
|
|
|
|
| ||
Property and equipment, net |
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11,919,797 |
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11,855,669 |
| ||
Goodwill |
|
6,149,168 |
|
6,149,168 |
| ||
Other intangible assets, net |
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4,706,394 |
|
4,807,644 |
| ||
Other assets |
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1,177,614 |
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1,069,050 |
| ||
|
|
$ |
88,765,751 |
|
$ |
92,067,371 |
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable |
|
$ |
16,307,547 |
|
$ |
16,656,257 |
|
Accrued expenses |
|
6,569,164 |
|
6,007,900 |
| ||
Accrued wages, salaries and bonuses |
|
2,080,139 |
|
3,161,817 |
| ||
Income taxes payable |
|
531,884 |
|
2,366,667 |
| ||
Current maturities of long-term debt |
|
745,177 |
|
893,291 |
| ||
Total current liabilities |
|
26,233,911 |
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29,085,932 |
| ||
|
|
|
|
|
| ||
Credit facility |
|
14,980,497 |
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18,816,709 |
| ||
Deferred income taxes |
|
1,145,250 |
|
1,075,861 |
| ||
Long-term debt, less current maturities |
|
4,902,732 |
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5,226,586 |
| ||
Other long-term liabilities |
|
71,061 |
|
587,479 |
| ||
Series A cumulative, convertible preferred stock, $.01 par value 100,000 shares authorized and issued, liquidation preference $25.00 per share |
|
2,500,000 |
|
2,500,000 |
| ||
Series B cumulative, convertible preferred stock, $.01 par value 80,000 shares authorized and issued, liquidation preference $25.00 per share |
|
2,000,000 |
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2,000,000 |
| ||
|
|
|
|
|
| ||
Shareholders equity: |
|
|
|
|
| ||
Preferred stock, $0.01 par value, 1,000,000 shares authorized, 180,000 shares outstanding and issued in Series A and B referred to above |
|
|
|
|
| ||
Common stock, $.01 par value, 3,000,000 shares authorized, 590,232 shares outstanding at March 2011 and 577,432 shares outstanding at September 2010 |
|
5,902 |
|
5,774 |
| ||
Additional paid-in capital |
|
9,482,317 |
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8,376,640 |
| ||
Retained earnings |
|
27,444,081 |
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24,392,390 |
| ||
Total shareholders equity |
|
36,932,300 |
|
32,774,804 |
| ||
|
|
$ |
88,765,751 |
|
$ |
92,067,371 |
|
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
AMCON Distributing Company and Subsidiaries
Condensed Consolidated Unaudited Statements of Operations
for the three and six months ended March 31, 2011 and 2010
|
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For the three months |
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For the six months |
| ||||||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
Sales (including excise taxes of $70.8 million and $76.9 million, and $152.1 million and $158.4 million, respectively) |
|
$ |
216,603,039 |
|
$ |
230,499,129 |
|
$ |
461,560,200 |
|
$ |
474,440,167 |
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Cost of sales |
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200,233,927 |
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213,558,955 |
|
427,583,366 |
|
440,271,980 |
| ||||
Gross profit |
|
16,369,112 |
|
16,940,174 |
|
33,976,834 |
|
34,168,187 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Selling, general and administrative expenses |
|
12,909,642 |
|
13,365,802 |
|
26,597,013 |
|
27,144,541 |
| ||||
Depreciation and amortization |
|
507,133 |
|
415,572 |
|
1,004,716 |
|
802,841 |
| ||||
|
|
13,416,775 |
|
13,781,374 |
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27,601,729 |
|
27,947,382 |
| ||||
Operating income |
|
2,952,337 |
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3,158,800 |
|
6,375,105 |
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6,220,805 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other expense (income): |
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|
|
|
|
|
|
|
| ||||
Interest expense |
|
263,872 |
|
368,425 |
|
648,455 |
|
773,670 |
| ||||
Other (income), net |
|
(45,211 |
) |
(23,046 |
) |
(68,092 |
) |
(36,426 |
) | ||||
|
|
218,661 |
|
345,379 |
|
580,363 |
|
737,244 |
| ||||
Income from operations before income tax |
|
2,733,676 |
|
2,813,421 |
|
5,794,742 |
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5,483,561 |
| ||||
Income tax expense |
|
1,149,000 |
|
1,022,000 |
|
2,378,000 |
|
1,963,000 |
| ||||
Net income |
|
1,584,676 |
|
1,791,421 |
|
3,416,742 |
|
3,520,561 |
| ||||
Preferred stock dividend requirements |
|
(73,239 |
) |
(73,239 |
) |
(148,106 |
) |
(148,106 |
) | ||||
Net income available to common shareholders |
|
$ |
1,511,437 |
|
$ |
1,718,182 |
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$ |
3,268,636 |
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$ |
3,372,455 |
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|
|
|
|
|
|
|
|
|
| ||||
Basic earnings per share available to common shareholders: |
|
$ |
2.56 |
|
$ |
3.05 |
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$ |
5.60 |
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$ |
6.00 |
|
Diluted earnings per share available to common shareholders: |
|
$ |
2.05 |
|
$ |
2.40 |
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$ |
4.47 |
|
$ |
4.72 |
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|
|
|
|
|
|
|
|
|
| ||||
Basic weighted average shares outstanding |
|
589,454 |
|
564,216 |
|
583,986 |
|
562,145 |
| ||||
Diluted weighted average shares outstanding |
|
771,738 |
|
746,873 |
|
765,067 |
|
745,773 |
|
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
AMCON Distributing Company and Subsidiaries
Condensed Consolidated Unaudited Statements of Cash Flows
for the six months ended March 31, 2011 and 2010
|
|
2011 |
|
2010 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
| ||
Net income |
|
$ |
3,416,742 |
|
$ |
3,520,561 |
|
Adjustments to reconcile net income from operations to net cash flows from operating activities: |
|
|
|
|
| ||
Depreciation |
|
845,120 |
|
678,860 |
| ||
Amortization |
|
159,596 |
|
123,981 |
| ||
Gain on sale of property and equipment |
|
(8,722 |
) |
(16,935 |
) | ||
Stock based compensation |
|
1,514,567 |
|
267,464 |
| ||
Net excess tax benefit on equity-based awards |
|
(125,904 |
) |
(130,126 |
) | ||
Deferred income taxes |
|
456,871 |
|
(34,196 |
) | ||
Provision for (recoveries) losses on doubtful accounts |
|
(843,000 |
) |
178,367 |
| ||
Provision for losses on inventory obsolescence |
|
26,538 |
|
16,393 |
| ||
Other |
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(4,022 |
) |
|
| ||
|
|
|
|
|
| ||
Changes in assets and liabilities: |
|
|
|
|
| ||
Accounts receivable |
|
3,945,809 |
|
491,271 |
| ||
Inventories |
|
1,039,737 |
|
1,125,441 |
| ||
Prepaid and other current assets |
|
(1,141,257 |
) |
(519,415 |
) | ||
Other assets |
|
(108,564 |
) |
(47,087 |
) | ||
Accounts payable |
|
(319,457 |
) |
1,144,665 |
| ||
Accrued expenses and accrued wages, salaries and bonuses |
|
(1,625,822 |
) |
(1,878,536 |
) | ||
Income tax payable |
|
(1,708,879 |
) |
(2,977,213 |
) | ||
Net cash flows from operating activities |
|
5,519,353 |
|
1,943,495 |
| ||
|
|
|
|
|
| ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
| ||
Purchases of property and equipment |
|
(957,254 |
) |
(1,102,929 |
) | ||
Proceeds from sales of property and equipment |
|
27,475 |
|
42,905 |
| ||
Acquisition |
|
|
|
(3,099,836 |
) | ||
Net cash flows from investing activities |
|
(929,779 |
) |
(4,159,860 |
) | ||
|
|
|
|
|
| ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
| ||
Net (payments) borrowings on bank credit agreements |
|
(3,836,212 |
) |
3,025,076 |
| ||
Principal payments on long-term debt |
|
(471,968 |
) |
(433,443 |
) | ||
Proceeds from exercise of stock options |
|
|
|
68,965 |
| ||
Net excess tax benefit on equity-based awards |
|
125,904 |
|
130,126 |
| ||
Dividends paid on convertible preferred stock |
|
(148,106 |
) |
(148,106 |
) | ||
Dividends on common stock |
|
(216,945 |
) |
(206,759 |
) | ||
Net cash flows from financing activities |
|
(4,547,327 |
) |
2,435,859 |
| ||
Net change in cash |
|
42,247 |
|
219,494 |
| ||
|
|
|
|
|
| ||
Cash, beginning of period |
|
356,735 |
|
309,914 |
| ||
Cash, end of period |
|
$ |
398,982 |
|
$ |
529,408 |
|
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
|
|
2011 |
|
2010 |
| ||
Supplemental disclosure of cash flow information: |
|
|
|
|
| ||
Cash paid during the period for interest |
|
$ |
668,389 |
|
$ |
760,727 |
|
Cash paid during the period for income taxes |
|
3,630,007 |
|
4,974,408 |
| ||
|
|
|
|
|
| ||
Supplemental disclosure of non-cash information: |
|
|
|
|
| ||
Equipment acquisitions classified as accounts payable |
|
8,953 |
|
85,939 |
| ||
|
|
|
|
|
| ||
Business acquisition: |
|
|
|
|
| ||
Inventory |
|
|
|
1,981,498 |
| ||
Property and equipment |
|
|
|
122,978 |
| ||
Customer relationships intangible asset |
|
|
|
1,620,000 |
| ||
Goodwill |
|
|
|
300,360 |
| ||
Note payable |
|
|
|
500,000 |
| ||
Contingent consideration |
|
|
|
425,000 |
| ||
The accompanying notes are an integral part of these condensed consolidated unaudited financial statements.
AMCON Distributing Company and Subsidiaries
Notes to Condensed Consolidated Unaudited Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
AMCON Distributing Company and Subsidiaries (AMCON or the Company) operate two business segments:
· |
Our wholesale distribution segment (Wholesale Segment) distributes consumer products in the Central, Rocky Mountain, and Southern regions of the United States. |
|
|
· |
Our retail health food segment (Retail Segment) operates fourteen health food retail stores located throughout the Midwest and Florida. |
WHOLESALE SEGMENT
Our Wholesale Segment serves approximately 4,300 retail outlets including convenience stores, grocery stores, liquor stores, drug stores, and tobacco shops. In October 2010, Convenience Store News ranked our Wholesale Segment as the ninth (9th) largest convenience store distributor in the United States based on annual sales.
Our Wholesale Segment distributes approximately 14,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery, beverages, groceries, paper products, health and beauty care products, frozen and chilled products and institutional food service products.
RETAIL SEGMENT
The Companys retail health food stores, which are operated as Chamberlins Market & Café and Akins Natural Foods Market, carry over 30,000 different national and regionally branded and private label products. These products include high-quality natural, organic, and specialty foods consisting of produce, baked goods, frozen foods, nutritional supplements, personal care items, and general merchandise. Chamberlins, which was first established in 1935, operates six stores in and around Orlando, Florida. Akins, which was also established in 1935, has a total of eight locations in Oklahoma, Nebraska, Missouri, and Kansas.
FINANCIAL STATEMENTS
The Companys fiscal year ends on September 30. The results for the interim period included with this Quarterly Report may not be indicative of the results which could be expected for the entire fiscal year. All significant intercompany transactions and balances have been eliminated in consolidation. Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles (GAAP) have been condensed or omitted. In the opinion of management, the accompanying condensed consolidated unaudited financial statements (financial statements) contain all adjustments necessary to fairly present the financial information included herein, such as adjustments consisting of normal recurring items. The Company believes that although the disclosures contained herein are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with the Companys annual audited consolidated financial statements for the fiscal year ended September 30, 2010, as filed with the Securities and Exchange Commission on Form 10-K. For purposes of this report, unless the context indicates otherwise, all references to we, us, our, the Company, and AMCON shall mean AMCON Distributing Company and its subsidiaries. Additionally, the three month fiscal periods ended March 31, 2011 and March 31, 2010 have been referred to throughout this quarterly report as Q2 2011 and Q2 2010, respectively. The fiscal balance sheet dates as of March 31, 2011, March 31, 2010, and September 30, 2010 have been referred to as March 2011, March 2010, and September 2010, respectively.
Notes to Condensed Consolidated Unaudited Financial Statements (Continued)
2. CONVERTIBLE PREFERRED STOCK:
The Company has two series of convertible preferred stock outstanding at March 2011 as identified in the following table:
|
|
Series A |
|
Series B |
| ||
Date of issuance: |
|
June 17, 2004 |
|
October 8, 2004 |
| ||
Optionally redeemable beginning |
|
June 18, 2006 |
|
October 9, 2006 |
| ||
Par value (gross proceeds): |
|
$ |
2,500,000 |
|
$ |
2,000,000 |
|
Number of shares: |
|
100,000 |
|
80,000 |
| ||
Liquidation preference per share: |
|
$ |
25.00 |
|
$ |
25.00 |
|
Conversion price per share: |
|
$ |
30.31 |
|
$ |
24.65 |
|
Number of common shares in which to be converted: |
|
82,481 |
|
81,136 |
| ||
Dividend rate: |
|
6.785 |
% |
6.37 |
% |
The Series A Convertible Preferred Stock (Series A) and Series B Convertible Preferred Stock (Series B), (collectively, the Preferred Stock), are convertible at any time by the holders into a number of shares of AMCON common stock equal to the number of preferred shares being converted multiplied by a fraction equal to $25.00 divided by the conversion price. The conversion prices for the Preferred Stock are subject to customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Common Stock. Cumulative dividends for the Preferred Stock are payable in arrears, when, and if declared by the Board of Directors, on March 31, June 30, September 30 and December 31 of each year.
In the event of a liquidation of the Company, the holders of the Preferred Stock are entitled to receive the liquidation preference plus any accrued and unpaid dividends prior to the distribution of any amount to the holders of the Common Stock. The shares of Preferred Stock are optionally redeemable by the Company beginning on various dates, as listed in the above table, at redemption prices equal to 112% of the liquidation preference. The redemption prices decrease 1% annually thereafter until the redemption price equals the liquidation preference, after which date it remains the liquidation preference. The Preferred Stock is redeemable at the liquidation value and at the option of the holder. The Series A Preferred Stock is owned by Mr. Chris Atayan, AMCONs Chief Executive Officer and Chairman of the Board who, under certain conditions, has a right to nominate members of our Board of Directors. The Series B Preferred Stock is owned by an institutional investor which has the right to nominate one member of our Board of Directors, pursuant to the voting rights in the Certificate of Designation creating the Series B Preferred Stock. Christopher H. Atayan was nominated to this seat in 2004.
3. INVENTORIES
Inventories consisted of finished goods at March 2011 and September 2010 and are stated at the lower of cost, determined on a first in first out, or FIFO basis, or market. The Wholesale Segment and Retail Segment inventories consist of products purchased in bulk quantities to be redistributed to the Companys customers or sold at retail. Finished goods include total reserves of approximately $0.8 million at both March 2011 and September 2010. These reserves include the Companys obsolescence allowance, which reflects estimated unsaleable or non-refundable inventory based on an evaluation of slow moving and discontinued products.
4. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill by reporting segment of the Company consisted of the following:
|
|
March |
|
September |
| ||
Wholesale Segment |
|
$ |
4,236,291 |
|
$ |
4,236,291 |
|
Retail Segment |
|
1,912,877 |
|
1,912,877 |
| ||
|
|
$ |
6,149,168 |
|
$ |
6,149,168 |
|
Notes to Condensed Consolidated Unaudited Financial Statements (Continued)
Other intangible assets of the Company consisted of the following:
|
|
March |
|
September |
| ||
Trademarks and tradenames |
|
$ |
3,373,269 |
|
$ |
3,373,269 |
|
Customer relationships (less accumulated amortization of $286,875 and $185,625 at March 2011 and September 2010, respectively) |
|
1,333,125 |
|
1,434,375 |
| ||
|
|
$ |
4,706,394 |
|
$ |
4,807,644 |
|
Goodwill, trademarks and tradenames are considered to have indefinite useful lives and therefore no amortization has been taken on these assets. The Company performs annual impairment testing of goodwill and other intangible assets during the fourth fiscal quarter of each year.
At March 2011, intangible assets considered to have finite lives represented acquired customer relationships. These customer relationships are being amortized over eight years. Amortization expense related to these assets totaled $0.1 million in each of the six month periods ended March 2011 and March 2010. In addition, these relationships are evaluated for accelerated attrition or amortization adjustments if warranted. Amortization expense for customer relationships for the periods subsequent to March 2011 is as follows:
Customer relationships |
|
March |
| |
Fiscal 2011 (1) |
|
$ |
101,250 |
|
Fiscal 2012 |
|
202,500 |
| |
Fiscal 2013 |
|
202,500 |
| |
Fiscal 2014 |
|
202,500 |
| |
Fiscal 2015 |
|
202,500 |
| |
Thereafter |
|
421,875 |
| |
|
|
$ |
1,333,125 |
|
(1) Represents amortization for the remaining six months of Fiscal 2011.
5. DIVIDENDS:
The Company paid cash dividends on its common stock and convertible preferred stock issuances totaling $0.2 million and $0.4 million for the three and six months ended, respectively, at both March 2011 and March 2010.
Notes to Condensed Consolidated Unaudited Financial Statements (Continued)
6. EARNINGS PER SHARE
Basic earnings per share available to common shareholders is calculated by dividing income from continuing operations less preferred stock dividend requirements by the weighted average common shares outstanding for each period. Diluted earnings per share available to common shareholders is calculated by dividing income from continuing operations less preferred stock dividend requirements (when anti-dilutive) by the sum of the weighted average common shares outstanding and the weighted average dilutive options, using the treasury stock method. There were no anti-dilutive stock options or potential common stock options at either March 2011 or March 2010.
|
|
For the three months ended March |
| ||||||||||
|
|
2011 |
|
2010 |
| ||||||||
|
|
Basic |
|
Diluted |
|
Basic |
|
Diluted |
| ||||
Weighted average common shares outstanding |
|
589,454 |
|
589,454 |
|
564,216 |
|
564,216 |
| ||||
Weighted average of net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock and conversion of preferred stock (1) |
|
|
|
182,284 |
|
|
|
182,657 |
| ||||
Weighted average number of shares outstanding |
|
589,454 |
|
771,738 |
|
564,216 |
|
746,873 |
| ||||
Income from operations |
|
$ |
1,584,676 |
|
$ |
1,584,676 |
|
$ |
1,791,421 |
|
$ |
1,791,421 |
|
Deduct: convertible preferred stock dividends (2) |
|
(73,239 |
) |
|
|
(73,239 |
) |
|
| ||||
Net income available to common shareholders |
|
1,511,437 |
|
1,584,676 |
|
1,718,182 |
|
1,791,421 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net earnings per share available to common shareholders |
|
$ |
2.56 |
|
$ |
2.05 |
|
$ |
3.05 |
|
$ |
2.40 |
|
(1) Diluted earnings per share calculation includes all stock options, convertible preferred stock, and restricted stock deemed to be dilutive.
(2) Diluted earnings per share calculation excludes dividends for convertible preferred stock deemed to be dilutive, as those amounts are assumed to have been converted to common stock of the Company.
|
|
For the six months ended March |
| ||||||||||
|
|
2011 |
|
2010 |
| ||||||||
|
|
Basic |
|
Diluted |
|
Basic |
|
Diluted |
| ||||
Weighted average common shares outstanding |
|
583,986 |
|
583,986 |
|
562,145 |
|
562,145 |
| ||||
Weighted average of net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock and conversion of preferred stock (1) |
|
|
|
181,081 |
|
|
|
183,628 |
| ||||
Weighted average number of shares outstanding |
|
583,986 |
|
765,067 |
|
562,145 |
|
745,773 |
| ||||
Income from operations |
|
$ |
3,416,742 |
|
$ |
3,416,742 |
|
$ |
3,520,561 |
|
$ |
3,520,561 |
|
Deduct: convertible preferred stock dividends (2) |
|
(148,106 |
) |
|
|
(148,106 |
) |
|
| ||||
|
|
3,268,636 |
|
3,416,742 |
|
3,372,455 |
|
3,520,561 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net earnings per share available to common shareholders |
|
$ |
5.60 |
|
$ |
4.47 |
|
$ |
6.00 |
|
$ |
4.72 |
|
(1) Diluted earnings per share calculation includes all stock options, convertible preferred stock, and restricted stock deemed to be dilutive.
(2) Diluted earnings per share calculation excludes dividends for convertible preferred stock deemed to be dilutive, as those amounts are assumed to have been converted to common stock of the Company.
Notes to Condensed Consolidated Unaudited Financial Statements (Continued)
7. DEBT
At March 2011, the Company had a credit agreement (the Facility) with Bank of America which included the following significant terms.
Significant Terms
· A January 1, 2012 maturity date and a $55.0 million revolving credit limit.
· Contains an evergreen renewal clause automatically renewing the agreement for one year unless either the borrower or lender provides written notice terminating the agreement at least 90 days prior to the end of the original term of the agreement or the end of any renewal period.
· The Facility bears interest at either the banks prime rate or at LIBOR plus 250 basis points, at the election of the Company.
· The Facility provides for an additional $5.0 million of credit advances available for certain inventory purchases. These advances bear interest at the banks prime rate plus one-quarter of one-percent (1/4%) per annum and are payable within 45 days of each advance.
· Lending limits subject to accounts receivable and inventory limitations.
· An unused commitment fee equal to one-quarter of one percent (1/4%) per annum on the difference between the maximum loan limit and average monthly borrowings.
· Secured by collateral including all of the Companys equipment, intangibles, inventories, and accounts receivable.
· Provides that the Company may not pay dividends on its common stock in excess of $0.72 per share on an annual basis.
The Facility includes a financial covenant which requires the Company to maintain a 1.0 to 1.0 fixed charge coverage ratio of as measured by the previous twelve month period then ended. The Company was in compliance with this covenant at March 2011.
The amount available for use on the Facility at any given time is subject to a number of factors including eligible accounts receivable and inventory balances that fluctuate day-to-day based on our collateral and loan limits as defined in the Facility agreement. The Companys calculated credit limit of the Facility at March 31 was $48.0 million of which $15.0 million was outstanding leaving $33.0 million available.
At March 2011, the revolving portion of the Companys Facility balance bore interest based on the banks prime rate and various short-term LIBOR rate elections made by the Company. The average interest rate was 3.01% at March 2011. At March 2011, the Company had $5.6 million in long-term debt outstanding. Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of this long-term debt approximated its carrying value at March 2011.
As discussed in Note 10, on April 18, 2011 the Company renewed and extended its credit facility through April 2014.
Cross Default and Co-Terminus Provisions
The Companys owned real estate in Bismarck, ND, Quincy, IL, and Rapid City, SD, and certain warehouse equipment in the Rapid City, SD warehouse is financed through term loans with Marshall and Ilsley Bank (M&I), which is also a participant lender on the Companys revolving line of credit. The M&I loans contain cross default provisions which cause all loans with M&I to be considered in default if any one of the loans where M&I is a lender, including the revolving credit facility, is in default. There were no such cross defaults at March 2011. In addition, the M&I loans contain co-terminus provisions which require all loans with M&I to be paid in full if any of the loans are paid in full prior to the end of their specified terms.
Notes to Condensed Consolidated Unaudited Financial Statements (Continued)
Other
AMCON has issued a letter of credit for $0.4 million to its workers compensation insurance carrier as part of its self-insured loss control program.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
8. EQUITY-BASED INCENTIVE AWARDS
Omnibus Plan
The Company has an Omnibus Incentive Plan (the Omnibus Plan) which provides for equity incentives to employees. The Omnibus Plan was designed with the intent of encouraging employees to acquire a vested interest in the growth and performance of the Company. The Omnibus Plan permits the issuance of up to 150,000 shares of the Companys common stock in the form of stock options, restricted stock awards, restricted stock units, performance share awards as well as awards such as stock appreciation rights, performance units, performance shares, bonus shares, and dividend share awards payable in the form of common stock or cash. The number of shares issuable under the Omnibus Plan is subject to customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Companys common stock. As of March 2011, a total of 87,900 shares of common stock had been issued pursuant to the Omnibus Plan and another 62,100 shares may be issued under the plan.
Stock Options
During the Companys third fiscal quarter of 2010, the Compensation Committee of the Board of Directors awarded various employees of the Company incentive stock options to purchase 6,000 shares of the Companys common stock. These awards vest annually in equal installments over a five year service period and have an exercise price of $51.50 per share.
The Company has estimated that the fair value of the incentive stock option awards was approximately $0.1 million using the Black-Scholes option pricing model. This amount is being amortized to compensation expense on a straight-line basis over the five year service period. The following assumptions were used in connection with the Black-Scholes option pricing calculation:
|
|
Stock Option Pricing |
|
Risk-free interest rate |
|
3.04 |
% |
Dividend yield |
|
1.30 |
% |
Expected volatility |
|
49.30 |
% |
Expected life in years |
|
7 |
|
The stock options issued by the Company expire ten years from the grant date and include graded vesting schedules up to five years in length. Stock options issued and outstanding to management employees at March 2011 are summarized as follows:
Date |
|
Exercise Price |
|
Number of |
|
Number |
| |
Fiscal 2003 |
|
$ |
28.80 |
|
84 |
|
84 |
|
Fiscal 2007 |
|
$ |
18.00 |
|
25,000 |
|
25,000 |
|
Fiscal 2010 |
|
$ |
51.50 |
|
5,500 |
|
|
|
|
|
|
|
30,584 |
|
25,084 |
|
Stock options issued and outstanding to the Companys outside directors at March 2011 are summarized as follows:
Date |
|
Exercise Price |
|
Number of |
|
Number |
| |
Fiscal 2002 |
|
$ |
26.94 |
|
834 |
|
834 |
|
Notes to Condensed Consolidated Unaudited Financial Statements (Continued)
The following summarizes all stock options issued and outstanding at March 2011:
|
|
|
|
|
|
Remaining |
|
|
|
Exercisable |
| |||||
|
|
Exercise |
|
Number |
|
Weighted-Average |
|
Weighted-Average |
|
Number |
|
Weighted-Average |
| |||
2002 Options |
|
$ |
26.94 |
|
834 |
|
1.37 years |
|
$ |
26.94 |
|
834 |
|
$ |
26.94 |
|
2003 Options |
|
$ |
28.80 |
|
84 |
|
1.57 years |
|
$ |
28.80 |
|
84 |
|
$ |
28.80 |
|
2007 Options |
|
$ |
18.00 |
|
25,000 |
|
5.70 years |
|
$ |
18.00 |
|
25,000 |
|
$ |
18.00 |
|
2010 Options |
|
$ |
51.50 |
|
5,500 |
|
9.08 years |
|
$ |
51.50 |
|
|
|
|
| |
|
|
|
|
31,418 |
|
|
|
$ |
24.13 |
|
25,918 |
|
$ |
18.32 |
|
The following is a summary of stock options activity for the six months ended March 2011:
|
|
Number |
|
Weighted |
| |
Outstanding at September 2010 |
|
31,918 |
|
$ |
24.56 |
|
Granted |
|
|
|
|
| |
Exercised |
|
|
|
|
| |
Forfeited/Expired |
|
(500 |
) |
$ |
51.50 |
|
Outstanding at March 2011 |
|
31,418 |
|
$ |
24.13 |
|
At March 2011, total unamortized compensation expense related to stock options was approximately $0.1 million. This unamortized compensation expense is expected to be amortized over approximately the next 49 months.
Restricted Stock Units
During the first fiscal quarter of 2011, the Compensation Committee of the Board of Directors authorized and approved the following restricted stock units awards to members of the Companys management team pursuant to the provisions of the Companys Omnibus Plan:
|
|
Restricted Stock Units (1) |
|
Restricted Stock Units (2) |
| ||
Date of award: |
|
November 22, 2010 |
|
November 22, 2010 |
| ||
Number of shares: |
|
38,400 |
|
12,000 |
| ||
Service period: |
|
24 months |
|
36 months |
| ||
Estimated fair value of award at grant date: |
|
$ |
2,765,000 |
|
$ |
864,000 |
|
Fair value of outstanding (non-vested) awards at March 2011: |
|
$ |
2,053,000 |
|
$ |
962,000 |
|
(1) 12,800 of the restricted stock unit awards were vested at Q2 2011. The remaining 25,600 restricted stock units will vest in equal amounts (12,800 per year) on October 26, 2011 and October 26, 2012.
(2) The 12,000 restricted stock units will vest in equal amounts (4,000 per year) on November 22, 2011, November 22 2012, and November 22, 2013.
There is no direct cost to the recipients of the restricted stock units, except for any applicable taxes. The recipients of the restricted stock units are entitled to the customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Companys common stock. All cash dividends and/or distributions payable to restricted stock recipients will be held in escrow until all the conditions of vesting have been met.
The restricted stock units provide that the recipients can elect, at their option, to receive either common stock in the Company, or a cash settlement based upon the closing price of the Companys shares, at the time of vesting. Based on these award provisions, the compensation expense recorded in the Companys Condensed Statement of Operations reflects the straight-line amortized fair value based on the period end closing price.
Notes to Condensed Consolidated Unaudited Financial Statements (Continued)
For the three and six months ended March 2011, net income before income taxes included compensation expense of $0.3 million and $1.5 million, respectively, related to the amortization of the Companys restricted stock unit awards. Total unamortized compensation expense for these awards based on the March 2011 closing price was approximately $2.5 million. This unamortized compensation expense, plus any changes in the fair value of the awards through the settlement date, are expected to be amortized over approximately the next 23 months (the weighted-average period). The following summarizes restricted stock unit activity under the Omnibus Plan for the six months ended March 2011:
|
|
Number |
|
Weighted Average |
| |
Nonvested restricted stock units at September 2010 |
|
|
|
$ |
|
|
Granted |
|
50,400 |
|
$ |
72.01 |
|
Vested |
|
(12,800 |
) |
$ |
72.50 |
|
Expired |
|
|
|
$ |
|
|
Nonvested restricted stock units at March 2011 |
|
37,600 |
|
$ |
80.20 |
|
9. BUSINESS SEGMENTS
AMCON has two reportable business segments: the wholesale distribution of consumer products and the retail sale of health and natural food products. The retail health food stores operations are aggregated to comprise the Retail Segment because such operations have similar economic characteristics, as well as similar characteristics with respect to the nature of products sold, the type and class of customers for the health food products and the methods used to sell the products. Included in the Other column are intercompany eliminations, and assets held and charges incurred by our holding company. The segments are evaluated on revenues, gross margins, operating income (loss), and income before taxes.
|
|
Wholesale |
|
Retail |
|
Other |
|
Consolidated |
| ||||
THREE MONTHS ENDED MARCH 2011: |
|
|
|
|
|
|
|
|
| ||||
External revenue: |
|
|
|
|
|
|
|
|
| ||||
Cigarettes |
|
$ |
154,090,343 |
|
$ |
|
|
$ |
|
|
$ |
154,090,343 |
|
Confectionery |
|
14,258,544 |
|
|
|
|
|
14,258,544 |
| ||||
Health food |
|
|
|
9,908,134 |
|
|
|
9,908,134 |
| ||||
Tobacco, food service & other |
|
38,346,018 |
|
|
|
|
|
38,346,018 |
| ||||
Total external revenue |
|
206,694,905 |
|
9,908,134 |
|
|
|
216,603,039 |
| ||||
Depreciation |
|
318,398 |
|
107,219 |
|
938 |
|
426,555 |
| ||||
Amortization |
|
80,578 |
|
|
|
|
|
80,578 |
| ||||
Operating income (loss) |
|
3,153,065 |
|
1,116,996 |
|
(1,317,724 |
) |
2,952,337 |
| ||||
Interest expense |
|
115,095 |
|
96,438 |
|
52,339 |
|
263,872 |
| ||||
Income (loss) from continuing operations before taxes |
|
3,054,200 |
|
1,026,304 |
|
(1,346,828 |
) |
2,733,676 |
| ||||
Total assets |
|
74,636,163 |
|
13,098,611 |
|
1,030,977 |
|
88,765,751 |
| ||||
Capital expenditures |
|
602,351 |
|
61,866 |
|
|
|
664,217 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
THREE MONTHS ENDED MARCH 2010: |
|
|
|
|
|
|
|
|
| ||||
External revenue: |
|
|
|
|
|
|
|
|
| ||||
Cigarettes |
|
$ |
166,914,751 |
|
$ |
|
|
$ |
|
|
$ |
166,914,751 |
|
Confectionery |
|
14,887,515 |
|
|
|
|
|
14,887,515 |
| ||||
Health food |
|
|
|
9,492,904 |
|
|
|
9,492,904 |
| ||||
Tobacco, food service & other |
|
39,203,959 |
|
|
|
|
|
39,203,959 |
| ||||
Total external revenue |
|
221,006,225 |
|
9,492,904 |
|
|
|
230,499,129 |
| ||||
Depreciation |
|
271,131 |
|
68,483 |
|
1,147 |
|
340,761 |
| ||||
Amortization |
|
74,811 |
|
|
|
|
|
74,811 |
| ||||
Operating income (loss) |
|
3,535,284 |
|
1,093,182 |
|
(1,469,666 |
) |
3,158,800 |
| ||||
Interest expense |
|
124,994 |
|
115,666 |
|
127,765 |
|
368,425 |
| ||||
Income (loss) from continuing operations before taxes |
|
3,422,768 |
|
987,668 |
|
(1,597,015 |
) |
2,813,421 |
| ||||
Total assets |
|
78,290,787 |
|
12,198,955 |
|
1,034,096 |
|
91,523,838 |
| ||||
Capital expenditures |
|
166,270 |
|
340,048 |
|
|
|
506,318 |
|
Notes to Condensed Consolidated Unaudited Financial Statements (Continued)
|
|
Wholesale |
|
Retail |
|
Other |
|
Consolidated |
| ||||
SIX MONTHS ENDED MARCH 2011: |
|
|
|
|
|
|
|
|
| ||||
External revenue: |
|
|
|
|
|
|
|
|
| ||||
Cigarettes |
|
$ |
329,862,580 |
|
$ |
|
|
$ |
|
|
$ |
329,862,580 |
|
Confectionery |
|
30,127,596 |
|
|
|
|
|
30,127,596 |
| ||||
Health food |
|
|
|
19,000,583 |
|
|
|
19,000,583 |
| ||||
Tobacco, food service & other |
|
82,569,441 |
|
|
|
|
|
82,569,441 |
| ||||
Total external revenue |
|
442,559,617 |
|
19,000,583 |
|
|
|
461,560,200 |
| ||||
Depreciation |
|
628,630 |
|
214,615 |
|
1,875 |
|
845,120 |
| ||||
Amortization |
|
159,596 |
|
|
|
|
|
159,596 |
| ||||
Operating income (loss) |
|
8,090,052 |
|
1,909,085 |
|
(3,624,032 |
) |
6,375,105 |
| ||||
Interest expense |
|
226,164 |
|
199,988 |
|
222,303 |
|
648,455 |
| ||||
Income (loss) from continuing operations before taxes |
|
7,882,840 |
|
1,720,389 |
|
(3,808,487 |
) |
5,794,742 |
| ||||
Total assets |
|
74,636,163 |
|
13,098,611 |
|
1,030,977 |
|
88,765,751 |
| ||||
Capital expenditures |
|
850,098 |
|
107,156 |
|
|
|
957,254 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
SIX MONTHS ENDED MARCH 2010: |
|
|
|
|
|
|
|
|
| ||||
External revenue: |
|
|
|
|
|
|
|
|
| ||||
Cigarettes |
|
$ |
344,498,796 |
|
$ |
|
|
$ |
|
|
$ |
344,498,796 |
|
Confectionery |
|
30,195,336 |
|
|
|
|
|
30,195,336 |
| ||||
Health food |
|
|
|
18,419,393 |
|
|
|
18,419,393 |
| ||||
Tobacco, food service & other |
|
81,326,642 |
|
|
|
|
|
81,326,642 |
| ||||
Total external revenue |
|
456,020,774 |
|
18,419,393 |
|
|
|
474,440,167 |
| ||||
Depreciation |
|
537,711 |
|
138,855 |
|
2,294 |
|
678,860 |
| ||||
Amortization |
|
123,981 |
|
|
|
|
|
123,981 |
| ||||
Operating income (loss) |
|
7,533,896 |
|
2,010,489 |
|
(3,323,580 |
) |
6,220,805 |
| ||||
Interest expense |
|
247,191 |
|
240,290 |
|
286,189 |
|
773,670 |
| ||||
Income (loss) from continuing operations before taxes |
|
7,302,417 |
|
1,790,498 |
|
(3,609,354 |
) |
5,483,561 |
| ||||
Total assets |
|
78,290,787 |
|
12,198,955 |
|
1,034,096 |
|
91,523,838 |
| ||||
Capital expenditures |
|
603,584 |
|
499,345 |
|
|
|
1,102,929 |
|
10. SUBSEQUENT EVENTS
On April 18, 2011, the Company executed a Second Amended and Restated Revolving Line of Credit Agreement with Bank of America. This new credit agreement replaces the Companys existing Facility with Bank of America which was scheduled to mature in January 2012. The significant provisions of the new credit agreement include the following:
· April 2014 maturity date and a $55.0 million revolving credit limit.
· Includes a loan accordion allowing the Company to increase the size of the credit facility agreement up to $25.0 million.
· Provides for an additional $5.0 million of credit advances available for certain inventory purchases.
· Contains an evergreen renewal clause automatically renewing the agreement for one year unless either the borrower or lender provides written notice terminating the agreement at least 90 days prior to the end of the original term of the agreement or the end of any renewal period.
· Includes a prepayment penalty equal to one-half of one percent (½%) if the Company prepays the entire Facility or terminates it in year one of the agreement, and one-quarter of one percent (¼%) if the Company prepays the entire Facility or terminates it in year two of the agreement. The prepayment penalty is calculated based on the maximum loan amount.
Notes to Condensed Consolidated Unaudited Financial Statements (Continued)
10. SUBSEQUENT EVENTS (continued)
· The Facility bears interest at either the banks prime rate or at LIBOR plus 175 basis points, at the election of the Company.
· Lending limits subject to accounts receivable and inventory limitations.
· An unused commitment fee equal to one-quarter of one percent (1/4%) per annum on the difference between the maximum loan limit and average monthly borrowings.
· Secured by collateral including all of the Companys equipment, intangibles, inventories, and accounts receivable.
· Provides that the Company may not pay dividends on its common stock in excess of $1.00 per share on an annual basis.
· Includes a financial covenant requiring a fixed charge coverage ratio of at least 1.0, measured only if excess credit facility availability falls below $5.5 million.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including the Managements Discussion and Analysis and other sections, contains forward-looking statements that are subject to risks and uncertainties and which reflect managements 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 that 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. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. 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:
· increases in state and federal excise taxes on cigarette and tobacco products,
· higher commodity prices which could impact food ingredient costs for many of the products we sell,
· regulation of cigarette and tobacco products by the FDA, in addition to existing state and federal regulations by other agencies,
· potential bans imposed by the FDA on the manufacture, distribution, and sale of certain cigarette and tobacco products such as products including menthol additives,
· increases in manufacturer prices,
· increases in inventory carrying costs and customer credit risk,
· changes in promotional and incentive programs offered by manufacturers,
· decreased availability of capital resources
· demand for the Companys products, particularly cigarette and tobacco products,
· new business ventures or acquisitions,
· domestic regulatory and legislative risks,
· competition,
· poor weather conditions,
· increases in fuel prices,
· consolidation trends within the convenience store industry,
· other risks over which the Company has little or no control, and any other factors not identified herein.
Changes in these factors could result in significantly different results. Consequently, future results may differ from managements expectations. Moreover, past financial performance should not be considered a reliable indicator of future performance. Any forward-looking statement contained herein is made as of the date of this document. Except as required by law, the Company undertakes no obligation to publicly update or correct any of these forward-looking statements in the future to reflect changed assumptions, the occurrence of material events or changes in future operating results, financial conditions or business over time.
CRITICAL ACCOUNTING ESTIMATES
Certain accounting estimates used in the preparation of the Companys financial statements require us to make judgments and estimates and the financial results we report may vary depending on how we make these judgments and estimates. Our critical accounting estimates are set forth in our annual report on Form 10-K for the fiscal year ended September 30, 2010, as filed with the Securities and Exchange Commission. There have been no significant changes with respect to these policies during the fiscal quarter ended March 2011.
SECOND FISCAL QUARTER 2011 (Q2 2011)
The following discussion and analysis includes the Companys results of operations for the three and six months ended March 2011 and March 2010.
Wholesale Segment
Our Wholesale Segment serves approximately 4,300 retail outlets including convenience stores, grocery stores, liquor stores, drug stores, and tobacco shops. In October 2010, Convenience Store News ranked our Wholesale Segment as the ninth (9th) largest convenience store distributor in the United States based on annual sales.
Our Wholesale Segment distributes approximately 14,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery, beverages, groceries, paper products, health and beauty care products, frozen and chilled products and institutional food service products.
Retail Segment
The Companys Retail Segment, which is operated as Chamberlins Market & Café and Akins Natural Foods Market, carry over 30,000 different national and regionally branded and private label products. These products include high-quality natural, organic, and specialty foods consisting of produce, baked goods, frozen foods, nutritional supplements, personal care items, and general merchandise. Chamberlins, which was first established in 1935, operates six stores in and around Orlando, Florida. Akins, which was also established in 1935, has a total of eight locations in Oklahoma, Nebraska, Missouri, and Kansas.
Business Update General
While the United States economy has shown signs of stabilization, consumer demand has generally remained flat. Higher fuel and food commodity prices, combined with ongoing high unemployment rates, has left consumers price sensitive and extremely value conscious. Additionally, many real estate markets remain depressed as prices continue to decline. Our businesses have generally remained more resilient than many other distribution and retail formats and have performed comparatively well given the challenging operating environment.
Forward looking, we believe the possibility of additional regulatory pressures and higher excise taxes could adversely affect our sales, gross margins, and operating profits. Additionally, the long-term implications of the new healthcare legislation remains uncertain. We are, however, confident that our conservative strategy of cost containment and maintaining maximum liquidity positions us well to capture market share, execute strategic acquisitions, open new retail stores, and ultimately reward our shareholders.
Business Update Wholesale Segment
The competitive landscape in our wholesale distribution business is intensifying on a number of fronts. Convenience stores, which constitute the largest portion of our customer base, continue to remake their businesses, focusing on food service offerings such as hot on-the-go meals and over-sized beverage and coffee bars. Most recently, higher fuel and food commodity prices have began to stress discretionary consumer spending, squeezing profit margins for our customers. These factors are driving consolidation among convenience stores, as business owners seek to maximize economies of scale. Wholesale distributors who service convenience stores are challenged by the same structural and macro-economic issues. Declining revenue streams from tobacco products, higher inventory carrying costs, shrinking profit margins, and access to capital have accelerated consolidation among wholesale distributors.
Despite these issues, we believe the current market conditions offer some unique opportunities. The ability of smaller distributors to compete moving forward will be difficult, presenting our Company with more attractive acquisition opportunities and the ability to expand our geographic reach. Further, the long-term sustainability of the convenience store industry remains strong. According to a January 2011 report by the National Association of Convenience Stores (NACS), the total number of convenience stores nation-wide grew to a record high of 146,000 during the 2010 calendar year, more than the total number of other competing retail channel locations (supermarkets, drug stores, and mass merchandiser/dollar stores) in the United States combined. Furthermore, the industry remains highly fragmented with independent single-store operators still accounting for more than 63% of all stores, a market segment our Company specializes in serving. While the particular products sold by convenience stores may evolve and change over time, we feel the primary value they convey (speedy service for time starved customers) will not.
Business Update Retail Segment
Natural foods remain one of the fastest growing categories in food retailing. Our business has also benefited from a loyal customer following, enabling us to maintain a strong and profitable business. Both Chamberlins Market & Café and Akins Natural Foods Market have had a local market presence for over 75 years affording them tremendous brand recognition in the area of natural products.
Forward looking, we will continue to face a highly competitive environment based on the expansion of both regional and national chains. While our stores have recently shown a modest improvement in sales, higher food commodity prices may dampen near term sales growth. We believe, however, that our health food stores continue to offer a unique value proposition, carrying product lines not readily found in other stores, coupled with highly trained store associates. As the economy continues to recover and consumer confidence improves, we believe our stores will be well positioned to benefit from the long-term growth trends in natural products retailing.
RESULTS OF OPERATIONS
|
|
For the three months ended March |
| |||||||||
|
|
2011 |
|
2010 |
|
Incr |
|
% Change |
| |||
CONSOLIDATED: |
|
|
|
|
|
|
|
|
| |||
Sales (1) |
|
$ |
216,603,039 |
|
$ |
230,499,129 |
|
$ |
(13,896,090 |
) |
(6.0 |
) |
Cost of sales |
|
200,233,927 |
|
213,558,955 |
|
(13,325,028 |
) |
(6.2 |
) | |||
Gross profit |
|
16,369,112 |
|
16,940,174 |
|
(571,062 |
) |
(3.4 |
) | |||
Gross profit percentage |
|
7.6 |
% |
7.3 |
% |
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Operating expense |
|
13,416,775 |
|
13,781,374 |
|
(364,599 |
) |
(2.6 |
) | |||
Operating income |
|
2,952,337 |
|
3,158,800 |
|
(206,463 |
) |
(6.5 |
) | |||
Interest expense |
|
263,872 |
|
368,425 |
|
(104,553 |
) |
(28.4 |
) | |||
Income tax expense |
|
1,149,000 |
|
1,022,000 |
|
127,000 |
|
12.4 |
| |||
Income from continuing operations before income taxes |
|
1,584,676 |
|
1,791,421 |
|
(206,745 |
) |
(11.5 |
) | |||
|
|
|
|
|
|
|
|
|
| |||
BUSINESS SEGMENTS: |
|
|
|
|
|
|
|
|
| |||
Wholesale |
|
|
|
|
|
|
|
|
| |||
Sales |
|
$ |
206,694,905 |
|
$ |
221,006,225 |
|
$ |
(14,311,320 |
) |
(6.5 |
) |
Gross profit |
|
12,091,918 |
|
12,809,400 |
|
(717,482 |
) |
(5.6 |
) | |||
Gross profit percentage |
|
5.9 |
% |
5.8 |
% |
|
|
|
| |||
Retail |
|
|
|
|
|
|
|
|
| |||
Sales |
|
$ |
9,908,134 |
|
$ |
9,492,904 |
|
$ |
415,230 |
|
4.4 |
|
Gross profit |
|
4,277,194 |
|
4,130,774 |
|
146,420 |
|
3.5 |
| |||
Gross profit percentage |
|
43.2 |
% |
43.5 |
% |
|
|
|
|
(1) Sales are reported net of costs associated with incentives provided to retailers. These incentives totaled $3.5 million in Q2 2011 and $3.7 million in Q2 2010.
SALES:
Changes in sales are driven by two primary components:
(i) changes to selling prices, which are largely controlled by our product suppliers, and excise taxes imposed on cigarettes and tobacco products by various states; and
(ii) changes in the volume of products sold to our customers, either due to a change in purchasing patterns resulting from consumer preferences or the fluctuation in the comparable number of business days in our reporting period.
SALES Q2 2011 vs. Q2 2010
Sales in our Wholesale Segment decreased $14.3 million during Q2 2011 as compared to Q2 2010. Significant items impacting sales during Q2 2011 included a $5.9 million increase in sales due to cigarette price increases implemented by manufacturers, a $18.7 million decrease in sales primarily related to the volume and mix of cigarette cartons sold, and a $1.5 million decrease in sales in our tobacco, beverage, snacks, candy, grocery, health & beauty products, automotive, food service, and store supplies categories (Other Products).
Sales in our Retail Segment increased approximately $0.4 million in Q2 2011 as compared to Q2 2010. The increase in sales is primarily related to the addition of our new retail store in Tulsa, Oklahoma which opened during our third fiscal quarter of 2010, as well as higher overall sales in our Florida market stores.
GROSS PROFIT Q2 2011 vs. Q2 2010
Our gross profit does not include fulfillment costs and costs related to the distribution network which are included in selling, general and administrative costs, and may not be comparable to those of other entities. Some entities may classify such costs as a component of cost of sales. Cost of sales, a component used in determining gross profit, for the wholesale and retail segments includes the cost of products purchased from manufacturers, less incentives we receive which are netted against such costs.
Gross profit in our Wholesale Segment decreased $0.7 million in Q2 2011 as compared to Q2 2010. This decrease is primarily related to lower overall sales in our cigarette and Other Products categories.
Gross profit for the Retail Segment increased $0.1 million in Q2 2011 as compared to Q2 2010. This increase was primarily related to the additional sales generated by our new retail store in Tulsa, Oklahoma, as well as improved sales in our Florida market retail stores
OPERATING EXPENSE Q2 2011 vs. Q2 2010
Operating expense includes selling, general and administrative expenses and depreciation and amortization. Selling, general, and administrative expenses include costs related to our sales, warehouse, delivery and administrative departments for all segments. Specifically, purchasing and receiving costs, warehousing costs and costs of picking and loading customer orders are all classified as selling, general and administrative expenses. Our most significant expenses relate to employee costs, facility and equipment leases, transportation costs, fuel costs, insurance, and professional fees.
Q2 2011 operating expenses decreased $0.4 million as compared to Q2 2010. Significant items impacting operating expenses during Q2 2011 included a $0.4 million reduction in bad debt expense and a $0.1 million decrease in compensation costs. These decreases were partially offset by a $0.1 million increase in depreciation and other operating expenses.
INTEREST EXPENSE Q2 2011 vs. Q2 2010
Q2 2011 interest expense decreased $0.1 million as compared to Q2 2010. This change was primarily related to a $12.0 million reduction in average borrowings during Q2 2011 as compared to Q2 2010.
RESULTS OF OPERATIONS SIX MONTHS ENDED MARCH 2011:
|
|
For the six months |
| |||||||||
|
|
ended March |
| |||||||||
|
|
|
|
|
|
Incr |
|
|
| |||
|
|
2011 |
|
2010 |
|
(Decr) |
|
% Change |
| |||
CONSOLIDATED: |
|
|
|
|
|
|
|
|
| |||
Sales |
|
$ |
461,560,200 |
|
$ |
474,440,167 |
|
$ |
(12,879,967 |
) |
(2.7 |
) |
Cost of sales |
|
427,583,366 |
|
440,271,980 |
|
(12,688,614 |
) |
(2.9 |
) | |||
Gross profit |
|
33,976,834 |
|
34,168,187 |
|
(191,353 |
) |
(0.6 |
) | |||
Gross profit percentage |
|
7.4 |
% |
7.2 |
% |
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Operating expenses |
|
27,601,729 |
|
27,947,382 |
|
(345,653 |
) |
(1.2 |
) | |||
Operating income |
|
6,375,105 |
|
6,220,805 |
|
154,300 |
|
2.5 |
| |||
Interest expense |
|
648,455 |
|
773,670 |
|
(125,215 |
) |
(16.2 |
) | |||
Income tax expense |
|
2,378,000 |
|
1,963,000 |
|
415,000 |
|
21.1 |
| |||
Income from continuing operations before income taxes |
|
3,416,742 |
|
3,520,561 |
|
(103,819 |
) |
(2.9 |
) | |||
|
|
|
|
|
|
|
|
|
| |||
BUSINESS SEGMENTS: |
|
|
|
|
|
|
|
|
| |||
Wholesale |
|
|
|
|
|
|
|
|
| |||
Sales |
|
$ |
442,559,617 |
|
$ |
456,020,774 |
|
$ |
(13,461,157 |
) |
(3.0 |
) |
Gross profit |
|
25,800,359 |
|
26,196,176 |
|
(395,817 |
) |
(1.5 |
) | |||
Gross profit percentage |
|
5.8 |
% |
5.7 |
% |
|
|
|
| |||
Retail |
|
|
|
|
|
|
|
|
| |||
Sales |
|
$ |
19,000,583 |
|
$ |
18,419,393 |
|
$ |
581,190 |
|
3.2 |
|
Gross profit |
|
8,176,475 |
|
7,972,011 |
|
204,464 |
|
2.6 |
| |||
Gross profit percentage |
|
43.0 |
% |
43.3 |
% |
|
|
|
|
(1) Sales are reported net of costs associated with incentives provided to retailers. These incentives totaled $7.3 million for the six months ended March 2011 and $7.5 million for the six months ended March 2010.
SALES Six Months Ended March 2011
Sales in our Wholesale Segment decreased $13.5 million for the six months ended March 2011 as compared to the same prior year period. Significant items impacting our Wholesale Segment sales for the six months ended March 2011 included a $11.3 million increase in sales due to cigarette price increases implemented by manufacturers, a $26.0 million decrease in sales primarily related to the volume and mix of cigarette cartons sold, and a $1.2 million increase in our tobacco, beverage, snacks, candy, grocery, health & beauty products, automotive, food service, and store supplies categories (Other Products).
Sales in our Retail Segment for the six months ended March 2011 increased approximately $0.6 million as compared to the same prior year period. Of this increase, approximately $0.4 million related to the addition of our new retail store in Tulsa, Oklahoma and $0.2 million related to higher overall sales in our existing retail stores.
GROSS PROFIT Six Months Ended March 2011
Gross profit in our Wholesale Segment decreased $0.4 million for the six month period ended March 2011 as compared to the same prior year period. This decrease is primarily related to lower overall sales in our cigarette category.
Gross profit for the Retail Segment increased $0.2 million for the six month period ended March 2011 as compared to the same period year period. This increase was primarily related to the additional sales generated by our new Tulsa, Oklahoma retail store, as well as higher overall sales in our existing stores.
OPERATING EXPENSE Six Months Ended March 2011
Operating expenses decreased $0.3 million for the six months ended March 2011 as compared to the same prior year period. Significant items impacting operating expenses during the current period included a $1.0 million reduction in bad debt expense, and a $0.2 million increase in fuel expenses, a $0.2 increase in depreciation expense, and a $0.3 increase in compensation and other operating expenses.
INTEREST EXPENSE Six Months Ended March 2011
Interest expense for the six months ended March 2011 decreased $0.1 million as compared to the same prior year period. This change in interest expense primarily resulted from a $12.0 reduction in average credit facility borrowings during our second fiscal quarter (Q2 2011).
LIQUIDITY AND CAPITAL RESOURCES
Overview
General. The Company requires cash to pay operating expenses, purchase inventory, and make capital investments. In general, the Company finances its cash flow requirements with cash generated from operating activities and credit facility borrowings.
Operating Activities. The Company generated cash of approximately $5.5 million from operating activities during the six months ended March 2011. The cash generated primarily resulted from a decrease in accounts receivable and inventory, partially offset by higher prepaid assets, as well as a decrease in accrued compensation expenses and income tax payable.
Our variability in cash flows from operating activities is dependent on the timing of inventory purchases and seasonal fluctuations. For example, periodically we have inventory buy-in opportunities which offer more favorable pricing terms. As a result, we may have to hold inventory for a period longer than the payment terms. This generates a cash outflow from operating activities which we expect to reverse in later periods. Additionally, during the warm weather months, which is our peak time of operations, we generally carry higher amounts of inventory to ensure high fill rates and customer satisfaction.
Investing Activities. The Company used approximately $0.9 million of cash during the six month period ended March 2011 for investing activities, primarily related to capital expenditures for property and equipment.
Financing Activities. The Company used cash of $4.5 million for financing activities during the six months ended March 2011. Of this amount, $3.8 million related to net payments on the Companys credit facility, and $0.5 million related to payments on long-term debt, and $0.3 million related to dividends on the Companys common and preferred stock. Offsetting these items was $0.1 million related to equity-based awards.
Cash on Hand/Working Capital. At March 2011, the Company had cash on hand of $0.4 million and working capital (current assets less current liabilities) of $38.6 million. This compares to cash on hand of $0.4 million and working capital of $39.1 million at September 2010.
CREDIT AGREEMENT
On April 18, 2011, the Company executed a Second Amended and Restated Revolving Line of Credit Agreement with Bank of America. This new credit agreement replaces the Companys existing Facility with Bank of America which was scheduled to mature in January 2012. The significant provisions of the new credit agreement include the following:
· April 2014 maturity date and a $55.0 million revolving credit limit.
· Includes a loan accordion allowing the Company to increase the size of the credit facility agreement up to $25.0 million.
· Provides for an additional $5.0 million of credit advances available for certain inventory purchases.
· Contains an evergreen renewal clause automatically renewing the agreement for one year unless either the borrower or lender provides written notice terminating the agreement at least 90 days prior to the end of the original term of the agreement or the end of any renewal period.
· Includes a prepayment penalty equal to one-half of one percent (½%) if the Company prepays the entire Facility or terminates it in year one of the agreement, and one-quarter of one percent (¼%) if the Company prepays the entire Facility or terminates it in year two of the agreement. The prepayment penalty is calculated based on the maximum loan amount.
CREDIT AGREEMENT (continued)
· The Facility bears interest at either the banks prime rate or at LIBOR plus 175 basis points, at the election of the Company.
· Lending limits subject to accounts receivable and inventory limitations.
· An unused commitment fee equal to one-quarter of one percent (1/4%) per annum on the difference between the maximum loan limit and average monthly borrowings.
· Secured by collateral including all of the Companys equipment, intangibles, inventories, and accounts receivable.
· Provides that the Company may not pay dividends on its common stock in excess of $1.00 per share on an annual basis.
· Includes a financial covenant requiring a fixed charge coverage ratio of at least 1.0, measured only if excess credit facility availability falls below $5.5 million.
The amount available for use on the Facility at any given time is subject to a number of factors including eligible accounts receivable and inventory balances that fluctuate day-to-day. Based on our collateral and loan limits as defined in the Facility agreement, the calculated credit limit of the Facility at March 2011 was $48.0 million, of which $15.0 million was outstanding, leaving $33.0 million available.
At March 2011, the revolving portion of the Companys Facility balance bore interest based on the banks prime rate and various short-term LIBOR rate elections made by the Company. The average interest rate was 3.01% at March 2011.
At March 2011, the Company had $5.6 million in long-term debt outstanding. Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of this long-term debt approximated its carrying value at March 2011.
For the six months ended March 2011, our peak borrowings under the Facility were $40.7 million and our average borrowings and average availability were $26.3 million and $24.4 million, respectively. Our availability to borrow under the Facility generally decreases as inventory and accounts receivable levels increase because of the borrowing limitations that are placed on collateralized assets.
Cross Default and Co-Terminus Provisions
The Companys owned real estate in Bismarck, ND, Quincy, IL, and Rapid City, SD, and certain warehouse equipment in the Rapid City, SD warehouse is financed through term loans with Marshall and Ilsley Bank (M&I), which is also a participant lender on the Companys revolving line of credit. The M&I loans contain cross default provisions which cause all loans with M&I to be considered in default if any one of the loans where M&I is a lender, including the revolving credit facility, is in default. There were no such cross defaults at March 2011. In addition, the M&I loans contain co-terminus provisions which require all loans with M&I to be paid in full if any of the loans are paid in full prior to the end of their specified terms.
Dividends Payments
The Company paid cash dividends on its common stock and convertible preferred stock issuances totaling $0.2 million and $0.4 million for the three and six months ended, respectively, at both March 2011 and March 2010.
Contractual Obligations
There have been no significant changes to the Companys contractual obligations as set forth in the Companys annual report on Form 10-K for the fiscal period ended September 30, 2010.
OTHER
The Company has issued a letter of credit for $0.4 million to its workers compensation insurance carrier as part of its self-insured loss control program.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Liquidity Risk
The Companys liquidity position is significantly influenced by its ability to maintain sufficient levels of working capital. For our Company and industry in general, customer credit risk and ongoing access to bank credit heavily influence liquidity positions.
The Company does not currently hedge its exposure to interest rate risk or fuel costs. Accordingly, significant price movements in these areas can and do impact the Companys profitability.
The Company believes its liquidity position going forward will be adequate to sustain operations. However, a precipitous change in market conditions could materially impact the Companys future revenue stream as well as its ability to collect on customer accounts receivable or secure bank credit.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2011 was made under the supervision and with the participation of our senior management, including our principal executive officer and principal financial officer. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all errors and fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by managements override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control that occurred during the fiscal quarter ended March 31, 2011, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
There have been no material changes to the Companys risk factors as previously disclosed in Item 1A Risk Factors of the Companys annual report on Form 10-K for the fiscal year ended September 30, 2010.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. (Removed and Reserved)
Not applicable.
(a) Exhibits
10.1 |
|
Second Amended and Restated Revolving Line of Credit Agreement, dated April 18, 2011, between the Company and Bank of America, as agent. |
|
|
|
10.2 |
|
Form of Stock Option Award Agreement under the 2007 Omnibus Incentive Plan, together with a schedule identifying individual award recipients and the related terms. |
|
|
|
10.3 |
|
Form of Restricted Stock Unit Award Agreement under the 2007 Omnibus Incentive Plan, together with a schedule identifying individual award recipients and the related terms. |
|
|
|
31.1 |
|
Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 302 of the Sarbanes-Oxley Act |
|
|
|
31.2 |
|
Certification by Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal Financial Officer furnished pursuant to section 302 of the Sarbanes-Oxley Act |
|
|
|
32.1 |
|
Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 906 of the Sarbanes-Oxley Act |
|
|
|
32.2 |
|
Certification by Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal Financial Officer furnished pursuant to section 906 of the Sarbanes-Oxley Act |
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 thereunto duly authorized.
|
AMCON DISTRIBUTING COMPANY |
|
(registrant) |
|
|
Date: April 19, 2011 |
/s/ Christopher H. Atayan |
|
Christopher H. Atayan, |
|
Chief Executive Officer and Chairman |
|
|
Date: April 19, 2011 |
/s/ Andrew C. Plummer |
|
Andrew C. Plummer, |
|
Vice President, Chief Financial Officer |
|
(Principal Financial and Accounting Officer) |
Exhibit 10.1
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
dated as of April 18, 2011
by and among
BANK OF AMERICA, N.A., as Agent,
The Financial Institutions From Time To Time
A Party Hereto, as Lenders,
AMCON DISTRIBUTING COMPANY,
CHAMBERLIN NATURAL FOODS, INC.,
and
HEALTH FOOD ASSOCIATES, INC.,
as the Borrowers
TABLE OF CONTENTS
|
|
Page | |
|
|
| |
1. |
DEFINITIONS |
1 | |
2. |
LOANS |
11 | |
|
(a) |
Revolving Loans |
11 |
|
(b) |
Repayments |
15 |
|
(c) |
Notes |
16 |
|
(d) |
Borrower Representative |
16 |
3. |
LETTERS OF CREDIT |
17 | |
|
(a) |
General Terms |
17 |
|
(b) |
Requests for Letters of Credit |
17 |
|
(c) |
Obligations Absolute |
17 |
|
(d) |
Expiration Dates of Letters of Credit |
18 |
|
(e) |
Participation |
18 |
4. |
INTEREST, FEES AND CHARGES |
18 | |
|
(a) |
Interest Rate |
18 |
|
(b) |
Other LIBOR Provisions |
19 |
|
(c) |
Fees And Charges |
21 |
|
(d) |
Maximum Interest |
22 |
5. |
COLLATERAL |
23 | |
|
(a) |
Grant of Security Interest to Agent |
23 |
|
(b) |
Other Security |
23 |
|
(c) |
Possessory Collateral |
23 |
|
(d) |
Electronic Chattel Paper |
24 |
|
(e) |
Release of Subsidiary Borrower Liens |
24 |
6. |
PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN |
24 | |
7. |
POSSESSION OF COLLATERAL AND RELATED MATTERS |
24 | |
8. |
COLLECTIONS |
25 | |
9. |
COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES |
27 |
TABLE OF CONTENTS
(continued)
|
|
Page | |
|
|
|
|
|
(a) |
Daily Reports |
27 |
|
(b) |
Monthly Reports |
27 |
|
(c) |
Financial Statements |
27 |
|
(d) |
Annual Projections |
28 |
|
(e) |
Explanation of Budgets and Projections |
28 |
|
(f) |
Public Reporting |
28 |
|
(g) |
Other Information |
28 |
10. |
TERMINATION; AUTOMATIC RENEWAL |
28 | |
11. |
REPRESENTATIONS AND WARRANTIES |
29 | |
|
(a) |
Financial Statements and Other Information |
29 |
|
(b) |
Locations |
29 |
|
(c) |
Loans by Borrower |
30 |
|
(d) |
Accounts and Inventory |
30 |
|
(e) |
Liens |
30 |
|
(f) |
Organization, Authority and No Conflict |
30 |
|
(g) |
Litigation |
31 |
|
(h) |
Compliance with Laws and Maintenance of Permits |
31 |
|
(j) |
Names and Trade Names |
31 |
|
(k) |
Equipment |
31 |
|
(l) |
Enforceability |
31 |
|
(m) |
Solvency |
31 |
|
(n) |
Indebtedness |
32 |
|
(o) |
Margin Security and Use of Proceeds |
32 |
|
(p) |
Parent, Subsidiaries and Affiliates |
32 |
|
(q) |
No Defaults |
32 |
|
(r) |
Employee Matters |
32 |
|
(s) |
Intellectual Property |
32 |
|
(t) |
Environmental Matters |
32 |
TABLE OF CONTENTS
(continued)
|
|
Page | |
|
|
|
|
|
(u) |
ERISA Matters |
33 |
12. |
AFFIRMATIVE COVENANTS |
33 | |
|
(a) |
Maintenance of Records |
33 |
|
(b) |
Notices |
33 |
|
(c) |
Compliance with Laws and Maintenance of Permits |
34 |
|
(d) |
Inspection and Audits |
34 |
|
(e) |
Insurance |
35 |
|
(f) |
Collateral |
36 |
|
(g) |
Use of Proceeds |
36 |
|
(h) |
Taxes |
36 |
|
(i) |
Intellectual Property |
37 |
|
(j) |
Checking Accounts and Cash Management Services |
37 |
|
(k) |
Patriot Act, Bank Secrecy Act and Office of Foreign Assets Control |
37 |
13. |
NEGATIVE COVENANTS |
37 | |
|
(a) |
Guaranties |
37 |
|
(b) |
Indebtedness |
38 |
|
(c) |
Liens |
38 |
|
(d) |
Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the Ordinary Course of Business |
38 |
|
(e) |
Dividends and Distributions |
40 |
|
(f) |
Investments; Loans; Transfers |
40 |
|
(g) |
Fundamental Changes, Line of Business |
40 |
|
(h) |
Equipment |
40 |
|
(i) |
Affiliate Transactions |
41 |
|
(j) |
Settling of Accounts |
41 |
14. |
FINANCIAL COVENANTS |
41 | |
|
(a) |
Fixed Charge Coverage Ratio |
41 |
15. |
DEFAULT |
41 | |
|
(a) |
Payment |
41 |
TABLE OF CONTENTS
(continued)
|
|
|
Page |
|
|
|
|
|
(b) |
Breach of this Agreement and the Other Agreements |
41 |
|
(c) |
Breaches of Other Obligations |
41 |
|
(d) |
Breach of Representations and Warranties |
42 |
|
(e) |
Loss of Collateral |
42 |
|
(f) |
Levy, Seizure or Attachment |
42 |
|
(g) |
Bankruptcy or Similar Proceedings |
42 |
|
(h) |
Appointment of Receiver |
42 |
|
(i) |
Judgment |
42 |
|
(j) |
Death or Dissolution of Obligor |
42 |
|
(k) |
Default or Revocation of Guaranty |
43 |
|
(l) |
Criminal Proceedings |
43 |
|
(m) |
Change of Control |
43 |
16. |
REMEDIES UPON AN EVENT OF DEFAULT |
43 | |
17. |
CONDITIONS PRECEDENT |
44 | |
18. |
JOINT AND SEVERAL LIABILITY |
44 | |
19. |
SETTLEMENTS, DISTRIBUTIONS AND APPORTIONMENT OF PAYMENTS |
46 | |
20. |
AGENT |
47 | |
|
(a) |
Appointment of Agent |
47 |
|
(b) |
Nature of Duties of Agent |
47 |
|
(c) |
Lack of Reliance on Agent |
48 |
|
(d) |
Certain Rights of Agent |
48 |
|
(e) |
Reliance by Agent |
48 |
|
(f) |
Indemnification of Agent |
49 |
|
(g) |
Agent in its Individual Capacity |
49 |
|
(h) |
Holders of Notes |
49 |
|
(i) |
Successor Agent |
49 |
|
(j) |
Collateral Matters |
50 |
|
(k) |
Actions with Respect to Defaults |
51 |
TABLE OF CONTENTS
(continued)
|
|
|
Page |
|
|
|
|
|
(l) |
Delivery of Information |
52 |
|
(m) |
Demand |
52 |
|
(n) |
Notice of Default |
52 |
21. |
ASSIGNABILITY |
52 | |
22. |
AMENDMENTS, ETC. |
54 | |
23. |
NONLIABILITY OF AGENT AND LENDERS |
55 | |
24. |
INDEMNIFICATION |
55 | |
25. |
NOTICE |
56 | |
26. |
CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION |
56 | |
27. |
HEADINGS OF SUBDIVISIONS |
57 | |
28. |
POWER OF ATTORNEY |
57 | |
29. |
CONFIDENTIALITY |
57 | |
30. |
COUNTERPARTS |
58 | |
31. |
ELECTRONIC SUBMISSIONS |
58 | |
32. |
EFFECT OF AMENDMENT AND RESTATEMENT |
58 | |
33. |
WAIVER OF JURY TRIAL; OTHER WAIVERS |
59 | |
34. |
AMENDMENT AND RESTATEMENT |
60 |
Exhibits and Schedules | |
|
|
EXHIBIT A |
Business and Collateral Locations |
EXHIBIT B |
Compliance Certificate |
EXHIBIT C |
Commercial Tort Claims |
EXHIBIT D |
Form of Assignment and Acceptance Agreement |
|
|
SCHEDULE 1 |
Permitted Liens |
SCHEDULE 11(i) |
Affiliate Transactions |
SCHEDULE 11(j) |
Names & Trade Names |
SCHEDULE 11(n) |
Indebtedness |
SCHEDULE 11(p) |
Parent, Subsidiaries and Affiliates |
SCHEDULE 17(a) |
Closing Document Checklist |
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (as amended, modified or supplemented from time to time, this Agreement) made this 18th day of April, 2011 by and among BANK OF AMERICA, N.A., a national banking association (in its individual capacity, BofA), as agent (in such capacity as agent, Agent) for itself and all other lenders from time to time a party hereto (Lenders), 135 South LaSalle Street, Chicago, Illinois 60603-4105, all other Lenders and each of AMCON Distributing Company, a Delaware corporation, having its principal place of business at 7405 Irvington Road, Omaha, Nebraska 68122 (AMCON), Chamberlin Natural Foods, Inc., a Florida corporation, having its principal place of business at 430 North Orlando Avenue, Winter Park, Florida 32789 (Chamberlin Natural), and Health Food Associates, Inc., an Oklahoma corporation, having its principal place of business at 7807 East 51st Street, Tulsa, Oklahoma 74145 (Health Food; AMCON, Chamberlin Natural, and Health Food are each referred to as a Borrower and are collectively referred to as Borrowers).
W I T N E S S E T H:
WHEREAS, AMCON, Agent and Lenders are parties to a certain Amended and Restated Loan and Security Agreement, dated as of September 30, 2004 as amended from time to time (collectively, the Original Agreement) and various other agreements;
WHEREAS, AMCON has requested that Agent and Lenders amend the terms and conditions of the Original Agreement in several respects and Agent and Lenders are willing to do so subject to the terms and conditions set forth in this Agreement;
WHEREAS, it is the intention of the parties to this Agreement that upon execution of this Agreement, the Original Agreement (and, except as otherwise set forth in the following proviso, all obligations and rights of any party thereunder), shall be amended and restated by this Agreement; provided, however, the obligations to repay the loans and advances arising under the Original Agreement shall continue in full force and effect and the liens and security interests securing payment thereof shall be continuing but shall now be governed by the terms of this Agreement and the Other Agreements; and
WHEREAS, Borrowers may, from time to time, continue to request Loans from Agent and Lenders, and the parties wish to provide for the terms and conditions upon which such Loans or other financial accommodations, if made by Agent and Lenders, shall be made.
NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal or extension) hereafter made to Borrowers by Agent and/or Lenders, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Borrowers, the parties agree to amend and restate the Original Agreement as follows:
1. DEFINITIONS.
Account, Account Debtor, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Fixtures,
General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter-of-Credit Right, Proceeds and Tangible Chattel Paper shall have the respective meanings assigned to such terms in the Illinois Uniform Commercial Code, as the same may be in effect from time to time.
Acquisition means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of all or substantially all of any business or division of a Person, (b) the acquisition of in excess of 50% of the Capital Securities of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is already a Subsidiary).
Affiliate shall mean any Person (i) which directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, a Borrower, (ii) which beneficially owns or holds five percent (5%) or more of the voting control or equity interests of a Borrower, or (iii) five percent (5%) or more of the voting control or equity interests of which is beneficially owned or held by a Borrower.
Assignment and Acceptance shall have the meaning in Section 20 hereof.
Average Excess Availability shall have the meaning set forth in Section 13(d) hereof.
Borrower Representative shall mean AMCON.
Business Day shall mean any day other than a Saturday, a Sunday or (i) with respect to all matters, determinations, fundings and payments in connection with LIBOR Rate Loans, any day on which banks in London, England or Chicago, Illinois are required or permitted to close, and (ii) with respect to all other matters, any day that banks in Chicago, Illinois are required or permitted to close.
Capital Expenditures shall mean with respect to any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities and including expenditures for capitalized lease obligations) by Borrowers and their Subsidiaries during such period that are required by generally accepted accounting principles, consistently applied, to be included in or reflected by the property, plant and equipment or similar fixed asset accounts (or intangible accounts subject to amortization) on the balance sheet of Borrowers and their Subsidiaries.
Cigarette Inventory shall mean Inventory of AMCON consisting of cigarettes and cigarette tax stamps.
Collateral shall mean all of the property of each Borrower described in Section 5 hereof, together with all other real or personal property of any Obligor or any other Person now or hereafter pledged to Agent, for the benefit of Agent and Lenders to secure, either directly or indirectly, repayment of any of the Liabilities.
Compliance Certificate shall have the meaning set forth in Section 9(c).
Confectionary and Tobacco Advance Limit shall mean the lesser of (x) up to one hundred percent (100%) of the lesser of cost or market value of Eligible Tobacco Products (inclusive of all excise stamps), plus eighty-five percent (85%) of the lesser of cost or market value of Eligible Confectionary Goods and (y) the Confectionary and Tobacco Limit.
Confectionary and Tobacco Limit shall mean Five Million and No/100 Dollars ($5,000,000.00).
Control Agreement shall mean an agreement among Agent, a Borrower and a financial institution with respect to a Lock Box, Lock Box Account or other Deposit Account, which agreement, among other things, acknowledges Agents security interest in such account, provides that such financial institution has no right to setoff against account, and provides that such financial institution shall, following the occurrence of an Event of Default, wire, or otherwise transfer in immediately available funds to Agent in a manner satisfactory to Agent, funds deposited in such account on a daily basis as such funds are collected or as otherwise directed by Agent, without requiring any further consent from any Borrower or Borrower Representative.
Defaulting Lender shall have the meaning set forth in subsection 2(a) hereof.
Dominion Account shall have the meaning specified in subsection 8(a) hereof.
EBITDA shall mean, with respect to any period, AMCONs net income after taxes for such period (excluding (i) any after-tax gains or losses on the sale of assets (other than the sale of Inventory in the ordinary course of business, (ii) other after-tax extraordinary gains or losses and (iii) other non-cash impairment charges and cash or non-cash non-recurring charges as determined by Agent in its reasonable discretion) plus interest expense, income tax expense, depreciation and amortization for such period, plus or minus any other non-cash charges or gains which have been subtracted or added in calculating net income after taxes for such period.
Eligible Account shall mean an Account owing to a Borrower which is acceptable to Agent in its sole discretion for lending purposes. Without limiting Agents discretion, Agent shall, in general, consider an Account to be an Eligible Account if it meets, and so long as it continues to meet, all of the following requirements:
(i) it is genuine and in all respects what it purports to be;
(ii) it is owned by such Borrower, such Borrower has the right to subject it to a security interest in favor of Agent or assign it to Agent and it is subject to a first priority perfected security interest in favor of Agent and to no other claim, lien, security interest or encumbrance whatsoever, other than Permitted Liens;
(iii) it arises from (A) the performance of services by such Borrower in the ordinary course of such Borrowers business, and such services have been fully performed and acknowledged and accepted by the Account Debtor thereunder; or (B) the sale or lease of Goods by such Borrower in the ordinary course of such Borrowers business, and (x) such Goods have been completed in accordance with the Account Debtors specifications (if any) and delivered to the Account Debtor, (y) such Account
Debtor has not refused to accept, returned or offered to return, any of the Goods which are the subject of such Account, and (z) such Borrower has possession of, or such Borrower has delivered to Agent (at Agents request) shipping and delivery receipts evidencing delivery of such Goods;
(iv) it is evidenced by an invoice rendered to the Account Debtor thereunder, is due and payable within thirty (30) days after the date of the invoice and does not remain unpaid more than thirty (30) days past the invoice date thereof for invoices with seven (7) day terms or less or sixty (60) days past the invoice date thereof for all other invoices; provided, however, that if more than twenty-five percent (25%) of the aggregate dollar amount of invoices owing by a particular Account Debtor remain unpaid more than thirty (30) days past the invoice date thereof for invoices with seven (7) day terms or less or sixty (60) days after the respective invoice dates thereof for all other invoices, then all Accounts owing by that Account Debtor shall be deemed ineligible;
(v) it is a valid, legally enforceable and unconditional obligation of the Account Debtor thereunder, and is not subject to setoff, counterclaim, credit, allowance or adjustment by such Account Debtor, or to any claim by such Account Debtor denying liability thereunder in whole or in part;
(vi) it does not arise out of a contract or order which fails in any material respect to comply with the requirements of applicable law;
(vii) the Account Debtor thereunder is not a director, officer, employee or agent of a Borrower, or a Subsidiary, Parent or Affiliate;
(viii) it is not an Account with respect to which the Account Debtor is the United States of America or any state or local government, or any department, agency or instrumentality thereof, unless such Borrower assigns its right to payment of such Account to Agent pursuant to, and in full compliance with, the Assignment of Claims Act of 1940, as amended, or any comparable state or local law, as applicable;
(ix) it is not an Account with respect to which the Account Debtor is located in a state which requires such Borrower, as a precondition to commencing or maintaining an action in the courts of that state, either to (A) receive a certificate of authority to do business and be in good standing in such state; or (B) file a notice of business activities report or similar report with such states taxing authority, unless (x) such Borrower has taken one of the actions described in clauses (A) or (B); (y) the failure to take one of the actions described in either clause (A) or (B) may be cured retroactively by such Borrower at its election; or (z) such Borrower has proven, to Agents satisfaction, that it is exempt from any such requirements under any such states laws;
(x) the Account Debtor is located within the United States of America or is located within a foreign country and, in such case, the Account is payable in U.S. Dollars and with respect to Account Debtors who are located within a foreign country, the Account is supported by a letter of credit which is in form and substance satisfactory
to Agent, issued by a financial institution acceptable to Agent and assigned to Agent in a manner acceptable to Agent;
(xi) it is an Account which arises out of a sale made in the ordinary course of each Borrowers business;
(xii) it is not an Account with respect to which the Account Debtors obligation to pay is conditional upon the Account Debtors approval of the Goods or services or is otherwise subject to any repurchase obligation or return right (other than a right to return dated Cigarette Inventory which can, in turn, be returned by such Borrower to the manufacturer thereof for a full refund), as with sales made on a bill-and-hold, guaranteed sale, sale on approval, sale or return or consignment basis;
(xiii) it is not an Account (A) with respect to which any representation or warranty contained in this Agreement is untrue; or (B) which violates any of the covenants of such Borrower contained in this Agreement;
(xiv) it is not an Account which, when added to a particular Account Debtors other indebtedness to such Borrower, exceeds a credit limit determined by Agent in its sole discretion for that Account Debtor (except that Accounts excluded from Eligible Accounts solely by reason of this clause (xiv) shall be Eligible Accounts to the extent of such credit limit); and
(xv) it is not an Account with respect to which the prospect of payment or performance by the Account Debtor is or will be impaired, as determined by Agent in its sole discretion.
Eligible Cigarette Inventory shall mean Inventory of AMCON consisting of Cigarette Inventory which is acceptable to Agent in its sole discretion for lending purposes. Without limiting Agents discretion, Agent shall, in general, consider Cigarette Inventory to be Eligible Inventory if it meets and so long as it continues to meet the following requirements:
(xvi) it consists of cigarettes without tax stamps or cigarettes which have cigarette tax stamps affixed thereto which have been issued by any State or political subdivisions thereof where Agent determines, in its sole discretion, that the affixing of such jurisdictions tax stamps thereto does not render such Inventory ineligible;
(xvii) it consists of tax stamps which have been paid in full with good funds by AMCON to the applicable state or local agency (i.e. no post-dated checks or the posting of bonds in lieu of payment) and no obligations for payment of the cigarette tax stamps remain outstanding with the applicable state or local agency, unless such stamps have been issued by any State or political subdivisions thereof where Agent determines in its sole discretion that Agent would be unable to affix or redeem such cigarette tax stamps or otherwise determines that such Inventory shall be ineligible; and
(xviii) such Cigarette Inventory otherwise constitutes Eligible Inventory.
Eligible Confectionary Goods shall mean Inventory of AMCON consisting of confectionary goods which are acceptable to Agent in its sole discretion for lending purposes and otherwise constitute Eligible Inventory.
Eligible Inventory shall mean Inventory of a Borrower which is acceptable to Agent in its sole discretion for lending purposes. Without limiting Agents discretion, Agent shall, in general, consider Inventory to be Eligible Inventory if it meets, and so long as it continues to meet, the following requirements:
(i) it is owned by such Borrower, such Borrower has the right to subject it to a security interest in favor of Agent and it is subject to a first priority perfected security interest in favor of Agent and to no other claim, lien, security interest or encumbrance whatsoever, other than Permitted Liens;
(ii) it is located on one of the premises listed on Exhibit A (or other locations of which Agent has been advised in writing pursuant to subsection 12(b)(i) hereof), such locations are within the United States and is not in transit except to the extent that it may be in transit to another location listed on Exhibit A on vehicles owned by such Borrower;
(iii) if held for sale or lease or furnishing under contracts of service, it is (except as Agent may otherwise consent in writing) new and unused and free from defects which would, in Agents sole determination, affect its market value;
(iv) it is not stored with a bailee, consignee, warehouseman, processor or similar party unless Agent has given its prior written approval and such Borrower has caused any such bailee, consignee, warehouseman, processor or similar party to issue and deliver to Agent, in form and substance acceptable to Agent, such Uniform Commercial Code financing statements, warehouse receipts, waivers and other documents as Agent shall require;
(v) it is not Inventory consisting of perishable, non frozen or refrigerated foods;
(vi) Agent has determined, in accordance with Agents customary business practices, that it is not unacceptable due to age, type, category or quantity; and
(vii) it is not Inventory (A) with respect to which any of the representations and warranties contained in this Agreement are untrue; or (B) which violates any of the covenants of such Borrower contained in this Agreement.
Eligible Tobacco Products shall mean Inventory of AMCON consisting of tobacco products such as Cigarette Inventory, cigars, chewing tobacco and other tobacco products which are acceptable to Agent in its sole discretion for lending purposes and otherwise constitute Eligible Inventory.
Environmental Laws shall mean all federal, state, district, local and foreign laws, rules, regulations, ordinances, and consent decrees relating to health, safety, hazardous
substances, pollution and environmental matters, as now or at any time hereafter in effect, applicable to a Borrowers business or facilities owned or operated by a Borrower, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contamination, chemicals, or hazardous, toxic or dangerous substances, materials or wastes into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended, modified or restated from time to time.
Event of Default shall have the meaning specified in Section 15 hereof.
Excess Availability shall mean, as of any date of determination by agent, the excess, if any, of the lesser of (i) the Maximum Revolving Loan Limit less the sum of the outstanding Revolving Loans and Letter of Credit Obligations and (ii) the Revolving Loan Limit less the sum of the outstanding Revolving Loans and Letter of Credit Obligations, in each case as of the close of business on such date and assuming, for purposes of calculation, that all accounts payable which remain unpaid more than thirty (30) days after the due dates thereof as the close of business on such date are treated as additional Revolving Loans outstanding on such date.
Fiscal Year shall mean each twelve (12) month accounting period of Borrowers, which ends on September 30th of each year.
Fixed Charges shall mean for any period, without duplication, scheduled payments of principal during the applicable period with respect to all indebtedness of AMCON for borrowed money, plus scheduled payments of principal during the applicable period with respect to all capitalized lease obligations of AMCON, plus scheduled payments of interest with respect to all indebtedness of AMCON and the Harp Note, for borrowed money including capital lease obligations, plus unfinanced Capital Expenditures of AMCON, during the applicable period, plus payments during the applicable period in respect of income or franchise taxes of AMCON, plus any dividends or distributions made by AMCON, plus any payments made by any Borrower in connection with contingent earn-out payments pursuant to any acquisition.
Hazardous Materials shall mean any hazardous, toxic or dangerous substance, materials and wastes, including, without limitation, hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including, without limitation, materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including, without limitation any that are or become classified as hazardous or toxic under any Environmental Law).
Indemnified Party shall have the meaning specified in Section 24 hereof.
Interest Period shall have the meaning specified in subsection 4(a)(ii) hereof.
Letter of Credit shall mean any Letter of Credit issued on behalf of a Borrower in accordance with this Agreement.
Letter of Credit Obligations shall mean, as of any date of determination, the sum of (i) the aggregate undrawn face amount of all Letters of Credit, and (ii) the aggregate unreimbursed amount of all drawn Letters of Credit not already converted to Loans hereunder.
Liabilities shall mean any and all obligations, liabilities and indebtedness, (including, without limitation, Rate Hedging Obligations and Letter of Credit Obligations) of Borrowers to Agent and each Lender or to any parent, affiliate or subsidiary of Agent and each Lender of any and every kind and nature arising under this Agreement, or the Other Agreements, including without limitation, any Letters of Credit, howsoever created, arising or evidenced and howsoever owned, held or acquired, whether now or hereafter existing, whether now due or to become due, whether primary, secondary, direct, indirect, absolute, contingent or otherwise (including, without limitation, obligations of performance), whether several, joint or joint and several, and whether arising or existing under written or oral agreement or by operation of law.
LIBOR Rate shall mean, with respect to any LIBOR Rate Loan for any Interest Period, a rate per annum equal to (a) the offered rate for deposits in United States dollars for a period equal to such Interest Period as displayed in the Bloomberg Financial Markets system (or such other authoritative source as selected by Agent in its sole discretion) as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period divided by (b) a number equal to 1.0 minus the maximum reserve percentages (expressed as a decimal fraction) including, without limitation, basic supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other governmental authority having jurisdiction with respect thereto, as now and from time to time in effect, for Eurocurrency funding (currently referred to as Eurocurrency Liabilities in Regulation D of such Board) which are required to be maintained by Agent by the Board of Governors of the Federal Reserve System. The LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in such reserve percentage.
LIBOR Rate Loans shall mean the Loans bearing interest with reference to the LIBOR Rate.
Loans shall mean all loans and advances made by Agent and/or Lenders to or on behalf of Borrowers hereunder.
Lock Box shall have the meanings specified in subsection 8(a) hereof.
M&I Bank shall mean M&I Marshall & Ilsley Bank.
Material Adverse Effect shall mean a material adverse effect on the business, property, assets, prospects, operations or condition, financial or otherwise, of a Person.
Maximum Loan Limit shall mean Fifty-Five Million and 00/100 Dollars ($55,000,000.00).
Maximum Revolving Loan Limit shall have the meaning specified in subsection 2(a) hereof.
Obligor shall mean Borrowers and each other Person who is or shall become primarily or secondarily liable for any of the Liabilities.
Original Term shall have the meaning specified in Section 10 hereof.
Other Agreements shall mean all agreements, instruments and documents, other than this Agreement, including, without limitation, guaranties, mortgages, trust deeds, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, leases, financing statements and all other writings heretofore, now or from time to time hereafter executed by or on behalf of a Borrower or any other Person and delivered to Agent and/or any Lender in connection with the Loans, the Letters of Credit or the other transactions contemplated hereby, as each of the same may be amended, modified or supplemented from time to time.
Parent shall mean any Person now or at any time or times hereafter owning or controlling (alone or with any other Person) at least a majority of the issued and outstanding equity of a Borrower and, if a Borrower is a partnership, the general partner of such Borrower.
PBGC shall have the meaning specified in subsection 12(b)(v) hereof.
Permitted Liens shall mean (i) statutory liens of landlords, carriers, warehousemen, processors, mechanics, materialmen or suppliers incurred in the ordinary course of business and securing amounts not yet due or declared to be due by the claimant thereunder or amounts which are being contested in good faith and by appropriate proceedings and for which such Borrower has maintained adequate reserves; (ii) liens or security interests in favor of Agent; (iii) zoning restrictions and easements, licenses, covenants and other restrictions affecting the use of real property that do not individually or in the aggregate have a material adverse effect on a Borrowers ability to use such real property for its intended purpose in connection with such Borrowers business; (iv) liens in connection with purchase money indebtedness and capitalized leases otherwise permitted pursuant to this Agreement, provided, that such liens attach only to the assets the purchase of which was financed by such purchase money indebtedness or which is the subject of such capitalized leases; (v) liens set forth on Schedule 1 hereto; (vi) liens specifically permitted by Requisite Lenders in writing; (vii) pledges or deposits in connection with workers compensation, unemployment insurance and other social security legislation, or to secure the performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases or to secure statutory obligations or surety, appeal or stay bonds, or to secure indemnity, performance or other similar bonds in the ordinary course of business; (viii) liens for taxes not yet due or for taxes which are being contested in good faith and by appropriate proceeding provided that (x) the contesting of any such payment does not give rise to a lien for taxes and (y) such Borrower keeps on deposit with Agent (such deposit to be held without interest) an amount of money which, in the sole judgment of Agent, is sufficient to pay such taxes and any interest or penalties that may accrue thereon; and (ix) mortgage liens on properties commonly known as 3125 East Thayer, Bismarck, North Dakota 58502, 2517 Ellington Road, Quincy, Illinois 62305 and 1511 Turbine Drive, Rapid City, South Dakota 57703 in favor of M&I Bank to secure indebtedness permitted hereunder.
Person shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, entity, party or foreign or United States government (whether federal, state, county, city, municipal or otherwise), including, without limitation, any instrumentality, division, agency, body or department thereof.
Plan shall have the meaning specified in subsection 12(b)(v) hereof.
Pre-Settlement Determination Date shall have the meaning specified in Section 19 hereof.
Prime Rate shall mean BofAs publicly announced prime rate (which is not intended to be BofAs lowest or most favorable rate in effect at any time) in effect from time to time.
Prime Rate Loans shall mean the Loans bearing interest with reference to the Prime Rate.
Pro Rata Share shall mean at any time, with respect to any Lender, a fraction (expressed as a percentage in no more than nine (9) decimal places), the numerator of which shall be the Revolving Loan Commitment of such Lender at such time and the denominator of which shall be the Maximum Loan Limit at such time.
Rate Hedging Obligations shall mean any and all obligations of Borrowers to the Agent and/or the Lenders, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) under (1) any and all agreements designed to protect Borrowers from the fluctuations of interest rates, exchange rates or forward rates applicable to such partys assets, liabilities or exchange transactions, including, but not limited to: interest rate swap agreements, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap, floor or collar agreements, forward rate currency agreements relating to interest options, puts and warrants, and (2) any and all agreements relating to cancellations, buy backs, reversals, terminations or assignments of any of the foregoing. An agreement of the type described in clause (1) and/or clause (2) of the foregoing definition is referred to herein as a Rate Hedging Agreement.
Renewal Term shall have the meaning specified in Section 10 hereof.
Requisite Lenders shall mean, at any time, Lenders having Pro Rata Shares aggregating at least sixty-six and two-thirds percent (66-2/3rds%) at such time.
Retail Inventory Sublimit shall mean Six Million and No/100 Dollars ($6,000,000.00), as such amount is reduced from time to time pursuant to subsection 2(b)(ii) hereof.
Retail Subsidiary shall mean each of Chamberlin Natural and Health Food.
Revolving Loan Commitment shall mean, with respect to any Lender, the maximum amount of Revolving Loans which such Lender has agreed to make to Borrowers, subject to the
terms and conditions of this Agreement, as set forth on the signature page hereto or an Assignment and Acceptance Agreement executed by such Lender.
Revolving Loan Limit shall have the meaning specified in subsection 2(a) hereof.
Revolving Loans shall have the meaning specified in subsection 2(a) hereof.
Settlement Date shall have the meaning specified in Section 19 hereof.
Subsidiary shall mean any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time stock of any other class of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned by a Borrower, or any partnership, joint venture or limited liability company of which more than fifty percent (50%) of the outstanding equity interests are at the time, directly or indirectly, owned by a Borrower or any partnership of which a Borrower is a general partner.
Subsidiary Borrower shall mean each of Chamberlin Natural and Health Food.
Subsidiary Borrower Sale shall mean a sale of substantially all of the assets or equity interests of a Subsidiary Borrower consented to by Agent (which consent shall not be unreasonably withheld).
Subsidiary Sublimit shall mean the sum of the Retail Inventory Sublimit, as such amount is reduced from time to time pursuant to subsection 2(b)(ii) hereof.
Systems Day One shall mean the date upon which Agents system of record for loans and deposits shall convert to the system of record for loans and deposits used by Bank of America, N.A.
Tax shall mean, in relation to any LIBOR Rate Loans and the applicable LIBOR Rate, any tax, levy, impost, duty, deduction, withholding or charges of whatever nature required to be paid by Agent to be withheld or deducted from any payment otherwise required hereby to be made by a Borrower to Agent; provided, that the term Tax shall not include any taxes imposed upon the net income of Agent.
Trigger Period shall mean the period commencing on the day that (i) Excess Availability is less than twelve and one-half percent (12.5%) of the Maximum Loan Limit at any time or (ii) notice of an Event of Default is given by Agent to the depository bank.
2. LOANS.
(a) Revolving Loans. Subject to the terms and conditions of this Agreement and the Other Agreements, during the Original Term and any Renewal Term, each Lender, severally and not jointly, agrees absent the occurrence of an Event of Default, to make its Pro Rata Share of revolving loans and advances (the Revolving Loans) requested by Borrower Representative on behalf of each Borrower up to such Lenders Revolving Loan Commitment so
long as after giving effect to such Revolving Loans, the sum of the aggregate unpaid principal balance of the Revolving Loans and the Letter of Credit Obligations does not exceed an amount up to the sum of the following sublimits (the Revolving Loan Limit):
(i) Up to eighty-five percent (85%) of the face amount (less maximum discounts, credits and allowances which may be taken by or granted to Account Debtors in connection therewith in the ordinary course of AMCONs business) of AMCONs Eligible Accounts or Fifty-Five Million and No/100 Dollars ($55,000,000.00), whichever is less; plus
(ii) Up to eighty-five percent (85%) of the lower of cost or market value of Eligible Cigarette Inventory or Twenty-Five Million and No/100 Dollars ($25,000,000.00), whichever is less; plus
(iii) Up to seventy percent (70%) of the lower of cost or market value of AMCONs Eligible Inventory (consisting solely of AMCONs Eligible Inventory other than Eligible Cigarette Inventory set forth in clause (ii) above) or Fifteen Million and No/100 Dollars ($15,000,000.00), whichever is less; plus
(iv) Up to sixty percent (60%) of the lower of cost or market value of the Retail Subsidiaries Eligible Inventory or the Retail Inventory Sublimit, whichever is less; minus
(v) such reserves as Agent elects, in its sole discretion to establish from time to time, including without limitation, a reserve with respect to Rate Hedging Obligations;
provided, that the Revolving Loan Limit shall in no event exceed Fifty-Five Million and No/100 Dollars ($55,000,000.00) (the Maximum Revolving Loan Limit) except as such amount may be increased or, following the occurrence of an Event of Default, decreased by Agent from time to time, in Agents sole discretion. The aggregate unpaid principal balance of the Revolving Loans shall not at any time exceed the lesser of the (i) Revolving Loan Limit minus the Letter of Credit Obligations and (ii) the Maximum Revolving Loan Limit minus the Letter of Credit Obligations. If at any time the outstanding Revolving Loans exceeds either the Revolving Loan Limit or the Maximum Revolving Loan Limit, in each case minus the Letter of Credit Obligations, or any portion of the Revolving Loans and Letter of Credit Obligations exceeds any applicable sublimit within the Revolving Loan Limit (the Overadvance), Borrowers shall immediately, and without the necessity of demand by Agent, pay to Agent such amount as may be necessary to eliminate such Overadvance and Agent shall apply such payment to the Revolving Loans in such order as Agent shall determine in its sole discretion.
Notwithstanding the foregoing, the Borrower Representative shall have the right hereafter to notify the Agent and the Lenders in writing that it wishes to increase (an Increase) the Revolving Loan Commitment by an aggregate amount of up to $25,000,000, in increments of not less than $5,000,000; provided, however, that the Borrower Representative may not make more than three (3) requests for an Increase hereunder. Each such Increase shall become effective not less than twenty (20) Business Days after the date such notice is received by the Agent, so long
as (a) no Event of Default or unmatured Event of Default is in existence on such date and (b) either (i) the then-existing Lenders agree to increase their Revolving Loan Commitments by the aggregate amount of such Increase, (ii) other third party financial institutions reasonably acceptable to the Agent and the Borrowers (New Lenders) agree to provide new Revolving Loan Commitments in the aggregate amount of such Increase or (iii) a combination of then-existing Lenders and New Lenders agree to provide the aggregate amount of such Increase by increasing their Revolving Loan Commitments or providing new Revolving Loan Commitments, as applicable. The then-existing Lenders shall have the first right of refusal to provide such Increase for a period of fifteen (15) Business Days after receipt by the Agent of the written notice described above; provided, however, that (i) no Lender shall be obligated to provide an Increase as a result of any such request by the Borrower Representative, and (ii) any additional New Lender shall be subject to the approval of the Agent and the Borrowers (which approval shall not be unreasonably withheld). In the event of over-subscription, the pro rata shares of each such Person in the Increase shall be determined by the Agent. Any Increase shall be effected by an amendment to this Agreement. In each case, the Borrowers will issue to each affected Lender new Revolving Notes upon request of such Lender. Any Increase in the aggregate Revolving Loan Commitment shall also constitute an increase in the Maximum Revolving Loan Limit and Maximum Loan Limit by a like amount.
Neither Agent nor any Lender shall be responsible for any failure by any other Lender to perform its obligations to make Revolving Loans hereunder, and the failure of any Lender to make its Pro Rata Share of any Revolving Loan hereunder shall not relieve any other Lender of its obligation, if any, to make its Pro Rata Share of any Revolving Loans hereunder.
If Borrower Representative, on behalf of any Borrower, makes a request for a Revolving Loan as provided herein Agent, at its option and in its sole discretion, shall do either of the following:
(i) advance the amount of the proposed Revolving Loan to such Borrower disproportionately (a Disproportionate Advance) out of Agents own funds on behalf of Lenders, which advance shall be on the same day as Borrower Representatives request therefor with respect to Prime Rate Loans if Borrower Representative notifies Agent of such request by 1:00 P.M., Chicago time on such day, and request settlement in accordance with Section 19 hereof such that upon such settlement each Lenders share of the outstanding Revolving Loans (including, without limitation, the amount of any Disproportionate Advance) equals its Pro Rata Share; or
(ii) Notify each Lender by telecopy, electronic mail or other similar form of teletransmission of the proposed advance on the same day Agent is notified or deemed notified by Borrower Representative of such Borrowers request for an advance pursuant to this Section 2(a). Each Lender shall remit, to the demand deposit account designated by a Borrower at or prior to 3:00 P.M., Chicago time, on the date of notification, if such notification is made before 1:00 P.M., Chicago time, or 10:00 A.M., Chicago time, on the Business Day immediately succeeding the date of such notification, if such notification is made after 1:00 P.M., Chicago time, immediately available funds in an amount equal to such Lenders Pro Rata Share of such proposed advance.
If and to the extent that a Lender does not settle with Agent as required under this Agreement (a Defaulting Lender) Borrowers and Defaulting Lender severally agree to repay to Agent forthwith on demand such amount required to be paid by such Defaulting Lender to Agent, together with interest thereon, for each day from the date such amount is made available to a Borrower until the date such amount is repaid to Agent (x) in the case of a Defaulting Lender at the rate published by the Federal Reserve Bank of New York on the next succeeding Business Day as the Federal Funds Rate or if no such rate is published for any Business Day, at the average rate quoted for such day for such transactions from three (3) federal funds brokers of recognized standing selected by Agent, and (y) in the case of Borrowers, at the interest rate applicable at such time for such Loans; provided, that Borrowers obligation to repay such advance to Agent shall not relieve such Defaulting Lender of its liability to Agent for failure to settle as provided in this Agreement.
Each Borrower hereby authorizes Agent, in its sole discretion, to charge any of such Borrowers accounts or advance Revolving Loans to make any payments of principal, interest, fees, costs or expenses required to be made under this Agreement or the Other Agreements.
A request for a Revolving Loan shall be made or shall be deemed to be made, each in the following manner: the Borrower Representative, on behalf of the Borrower requesting such Revolving Loan, shall give Agent same day notice, no later than 1:00 P.M. (Chicago time) for such day, of its request for a Revolving Loan, in which notice the Borrower Representative shall specify the amount of the proposed borrowing and the proposed borrowing date; provided, however, that no such request may be made at a time when there exists an Event of Default or an event which, with the passage of time or giving of notice, will become an Event of Default. In the event that a Borrower maintains a controlled disbursement account at LaSalle, each check presented for payment against such controlled disbursement account and any other charge or request for payment against such controlled disbursement account shall constitute a request for a Revolving Loan as a Prime Rate Loan. As an accommodation to Borrowers, Agent may permit telephone requests for Revolving Loans and electronic transmittal of instructions, authorizations, agreements or reports to Agent by Borrower Representative, on behalf of Borrowers. Unless Borrower Representative specifically directs Agent in writing not to accept or act upon telephonic or electronic communications from Borrower Representative, Agent shall have no liability to Borrowers for any loss or damage suffered by Borrower Representative or any Borrower as a result of Agents honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically or electronically and purporting to have been sent to Agent by Borrower Representative and Agent shall have no duty to verify the origin of any such communication or the authority of the Person sending it.
Each Borrower hereby irrevocably authorizes Agent to disburse the proceeds of each Revolving Loan requested by Borrower Representative, or deemed to be requested by Borrower Representative, as follows: the proceeds of each Revolving Loan requested under Section 2(a) shall be disbursed by Agent in lawful money of the United States of America in immediately available funds, in the case of the initial borrowing, in accordance with the terms of the written disbursement letter from Borrower Representative, and in the case of each subsequent borrowing, by wire transfer or Automated Clearing House (ACH) transfer to such bank account
as may be agreed upon by Borrower Representative and Agent from time to time, or elsewhere if pursuant to a written direction from Borrower Representative.
Notwithstanding the forgoing, so long as no Event of Default exists or would arise therefrom, the Borrowers may from time to time request that the Lenders provide Revolving Loans in excess of the Maximum Revolving Loan Limit in an amount not to exceed the Confectionary and Tobacco Advance Limit (such advance being referred to herein at the Confectionary and Tobacco Accordian). The Confectionary and Tobacco Accordian shall be made, in whole or in part, at the sole discretion of the Agent, by each Lender according to its Pro Rata Share; provided, however, that no Lender shall be obligated to provide Confectionary and Tobacco Accordian advances. The Confectionary and Tobacco Accordian shall not be effective unless and until each of the following conditions have been satisfied:
(i) Each advance pursuant to the Confectionary and Tobacco Accordian shall be subject to the satisfactory review and approval by Agent in its sole discretion;
(ii) Each advance pursuant to the Confectionary and Tobacco Accordian shall be utilized for purchases of inventory which are outside the ordinary course of Borrowers business to take advantage of favorable vendor terms and pricing variances;
(iii) Each advance pursuant to the Confectionary and Tobacco Accordian shall bear interest at the Prime Rate plus one-quarter of one percent (0.25%) until repaid;
(iv) Each advance pursuant to the Confectionary and Tobacco Accordian shall be due and payable within 45 days of the date of each such advance; and
(v) The Borrowers shall deliver such other instruments, documents and agreements as the Agent may request in order to effectuate the Confectionary and Tobacco Accordian.
This Agreement shall be deemed amended without further action, to the extent necessary to effectuate the Confectionary and Tobacco Accordian as contemplated hereby.
(b) Repayments. The Liabilities shall be repaid as follows:
(i) Repayment of Revolving Loans. The Revolving Loans and all other Liabilities shall be repaid on the last day of the Original Term or any Renewal Term if this Agreement is renewed pursuant to Section 10 hereof.
(ii) Mandatory Prepayments and Reductions in Availability.
(A) Sales of Assets and/or Equity Interests. (i) Other than with respect to a Subsidiary Borrower Sale, upon receipt of the proceeds of the sale or other disposition of any Equipment or real property of a Borrower which is subject to a mortgage in favor of Agent, or if any of the Equipment or real
property subject to such mortgage is damaged, destroyed or taken by condemnation in whole or in part, the proceeds thereof shall be paid by such Borrower to Agent, for the benefit of Agent and Lenders, such payment to be applied against the Liabilities, as determined by Agent, in its sole discretion, and (ii) with respect to a Subsidiary Borrower Sale, provided that no Event of Default is then in existence, (I) the proceeds thereof shall be applied to the outstanding principal balance of Loans to such Subsidiary Borrower, and (II) in the event such Subsidiary Borrower is a Retail Subsidiary, such application shall result in a mandatory reduction of the Retail Inventory Sublimit (in such order and amount as Agent shall determine in its sole discretion), and (III) then the proceeds thereof shall be applied against the other Liabilities, as determined by Agent, in its sole discretion, provided further that upon the existence of an Event of Default, the proceeds thereof shall be applied to the Liabilities in such order as Agent shall determine in its sole discretion.
(B) Raising of Equity/Incurrence of Subordinated Debt. In the event AMCON or any Subsidiary Borrower causes any equity to be contributed or incurs indebtedness on a subordinated basis and AMCON elects to have such proceeds applied to the outstanding principal balance of the Loans to the Subsidiary Borrowers, then provided that Agent has consented to the contribution of equity or incurrence of indebtedness (which consent shall not be unreasonably withheld) and no Event of Default is then in existence, (i) in the case of AMCON, (I) the proceeds thereof shall be applied to the outstanding principal balance of Loans to the Subsidiary Borrowers in such order as Agent shall determine in its sole discretion, and (II) in the event such proceeds are applied to the outstanding principal balance of Loans to a Retail Subsidiary, such application shall result in a mandatory reduction of the Retail Inventory Sublimit (in such order and amount as Agent shall determine in its sole discretion), and (III) then the proceeds thereof shall be applied against the other Liabilities, as determined by Agent, in its sole discretion, and (ii) in the case of a Subsidiary Borrower, (I) the proceeds thereof shall be applied to the outstanding principal balance of Loans to such Subsidiary Borrower in such order as Agent shall determine in its sole discretion, and (II) in the event such proceeds are applied to the outstanding principal balance of Loans to a Retail Subsidiary, such application shall result in a mandatory reduction of the Retail Inventory Sublimit (in such order and amount as Agent shall determine in its sole discretion), and (III) then the proceeds thereof shall be applied against the other Liabilities, as determined by Agent, in its sole discretion.
(c) Notes. The Loans shall, in Agents and Lenders sole discretion, be evidenced by one or more promissory notes in form and substance satisfactory to each Lender. However, if such Loans are not so evidenced, such Loans may be evidenced solely by entries upon the books and records maintained by Agent and each Lender.
(d) Borrower Representative. Each Borrower hereby designates Borrower Representative as its representative and agent on its behalf for the purposes of issuing borrowing requests, giving instructions with respect to the disbursement of the proceeds of the Loans, selecting interest rate options, requesting Letters of Credit, giving and receiving all other notices
and consents hereunder or under any of the Other Agreements and taking all other actions (including in respect of compliance with covenants) on behalf of any Borrower or Borrowers under this Agreement and the Other Agreements. Borrower Representative hereby accepts such appointment. Agent and each Lender may regard any notice or other communication pursuant to this Agreement or any Other Agreement from Borrower Representative as a notice or communication from all Borrowers. Each warranty, covenant, agreement and undertaking made on a Borrowers behalf by Borrower Representative shall be deemed for all purposes to have been made by such Borrower and shall be binding upon and enforceable against such Borrower to the same extent as it if the same had been made directly by such Borrower.
3. LETTERS OF CREDIT.
(a) General Terms. Subject to the terms and conditions of this Agreement and the Other Agreements, during the Original Term or any Renewal Term, Agent shall, absent the existence of an Event of Default, from time to time issue, cause to be issued and co-sign for or otherwise guarantee, upon the request of Borrower Representative, on behalf of a Borrower, commercial and/or standby Letters of Credit; provided, that the aggregate undrawn face amount of all such Letters of Credit shall at no time exceed Five Million and No/100 Dollars ($5,000,000.00). Payments made by the issuer of a Letter of Credit to any Person on account of any Letter of Credit shall be immediately payable by such Borrower without notice, presentment or demand and each Borrower agrees that each payment made by the issuer of a Letter of Credit in respect of a Letter of Credit shall constitute a request by Borrower Representative, on behalf of such Borrower, for a Loan to reimburse such issuer. In the event such Loan is not advanced by Agent or Lenders for any reason, such reimbursement obligations (whether owing to the issuer of the Letter of Credit or Agent or Lenders) shall become part of the Liabilities hereunder and shall bear interest at the rate then applicable to Revolving Loans constituting Prime Rate Loans until repaid. Borrowers shall remit to Agent, for the benefit of Lenders, a Letter of Credit fee equal to [one percent (1%)] per annum on the aggregate undrawn face amount of all Letters of Credit outstanding, which fee shall be payable monthly in arrears on the last Business Day of each month. Borrowers shall also pay on demand the normal and customary administrative charges of the issuer of the Letter of Credit for issuance, amendment, negotiation, renewal or extension of any Letter of Credit.
(b) Requests for Letters of Credit. Borrower Representative, on behalf of each Borrower, shall make requests for Letters of Credit in writing at least three (3) Business Days prior to the date such Letter of Credit is to be issued. Each such request shall specify the date such Letter of Credit is to be issued, the amount thereof, the name and address of the beneficiary thereof and a description of the transaction to be supported thereby. Any such notice shall be accompanied by the form of Letter of Credit requested and any application or reimbursement agreement required by the issuer of such Letter of Credit. If any term of such application or reimbursement agreement is inconsistent with this Agreement, then the provisions of this Agreement shall control to the extent of such inconsistency.
(c) Obligations Absolute. Each Borrower shall be obligated to reimburse the issuer of any Letter of Credit, or Agent and/or Lenders if Agent and/or Lenders have reimbursed such issuer on a Borrowers behalf, for any payments made in respect of any Letter of Credit, which obligation shall be unconditional and irrevocable and shall be paid regardless of: (i) any
lack of validity or enforceability of any Letter of Credit, (ii) any amendment or waiver of or consent or departure from all or any provisions of any Letter of Credit, this Agreement or any Other Agreement, (iii) the existence of any claim, set off, defense or other right which a Borrower or any other Person may have against any beneficiary of any Letter of Credit or Agent, any Lender or issuer of the Letter of Credit, (iv) any draft or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect, (v) any payment under any Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, and (vi) any other act or omission to act or delay of any kind of the issuer of such Letter of Credit, Agent, any Lender or any other Person or any other event or circumstance that might otherwise constitute a legal or equitable discharge of a Borrowers obligations hereunder. It is understood and agreed by each Borrower that the issuer of any Letter of Credit may accept documents that appear on their face to be in order without further investigation or inquiry, regardless of any notice or information to the contrary.
(d) Expiration Dates of Letters of Credit. The expiration date of each Letter of Credit shall be no later than the earlier of (i) one (1) year from the date of issuance and (ii) the thirtieth (30th) day prior to the end of the Original Term or any Renewal Term. Notwithstanding the foregoing, a Letter of Credit may provide for automatic extensions of its expiration date for one or more one (1) year periods, so long as the issuer thereof has the right to terminate the Letter of Credit at the end of each one (1) year period and no extension period extends past the thirtieth (30th) day prior to the end of the Original Term or any Renewal Term.
(e) Participation. Immediately upon the issuance of a Letter of Credit in accordance with this Agreement, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from Agent, without recourse or warranty, an undivided interest and participation therein to the extent of such Lenders Pro Rata Share (including, without limitation, all obligations of Borrowers with respect thereto). Each Borrower hereby indemnifies Agent and each Lender against any and all liability and expense it may incur in connection with any Letter of Credit and agrees to reimburse Agent and each Lender for any payment made by Agent or any Lender to the issuer.
4. INTEREST, FEES AND CHARGES.
(a) Interest Rate. Subject to the terms and conditions set forth below, the Loans shall bear interest at the per annum rate of interest set forth in subsection (i), (ii) or (iii) below:
(i) Revolving Loans (other than Revolving Loans described in subsection (ii) below) shall bear interest at the Prime Rate in effect from time to time, payable on the last Business Day of each month in arrears. Said rate of interest shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the effective date of each such change in the Prime Rate.
(ii) Each Revolving Loan that constitutes a LIBOR Rate Loan as of April , 2011 may continue as a LIBOR Rate Loan until the latest to occur of (a) the last day of such Revolving Loans Interest Period, (b) the termination date of the Rate
Hedging Agreement related to such LIBOR Rate Loan, and (c) April 25, 2011 (the LIBOR Termination Date). Upon such LIBOR Rate Loans LIBOR Termination Date, such LIBOR Rate Loan shall be converted to a Prime Rate Loan. Effective on the date hereof, each new Revolving Loan that constitutes a LIBOR Rate Loan shall bear interest at one hundred seventy-five (175) basis points in excess of the LIBOR Rate for the applicable Interest Period, such rate to remain fixed for such Interest Period. Interest Period shall mean any continuous period of one (1) month, two (2) months, three (3) months or four (4) months, as selected from time to time by the Borrower Representative requesting such LIBOR Rate Loan by irrevocable notice (in writing, by telecopy, telex, electronic mail or cable) given to Agent not less than three (3) Business Days prior to the first day of each respective Interest Period. Interest shall be payable on the last Business Day of each month in arrears and on the last Business Day of such Interest Period.
(iii) Upon the occurrence of an Event of Default and during the continuance thereof, the Loans shall bear interest at the rate of two percent (2.0%) per annum in excess of the interest rate otherwise payable thereon, which interest shall be payable on demand. All interest shall be calculated on the basis of a 360-day year.
(b) Other LIBOR Provisions.
(i) Subject to the provisions of this Agreement, Borrower Representative, on behalf of each Borrower, shall have the option (A) as of any date, to convert all or any part of the Prime Rate Loans to, or request that new Loans be made as, LIBOR Rate Loans of various Interest Periods, (B) as of the last day of any Interest Period, to continue all or any portion of the relevant LIBOR Rate Loans as LIBOR Rate Loans; (C) as of the last day of any Interest Period, to convert all or any portion of the LIBOR Rate Loans to Prime Rate Loans; and (D) at any time, to request new Loans as Prime Rate Loans; provided, that Loans may not be continued as or converted to LIBOR Rate Loans, if the continuation or conversion thereof would violate the provisions of subsections 4(b)(ii) or 4(b)(iii) of this Agreement or if an Event of Default has occurred. Notwithstanding the foregoing, without the consent of the Required Lenders, Borrower Representative, on behalf of each Borrower, shall not be permitted (A) as of any date, to convert all or any part of the Prime Rate Loans to, or request that new Loans be made as, LIBOR Rate Loans of various Interest Periods, or (B) as of the last day of any Interest Period, to continue all or any portion of any LIBOR Rate Loans as a LIBOR Rate Loan to the extent the expiration of such continued LIBOR Rate Loans Interest Period occurs after such LIBOR Rate Loans LIBOR Termination Date.
(ii) Agents determination of the LIBOR Rate as provided above shall be conclusive, absent manifest error. Furthermore, if Agent or any Lender determines, in good faith (which determination shall be conclusive, absent manifest error), prior to the commencement of any Interest Period that (A) U.S. Dollar deposits of sufficient amount and maturity for funding the Loans are not available to Agent or such Lender in the London Interbank Eurodollar market in the ordinary course of business, or (B) by reason of circumstances affecting the London Interbank Eurodollar market, adequate and fair means do not exist for ascertaining the rate of interest to be applicable to the Loans
requested by Borrower Representative to be LIBOR Rate Loans or the Loans bearing interest at the rates set forth in subsection 4(a)(ii) of this Agreement shall not represent the effective pricing to such Lender for U.S. Dollar deposits of a comparable amount for the relevant period (such as for example, but not limited to, official reserve requirements required by Regulation D to the extent not given effect in determining the rate), Agent shall promptly notify Borrower Representative and (1) all existing LIBOR Rate Loans shall convert to Prime Rate Loans upon the end of the applicable Interest Period, and (2) no additional LIBOR Rate Loans shall be made until such circumstances are cured.
(iii) If, after the date hereof, the introduction of, or any change in any applicable law, treaty, rule, regulation or guideline or in the interpretation or administration thereof by any governmental authority or any central bank or other fiscal, monetary or other authority having jurisdiction over Agent or any Lender or its lending offices (a Regulatory Change), shall, in the opinion of counsel to Agent or such Lender, make it unlawful for Agent or such Lender to make or maintain LIBOR Rate Loans, then Agent shall promptly notify Borrower Representative and (A) the LIBOR Rate Loans shall immediately convert to Prime Rate Loans on the last Business Day of the then existing Interest Period or on such earlier date as required by law and (B) no additional LIBOR Rate Loans shall be made until such circumstance is cured.
(iv) If, for any reason, a LIBOR Rate Loan is paid prior to the last Business Day of any Interest Period or if a LIBOR Rate Loan does not occur on a date specified by the Borrower Representative in its request (other than as a result of a default by Agent or a Lender), each Borrower agrees to indemnify Agent and each Lender against any loss (including any loss on redeployment of the deposits or other funds acquired by Agent or such Lender to fund or maintain such LIBOR Rate Loan) cost or expense incurred by Agent or such Lender as a result of such prepayment.
(v) If any Regulatory Change (whether or not having the force of law) shall (A) impose, modify or deem applicable any assessment, reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of or loans by, or any other acquisition of funds or disbursements by, Agent or any Lender; (B) subject Agent or any Lender or the LIBOR Rate Loans to any Tax or change the basis of taxation of payments to Agent or any Lender of principal or interest due from a Borrower to Agent or such Lender hereunder (other than a change in the taxation of the overall net income of Agent or such Lender); or (C) impose on Agent or any Lender any other condition regarding the LIBOR Rate Loans or Agents or any Lenders funding thereof, and Agent or any Lender shall determine (which determination shall be conclusive, absent any manifest error) that the result of the foregoing is to increase the cost to Agent or such Lender of making or maintaining the LIBOR Rate Loans or to reduce the amount of principal or interest received by Agent or such Lender hereunder, then Borrowers shall pay to such party, on demand, such additional amounts as such party shall, from time to time, determine are sufficient to compensate and indemnify such party from such increased cost or reduced amount.
(vi) Each of Agent and each Lender shall receive payments of amounts of principal of and interest with respect to the LIBOR Rate Loans free and clear of, and
without deduction for, any Taxes. If (A) Agent or any Lender shall be subject to any Tax in respect of any LIBOR Rate Loans or any part thereof or, (B) Borrowers shall be required to withhold or deduct any Tax from any such amount, the LIBOR Rate applicable to such LIBOR Rate Loans shall be adjusted by Agent or such Lender to reflect all additional costs incurred by Agent or such Lender in connection with the payment by Agent or such Lender or the withholding by a Borrower of such Tax and Borrower Representative shall provide Agent or such Lender with a statement detailing the amount of any such Tax actually paid by Borrowers. Determination by Agent or any Lender of the amount of such costs shall be conclusive, absent manifest error. If after any such adjustment any part of any Tax paid by Agent or any Lender is subsequently recovered by Agent or such Lender, such party shall reimburse Borrowers to the extent of the amount so recovered. A certificate of an officer of Agent or any Lender setting forth the amount of such recovery and the basis therefor shall be conclusive, absent manifest error.
(vii) Each request for LIBOR Rate Loans shall be in an amount not less than One Million and No/100 Dollars ($1,000,000.00), and in integral multiples of, One Million and No/100 Dollars ($1,000,000.00).
(viii) Unless otherwise specified by Borrower Representative, all Loans shall be Prime Rate Loans.
(ix) No more than five (5) Interest Periods may be in effect with respect to outstanding LIBOR Rate Loans at any one time.
(c) Fees And Charges.
(i) Amendment and Restatement Fee: On the date hereof, Borrowers shall pay to Agent, for the benefit of Lenders, an amendment fee of Fifty-Five Thousand and No/100 Dollars ($55,000.00), which fee shall be fully earned by Lenders on the date of this amendment.
(ii) Unused Line Fee: Borrowers shall jointly and severally pay to Agent, for the benefit of Lenders, an unused line fee of one-fourth of one percent (1/4th of 1%) of the difference between the Maximum Revolving Loan Limit and the average daily balance of the Revolving Loans plus the Letter of Credit Obligations for each month, which fee shall be fully earned by Lenders and payable monthly in arrears on the first Business Day of each month. Said fee shall be calculated on the basis of a 360 day year.
(iii) Reserved,
(iv) Costs and Expenses: Borrowers shall reimburse Agent for all costs and expenses, including, without limitation, legal expenses and reasonable attorneys fees (whether for internal or outside counsel), incurred by Agent in connection with the (i) documentation and consummation of this transaction and any other transactions among Borrowers, Agent and Lenders, including, without limitation, Uniform Commercial Code and other public record searches and filings, overnight courier or other
express or messenger delivery, appraisal costs, surveys, title insurance and environmental audit or review costs; (ii) collection, protection or enforcement of any rights in or to the Collateral; (iii) collection of any Liabilities; and (iv) administration and enforcement of any of Agents and/or any Lenders rights under this Agreement or any Other Agreement (including, without limitation, any costs and expenses of any third party provider engaged by Agent for such purposes). Borrowers shall also pay all normal service charges with respect to all accounts maintained by each Borrower with BofA and any additional services requested by a Borrower from BofA. All such costs, expenses and charges shall, if owed to BofA, be reimbursed by Agent and Lenders and in such event, or in the event such costs and expenses are owed to Agent or a Lender, shall constitute Liabilities hereunder, shall be payable by Borrowers to Agent on demand, and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder. In addition, following the occurrence of an Event of Default, Borrowers shall reimburse each Lender for all costs and expenses, including, without limitation, legal expenses and reasonable attorneys fees, incurred by such Lender in connection with the (i) collection, protection or enforcement of any rights in or to the Collateral; (ii) collection of any Liabilities; and (iii) administration and enforcement of any of Lenders rights under this Agreement.
(v) Capital Adequacy Charge. If Agent or any Lender shall have determined that the adoption of any law, rule or regulation regarding capital adequacy, or any change therein or in the interpretation or application thereof, or compliance by Agent or such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or governmental authority enacted after the date hereof, does or shall have the effect of reducing the rate of return on such partys capital as a consequence of its obligations hereunder to a level below that which Agent or such Lender could have achieved but for such adoption, change or compliance (taking into consideration such partys policies with respect to capital adequacy) by a material amount, then from time to time, after submission by Agent to Borrower Representative of a written demand therefor (Capital Adequacy Demand) together with the certificate described below, Borrowers shall pay to such party such additional amount or amounts (Capital Adequacy Charge) as will compensate such party for such reduction, such Capital Adequacy Demand to be made with reasonable promptness following such determination. A certificate of Agent or such Lender claiming entitlement to payment as set forth above shall be conclusive in the absence of manifest error. Such certificate shall set forth the nature of the occurrence giving rise to such reduction, the amount of the Capital Adequacy Charge to be paid to Agent or such Lender, and the method by which such amount was determined. In determining such amount, the applicable party may use any reasonable averaging and attribution method, applied on a non-discriminatory basis.
(d) Maximum Interest. It is the intent of the parties that the rate of interest and other charges to each Borrower under this Agreement and the Other Agreements shall be lawful; therefore, if for any reason the interest or other charges payable under this Agreement are found by a court of competent jurisdiction, in a final determination, to exceed the limit which Agent or any Lender may lawfully charge such Borrower, then the obligation to pay interest and other charges shall automatically be reduced to such limit and, if any amount in excess of such limit shall have been paid, then such amount shall be refunded to such Borrower.
5. COLLATERAL.
(a) Grant of Security Interest to Agent. As security for the payment of all Loans now or in the future made by Agent and Lenders to Borrowers hereunder and for the payment or other satisfaction of all other Liabilities, each Borrower hereby ratifies and confirms its prior assignment and grant to Agent and further assigns to Agent, for the benefit of Agent and Lenders, and grants to Agent, for the benefit of Agent and Lenders, a continuing security interest in the following property of such Borrower, whether now or hereafter owned, existing, acquired or arising and wherever now or hereafter located: (a) all Accounts (whether or not Eligible Accounts) and all Goods whose sale, lease or other disposition by such Borrower has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, such Borrower; (b) all Chattel Paper, Instruments, Documents and General Intangibles (including, without limitation, all patents, patent applications, trademarks, trademark applications, trade names, trade secrets, goodwill, copyrights, copyright applications, registrations, licenses, software, franchises, customer lists, tax refund claims, claims against carriers and shippers, guarantee claims, contract rights, payment intangibles, security interests, security deposits and rights to indemnification); (c) all Inventory (whether or not Eligible Inventory); (d) all Goods (other than Inventory), including, without limitation, Equipment, vehicles and Fixtures; (e) all Investment Property; (f) all Deposit Accounts, bank accounts, deposits and cash; (g) all Letter-of-Credit Rights; (h) Commercial Tort Claims listed on Exhibit C hereto, (i) any other property of such Borrower now or hereafter in the possession, custody or control of Agent or any Lender or any agent or any parent, affiliate or subsidiary of Agent or any Lender or any participant with any Lender in the Loans, for any purpose (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise) and (j) all additions and accessions to, substitutions for, and replacements, products and Proceeds of the foregoing property, including, without limitation, proceeds of all insurance policies insuring the foregoing property, and all of such Borrowers books and records relating to any of the foregoing and to such Borrowers business.
(b) Other Security. Agent, in its sole discretion, without waiving or releasing any obligation, liability or duty of a Borrower under this Agreement or the Other Agreements or any Event of Default, may at any time or times hereafter, but shall not be obligated to, pay, acquire or accept an assignment of any security interest, lien, encumbrance or claim asserted by any Person in, upon or against the Collateral. All sums paid by Agent in respect thereof and all costs, fees and expenses including, without limitation, reasonable attorney fees, all court costs and all other charges relating thereto incurred by Agent shall constitute Liabilities, payable by Borrowers to Agent on demand and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder.
(c) Possessory Collateral. Immediately upon a Borrowers receipt of any portion of the Collateral evidenced by an agreement, Instrument or Document, including, without limitation, any Tangible Chattel Paper and any Investment Property consisting of certificated securities, such Borrower shall deliver the original thereof to Agent together with an appropriate endorsement or other specific evidence of assignment thereof to Agent (in form and substance acceptable to Agent). If an endorsement or assignment of any such items shall not be made for any reason, Agent is hereby irrevocably authorized, as each Borrowers attorney and agent-in-fact, to endorse or assign the same on such Borrowers behalf.
(d) Electronic Chattel Paper. To the extent that a Borrower obtains or maintains any Electronic Chattel Paper, such Borrower shall create, store and assign the record or records comprising the Electronic Chattel Paper in such a manner that (i) a single authoritative copy of the record or records exists which is unique, identifiable and except as otherwise provided in clauses (iv), (v) and (vi) below, unalterable, (ii) the authoritative copy identifies Agent as the assignee of the record or records, (iii) the authoritative copy is communicated to and maintained by the Agent or its designated custodian, (iv) copies or revisions that add or change an identified assignee of the authoritative copy can only be made with the participation of Agent, (v) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy and (vi) any revision of the authoritative copy is readily identifiable as an authorized or unauthorized revision.
(e) Release of Subsidiary Borrower Liens. So long as no Event of Default is then in existence, at such time as all Liabilities of each Subsidiary Borrower shall have been repaid in full and neither Agent nor any Lender shall have any commitment to lend or other obligation to such Subsidiary Borrowers, then (x) Agent shall, upon request, release its liens on the assets of such Subsidiary Borrowers and (y) at such time as Agent releases its liens, the Subsidiary Borrowers shall no longer be considered Borrowers hereunder and Agent shall have no claims against such Subsidiary Borrowers except with respect to claims thereafter arising under Section 24 hereunder.
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
Each Borrower shall, at Agents request, at any time and from time to time, authenticate, execute and deliver to Agent such financing statements, documents and other agreements and instruments (and pay the cost of filing or recording the same in all public offices deemed necessary or desirable by Agent) and do such other acts and things or cause third parties to do such other acts and things as Agent may deem necessary or desirable in its sole discretion in order to establish and maintain a valid, attached and perfected security interest in the Collateral in favor of Agent (free and clear of all other liens, claims, encumbrances and rights of third parties whatsoever, whether voluntarily or involuntarily created, except Permitted Liens) to secure payment of the Liabilities, and in order to facilitate the collection of the Collateral. Each Borrower irrevocably hereby makes, constitutes and appoints Agent (and all Persons designated by Agent for that purpose) as such Borrowers true and lawful attorney and agent-in-fact to execute and file such financing statements, documents and other agreements and instruments and do such other acts and things as may be necessary to preserve and perfect Agents security interest in the Collateral. Each Borrower further agrees that a carbon, photographic, photostatic or other reproduction of this Agreement or of a financing statement shall be sufficient as a financing statement. Each Borrower further ratifies and confirms the prior filing by Agent of any and all financing statements which identify such Borrower as debtor, Agent as secured party and any or all Collateral as collateral.
7. POSSESSION OF COLLATERAL AND RELATED MATTERS.
Until an Event of Default has occurred, each Borrower shall have the right, except as otherwise provided in this Agreement, in the ordinary course of such Borrowers business, to
(a) sell, lease or furnish under contracts of service any of such Borrowers Inventory normally held by such Borrower for any such purpose; and (b) use and consume any raw materials, work in process or other materials normally held by such Borrower for such purpose; provided, however, that a sale in the ordinary course of business shall not include any transfer or sale in satisfaction, partial or complete, of a debt owed by such Borrower.
8. COLLECTIONS.
(a) Borrowers shall direct all of their Account Debtors to make all payments on the Accounts directly to one or more post office box(s) (each, a Lock Box) designated by, and under the exclusive control of, Agent, at one or more financial institution(s) acceptable to Agent. Borrowers shall establish one or more accounts (each, a Dominion Account) in Borrowers name, for the Benefit of Agent, with a financial institution acceptable to Agent, into which all payments received in the Lock Box(es) shall be deposited, and into which Borrowers will immediately deposit all payments received by Borrowers on Accounts in the identical form in which such payments were received, whether by cash or check. If Borrowers, any Affiliate or Subsidiary, any shareholder, officer, director, employee or agent of Borrowers or any Affiliate or Subsidiary, or any other Person acting for or in concert with Borrowers shall receive any monies, checks, notes, drafts or other payments relating to or as Proceeds of Accounts or other Collateral, Borrowers and each such Person shall receive all such items in trust for Agent and, immediately upon receipt thereof, shall remit the same (or cause the same to be remitted) in kind to such Dominion Account. The financial institution with which a Dominion Account is established shall acknowledge and agree, in a manner satisfactory to Agent, that (x) such financial institution has no right to setoff against the Lock Box or Dominion Account or against any other account maintained by such financial institution into which the contents of the Lock Box or Dominion Account are transferred and (y) during the existence of a Trigger Period, such financial institution will follow the instructions of Lender with respect to disposition of funds in the Lock Box and such Dominion Account without further consent from Borrowers, including without limitation that such financial institution shall wire, or otherwise transfer in immediately available funds to Agent in a manner satisfactory to Agent, funds deposited in such Dominion Account on a daily basis as such funds are collected. Borrowers agree that all payments made to such Dominion Account or otherwise received by Agent, whether in respect of the Accounts or as Proceeds of other Collateral or otherwise (except for proceeds of Collateral which are required to be delivered to the holder of a Permitted Lien which is prior in right of payment), may, at the election of the Agent during the existence of a Trigger Period, be the sole and exclusive property of Agent and shall be applied on account of the Liabilities in accordance with the terms of this Agreement. If no Trigger Period is then continuing, Borrowers may access the funds in such Dominion Account and may, at its discretion, cause all or any portion of the funds in such Dominion Account to be paid to Agent for application to the Liabilities in accordance with the terms of this Agreement. Borrowers agree to pay all customary fees, costs and expenses in connection with opening and maintaining the Lock Box(es) and such Dominion Account. All of such fees, costs and expenses if not paid by Borrowers may be paid by Agent and in such event all amounts paid by Agent shall constitute Liabilities hereunder, shall be payable to Agent by Borrowers upon demand, and, until paid, shall bear interest at the default rate applicable to the Revolving Loans hereunder. All checks, drafts, instruments and other items of payment or Proceeds of Collateral required to be delivered to Agent hereunder shall be endorsed by Borrowers to Agent, and, if that endorsement of any such item shall not be made for any reason,
Agent is hereby irrevocably authorized to endorse the same on Borrowers behalf. For purpose of this section, Borrowers irrevocably hereby make, constitute and appoint Agent (and all Persons designated by Agent for that purpose) as Borrowers true and lawful attorney and agent-in-fact during the continuance of an Event of Default (i) to endorse Borrowers names upon said items of payment and/or Proceeds of Collateral and upon any Chattel Paper, Document, Instrument, invoice or similar document or agreement relating to any Account of Borrowers or Goods pertaining thereto; (ii) to take control in any manner of any item of payment or Proceeds thereof and (iii) to have access to any lock box or postal box into which any of Borrowers mail is deposited, and open and process all mail addressed to Borrowers and deposited therein.
(b) Agent may at any time and from time to time after the occurrence and during the continuance of an Event of Default, whether before or after notification to any Account Debtor and whether before or after the maturity of any of the Liabilities, (i) enforce collection of any of Borrowers Accounts or other amounts owed to such Borrower by suit or otherwise; (ii) exercise all of Borrowers rights and remedies with respect to proceedings brought to collect any Accounts or other amounts owed to such Borrower; (iii) surrender, release or exchange all or any part of any Accounts or other amounts owed to such Borrower, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder; (iv) sell or assign any Account of such Borrower or other amount owed to such Borrower upon such terms, for such amount and at such time or times as Agent deems advisable; (v) prepare, file and sign such Borrowers name on any proof of claim in bankruptcy or other similar document against any Account Debtor or other Person obligated to such Borrower; and (vi) do all other acts and things which are necessary, in Agents sole discretion, to fulfill such Borrowers obligations under this Agreement and the Other Agreements and to allow Agent to collect the Accounts or other amounts owed to such Borrower. In addition to any other provision hereof, Agent may at any time after the occurrence and during the continuance of an Event of Default, at Borrowers expense, notify any parties obligated on any of the Accounts to make payment directly to Agent of any amounts due or to become due thereunder.
(c) For purposes of determining the amount of Loans available for borrowing purposes, during the existence of a Trigger Period, the ledger balance in the main Dominion Account held at BofA or by Agent as of the end of a Business Day shall be applied to the Liabilities at the beginning of the next Business Day, provided that absent the existence of a Trigger Period, any such application by Agent of the ledger balance in the Dominion Account to the Liabilities shall be at the beginning of the next Business Day following Borrowers direction to make such application. However, solely for purposes of computing interest hereunder, in addition to Agents standard fees and charges relating to the Dominion Account, any application by Agent of such ledger balance to the Liabilities shall be deemed to be made on the same Business Day as application to the Liabilities set forth in the preceding sentence. If, as a result of such application, a credit balance exists, the balance shall not accrue interest in favor of Borrowers and shall be made available to Borrowers as long as no Event of Default exists. Borrowers irrevocably waive the right to direct the application of any payments or Collateral proceeds, and agrees that Agent shall have the continuing, exclusive right to apply and reapply same against the Liabilities, in such manner as Agent deems advisable, notwithstanding any entry by Agent in its records.
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.
(a) Daily Reports. Borrower Representative shall deliver to Agent an executed daily loan report and certificate in Agents then current form on each day on which such Borrower Representative requests a Revolving Loan on behalf of a Borrower, and in any event at least once each week, which shall be accompanied by copies of such Borrowers sales journal, cash receipts journal and credit memo journal for the relevant period. Such report shall reflect the activity of such Borrower with respect to Accounts for the immediately preceding week, and shall be in a form and with such specificity as is satisfactory to Agent and shall contain such additional information concerning Accounts and Inventory as may be requested by Agent including, without limitation, but only if specifically requested by Agent, copies of all invoices prepared in connection with such Accounts.
(b) Monthly Reports. Borrower Representative shall deliver to Agent, in addition to any other reports, as soon as practicable and in any event: (i) within ten (10) days after the end of each month, (A) a detailed trial balance of each Borrowers Accounts aged per invoice date, in form and substance reasonably satisfactory to Agent including, without limitation, the names and addresses of all Account Debtors of each Borrower, and (B) a summary and detail of accounts payable (such Accounts and accounts payable divided into such time intervals as Agent may require in its sole discretion), including a listing of any held checks; and (ii) within ten (10) days after the end of each month, the general ledger inventory account balance, a perpetual inventory report and Agents standard form of Inventory report then in effect or the form most recently requested from Borrowers by Agent, for each Borrower by each category of Inventory, together with a description of the monthly change in each category of Inventory.
(c) Financial Statements. Borrower Representative shall deliver to Agent and each Lender the following financial information, all of which shall be prepared in accordance with generally accepted accounting principles consistently applied, and shall be accompanied by a compliance certificate in the form of Exhibit B (the Compliance Certificate) hereto (except with respect to statements required pursuant to clause (i) of this subsection), which compliance certificate shall include a calculation of all financial covenants contained in this Agreement: (i) no later than thirty (30) days after each calendar month, copies of internally prepared financial statements, including, without limitation, balance sheets and statements of income, retained earnings and cash flow of Borrowers and their Subsidiaries on a consolidated and consolidating basis, certified by the Chief Financial Officer of Borrower Representative and each of Borrowers Subsidiaries; (ii) no later than forty five (45) days after the end of each of the first three quarters of each Borrowers Fiscal Year, copies of internally prepared financial statements including, without limitation, balance sheets, statements of income, retained earnings, cash flows and reconciliation of surplus of Borrowers and their Subsidiaries on a consolidated and consolidating basis, certified by the Chief Financial Officer of Borrower Representative and each of Borrowers Subsidiaries and (iii) no later than ninety (90) days after the end of each of Borrowers Fiscal Years, certified annual financial statements of Borrowers and their Subsidiaries on a consolidated and consolidating basis with an unqualified opinion by independent certified public accountants selected by Borrowers and their Subsidiaries and reasonably satisfactory to Agent, which financial statements shall be accompanied by (A) a letter
from such accountants acknowledging that they are aware that a primary intent of Borrowers and their Subsidiaries in obtaining such financial statements is to influence Agent and Lenders and that Agent and Lenders are relying upon such financial statements in connection with the exercise of their rights hereunder, provided, that Borrowers shall only be required to use their reasonable efforts exercised in good faith to obtain such letter; and (B) copies of any management letters sent to a Borrower by such accountants.
(d) Annual Projections. As soon as practicable and in any event prior to the beginning of each Fiscal Year, Borrower Representative shall deliver to Agent and each Lender projected balance sheets, statements of income and cash flow for Borrowers on a consolidated and consolidating basis, for each of the twelve (12) months during such Fiscal Year, which shall include the assumptions used therein, together with appropriate supporting details as reasonably requested by Agent.
(e) Explanation of Budgets and Projections. In conjunction with the delivery of the annual presentation of projections or budgets referred to in subsection 9(d) above, Borrower Representative shall deliver a letter signed by the President or a Vice President of Borrower Representative and by the Treasurer or Chief Financial Officer of Borrower Representative, describing, comparing and analyzing, in detail, all changes and developments between the anticipated financial results included in such projections or budgets and the historical financial statements of Borrowers.
(f) Public Reporting. Promptly upon the filing thereof, Borrower Representative shall deliver to Agent and each Lender copies of all registration statements and annual, quarterly, monthly or other regular reports which any Borrower or any of such Borrowers Subsidiaries files with the Securities and Exchange Commission, as well as promptly providing to Agent and each Lender copies of any reports and proxy statements delivered to its shareholders.
(g) Other Information. Promptly following request therefor by Agent, Borrower Representative shall deliver to Agent such other business or financial data, reports, appraisals and projections as Agent may reasonably request.
10. TERMINATION; AUTOMATIC RENEWAL.
THIS AGREEMENT SHALL BE IN EFFECT FROM THE DATE HEREOF UNTIL APRIL 18, 2014 (THE ORIGINAL TERM) AND SHALL AUTOMATICALLY RENEW ITSELF FROM YEAR TO YEAR THEREAFTER (EACH SUCH ONE-YEAR RENEWAL BEING REFERRED TO HEREIN AS A RENEWAL TERM) UNLESS (A) THE DUE DATE OF THE LIABILITIES IS ACCELERATED PURSUANT TO SECTION 16 HEREOF; OR (B) A BORROWER OR ANY LENDER ELECTS TO TERMINATE THIS AGREEMENT AT THE END OF THE ORIGINAL TERM OR AT THE END OF ANY RENEWAL TERM BY GIVING THE OTHER PARTIES HERETO WRITTEN NOTICE OF SUCH ELECTION AT LEAST NINETY (90) DAYS PRIOR TO THE END OF THE ORIGINAL TERM OR THE THEN CURRENT RENEWAL TERM. UPON TERMINATION OF THIS AGREEMENT BORROWERS SHALL PAY ALL OF THE LIABILITIES IN FULL. If one or more of the events specified in clauses (A) and (B)
occurs, then (i) Agent and Lenders shall not make any additional Loans on or after the date identified as the date on which the Liabilities are to be repaid; and (ii) this Agreement shall terminate on the date thereafter that the Liabilities are paid in full. At such time as Borrowers have repaid all of the Liabilities and this Agreement has terminated, each Borrower shall deliver to Agent and Lenders a release, in form and substance satisfactory to Agent, of all obligations and liabilities of Agent and its Lenders and their officers, directors, employees, agents, parents, subsidiaries and affiliates to such Borrower, and if such Borrower is obtaining new financing from another lender, such Borrower shall deliver such lenders indemnification of Agent and Lenders, in form and substance satisfactory to Agent, for checks which Agent has credited to such Borrowers account, but which subsequently are dishonored for any reason or for automatic clearinghouse or wire transfers not yet posted to such Borrowers account. If, during the term of this Agreement, Borrowers prepay all of the Liabilities and this Agreement is terminated, Borrowers jointly and severally agree to pay to Agent, for the benefit of the Lenders, as a prepayment fee, in addition to the payment of all other Liabilities, an amount equal to (i) one-half of one percent (1/2%) of the Maximum Loan Limit if such prepayment occurs after April 18, 2011 but on or before April 18, 2012, and (ii) one quarter of one percent (1/4%) of the Maximum Loan Limit if such prepayment occurs after April 18, 2012 but on or before April 18, 2013. Notwithstanding the foregoing, no prepayment fee shall be required in the event that such prepayment occurs after April 18, 2013.
11. REPRESENTATIONS AND WARRANTIES.
Each Borrower hereby represents and warrants to Agent and each Lender, which representations and warranties (whether appearing in this Section 11 or elsewhere) shall be true at the time of Borrowers execution hereof and the closing of the transactions described herein or related hereto, shall remain true until the repayment in full and satisfaction of all the Liabilities and termination of this Agreement, and shall be remade by each Borrower at the time each Loan is made pursuant to this Agreement.
(a) Financial Statements and Other Information. The financial statements and other information delivered or to be delivered by Borrowers to Agent or any Lender at or prior to the date of this Agreement accurately reflect the financial condition of Borrowers, and there has been no adverse change in the financial condition, the operations or any other status of a Borrower since the date of the financial statements delivered to Agent most recently prior to the date of this Agreement. All written information now or heretofore furnished by each Borrower to Agent or any Lender is true and correct as of the date with respect to which such information was furnished.
(b) Locations. The office where each Borrower keeps its books, records and accounts (or copies thereof) concerning the Collateral, each Borrowers principal place of business and all of each Borrowers other places of business, locations of Collateral and post office boxes and locations of bank accounts are as set forth in Exhibit A and at other locations within the continental United States of which Agent has been advised by Borrower Representative in accordance with subsection 12(b)(i). The Collateral, including, without limitation, the Equipment (except any part thereof which Borrower Representative shall have advised Agent in writing consists of Collateral normally used in more than one state) is kept, or, in the case of vehicles, based, only at the addresses set forth on Exhibit A, and at other locations
within the continental United States of which Agent has been advised by Borrower Representative in writing in accordance with subsection 12(b)(i) hereof.
(c) Loans by Borrower. No Borrower has made any loans or advances to any Affiliate or other Person except for (i) advances authorized hereunder to employees, officers and directors of such Borrower for travel, salaries or bonuses and other expenses arising in the ordinary course of such Borrowers business, and (ii) loans by AMCON permitted pursuant to subsection 13(f) hereof.
(d) Accounts and Inventory. Each Account or item of Inventory which a Borrower shall, expressly or by implication, request Agent to classify as an Eligible Account, Eligible Inventory, or as Eligible Cigarette Inventory, respectively, shall, as of the time when such request is made, conform in all respects to the requirements of such classification as set forth in the respective definitions of Eligible Account, Eligible Inventory and Eligible Cigarette Inventory as set forth herein and as otherwise established by Agent from time to time.
(e) Liens. Each Borrower is the lawful owner of all Collateral now purportedly owned or hereafter purportedly acquired by such Borrower, free from all liens, claims, security interests and encumbrances whatsoever, whether voluntarily or involuntarily created and whether or not perfected, other than the Permitted Liens.
(f) Organization, Authority and No Conflict. AMCON is a corporation, duly organized, validly existing and in good standing in the State of Delaware, its state organizational identification number is 2093842 and such Borrower is duly qualified and in good standing in all states where the nature and extent of the business transacted by it or the ownership of its assets makes such qualification necessary. Chamberlin Natural is a corporation, duly organized, validly existing and in good standing in the State of Florida, its state organizational identification number is 538536 and such Borrower is duly qualified and in good standing in all states where the nature and extent of the business transacted by it or the ownership of its assets makes such qualification necessary. Health Food is a corporation, duly organized, validly existing and in good standing in the State of Oklahoma, its state organizational identification number is 1900173205 and such Borrower is duly qualified and in good standing in all states where the nature and extent of the business transacted by it or the ownership of its assets makes such qualification necessary. Each Borrower has the right and power and is duly authorized and empowered to enter into, execute and deliver this Agreement and the Other Agreements and perform its obligations hereunder and thereunder. Each Borrowers execution, delivery and performance of this Agreement and the Other Agreements does not conflict with the provisions of the organizational documents of such Borrower, any statute, regulation, ordinance or rule of law, or any agreement, contract or other document which may now or hereafter be binding on such Borrower, and each Borrowers execution, delivery and performance of this Agreement and the Other Agreements shall not result in the imposition of any lien or other encumbrance upon any of such Borrowers property under any existing indenture, mortgage, deed of trust, loan or credit agreement or other agreement or instrument by which such Borrower or any of its property may be bound or affected.
(g) Litigation. There are no actions or proceedings which are pending or threatened against a Borrower which is, in the determination of Agent, reasonably likely to have a Material Adverse Effect on such Borrower, and each Borrower shall, promptly upon becoming aware of any such pending or threatened action or proceeding, give written notice thereof to Agent. No Borrower has any Commercial Tort Claims pending other than those set forth on Exhibit C hereto as Exhibit C may be amended from time to time.
(h) Compliance with Laws and Maintenance of Permits. Each Borrower has obtained all governmental consents, franchises, certificates, licenses, authorizations, approvals and permits, the lack of which would have a Material Adverse Effect on such Borrower. Each Borrower is in compliance in all material respects with all applicable federal, state, local and foreign statutes, orders, regulations, rules and ordinances (including, without limitation, Environmental Laws and statutes, orders, regulations, rules and ordinances relating to taxes, employer and employee contributions and similar items, securities, ERISA or employee health and safety) the failure to comply with which would have a Material Adverse Effect on such Borrower.
(i) Affiliate Transactions. Except as set forth on Schedule 11(i) hereto or as permitted pursuant to subsection 11(c) hereof, no Borrower is conducting, permitting or suffering to be conducted, transactions with any Affiliate other than transactions with Affiliates for the purchase or sale of Inventory or services in the ordinary course of business pursuant to terms that are no less favorable to such Borrower than the terms upon which such transactions would have been made had they been made to or with a Person that is not an Affiliate.
(j) Names and Trade Names. Each Borrowers name has always been as set forth on the first page of this Agreement and no Borrower uses trade names, assumed names, fictitious names or division names in the operation of its business, except as set forth on Schedule 11(j) hereto.
(k) Equipment. Each Borrower has good and indefeasible and merchantable title to and ownership of all Equipment. No Equipment is a Fixture to real property unless such real property is owned by such Borrower and is subject to a mortgage in favor of Agent, or if such real property is leased, is subject to a landlords agreement in favor of Agent on terms acceptable to Agent, or an accession to other personal property unless such personal property is subject to a first priority lien in favor of Agent.
(l) Enforceability. This Agreement and the Other Agreements to which a Borrower is a party are the legal, valid and binding obligations of such Borrower and are enforceable against such Borrower in accordance with their respective terms.
(m) Solvency. Each Borrower is, after giving effect to the transactions contemplated hereby, solvent, able to pay its debts as they become due, has capital sufficient to carry on its business, now owns property having a value both at fair valuation and at present fair saleable value on a going concern basis greater than the amount required to pay its debts, and will not be rendered insolvent by the execution and delivery of this Agreement or any of the Other Agreements or by completion of the transactions contemplated hereunder or thereunder.
(n) Indebtedness. Except as set forth on Schedule 11(n) hereto or as permitted pursuant to subsections 13(a) and 13(f) hereof, no Borrower is obligated (directly or indirectly), for any loans or other indebtedness for borrowed money other than the Loans.
(o) Margin Security and Use of Proceeds. No Borrower owns any margin securities, and none of the proceeds of the Loans hereunder shall be used for the purpose of purchasing or carrying any margin securities or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase any margin securities or for any other purpose not permitted by Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.
(p) Parent, Subsidiaries and Affiliates. Except as set forth on Schedule 11(p) hereto, no Borrower has any Parents, Subsidiaries or other Affiliates or divisions, nor is any Borrower engaged in any joint venture or partnership with any other Person.
(q) No Defaults. No Borrower is in default under any material contract, lease or commitment to which it is a party or by which it is bound, nor does any Borrower know of any dispute regarding any contract, lease or commitment which would have a Material Adverse Effect on such Borrower.
(r) Employee Matters. There are no controversies pending or threatened between a Borrower and any of its employees, agents or independent contractors other than employee grievances arising in the ordinary course of business which would not, in the aggregate, have a Material Adverse Effect on such Borrower, and each Borrower is in compliance with all federal and state laws respecting employment and employment terms, conditions and practices except for such non-compliance which would not have a Material Adverse Effect on such Borrower.
(s) Intellectual Property. Each Borrower possesses adequate licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications, trade styles and trade names to continue to conduct its business as heretofore conducted by it.
(t) Environmental Matters. No Borrower has generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates in any material respect any Environmental Law or any license, permit, certificate, approval or similar authorization thereunder and the operations of each Borrower comply in all material respects with all Environmental Laws and all licenses, permits, certificates, approvals and similar authorizations thereunder. There has been no investigation, proceeding, complaint, order, directive, claim, citation or notice by any governmental authority or any other Person, nor is any pending or to the best of each Borrowers knowledge threatened with respect to any non-compliance with or violation of the requirements of any Environmental Law by a Borrower or the release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, which affects a Borrower or its business, operations or assets or any properties at which a Borrower has transported, stored or disposed of any Hazardous Materials. No Borrower has any material
liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials.
(u) ERISA Matters. Each Borrower has paid and discharged all obligations and liabilities arising under ERISA of a character which, if unpaid or unperformed, might result in the imposition of a lien against any of its properties or assets.
12. AFFIRMATIVE COVENANTS.
Until payment and satisfaction in full of all Liabilities and termination of this Agreement, unless Borrowers obtain Requisite Lenders prior written consent waiving or modifying any of Borrowers covenants hereunder in any specific instance, each Borrower covenants and agrees as follows:
(a) Maintenance of Records. Each Borrower shall at all times keep accurate and complete books, records and accounts with respect to all of such Borrowers business activities, in accordance with sound accounting practices and generally accepted accounting principles consistently applied, and shall keep such books, records and accounts, and any copies thereof, only at the addresses indicated for such purpose on Exhibit A.
(b) Notices. Borrower Representative shall:
(i) Locations. Promptly (but in no event less than ten (10) days prior to the occurrence thereof) notify Agent of the proposed opening of any new place of business or new location of Collateral, the closing of any existing place of business or location of Collateral, any change in the location of any Borrowers books, records and accounts (or copies thereof), the opening or closing of any post office box, the opening or closing of any bank account or, if any of the Collateral consists of Goods of a type normally used in more than one state, the use of any such Goods in any state other than a state in which any Borrower has previously advised Agent that such Goods will be used.
(ii) Eligible Accounts and Inventory. Promptly upon becoming aware thereof, notify Agent if any Account or Inventory identified by any Borrower to Agent as an Eligible Account or Eligible Inventory becomes ineligible for any reason.
(iii) Litigation and Proceedings. Promptly upon becoming aware thereof, notify Agent of any actions or proceedings which are pending or threatened against any Borrower which might have a Material Adverse Effect on such Borrower and of any Commercial Tort Claims of such Borrower which may arise, which notice shall constitute such Borrowers authorization to amend Exhibit C to add such Commercial Tort Claim.
(iv) Names and Trade Names. Notify Agent within ten (10) days of the change of its name or the use of any trade name, assumed name, fictitious name or division name not previously disclosed to Agent in writing.
(v) ERISA Matters. Promptly notify Agent of (x) the occurrence of any reportable event (as defined in ERISA) which might result in the termination by the Pension Benefit Guaranty Corporation (the PBGC) of any employee benefit plan (Plan) covering any officers or employees of such Borrower, any benefits of which are, or are required to be, guaranteed by the PBGC, (y) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trust therefor or (z) its intention to terminate or withdraw from any Plan.
(vi) Environmental Matters. Immediately notify Agent upon becoming aware of any investigation, proceeding, complaint, order, directive, claim, citation or notice with respect to any non-compliance with or violation of the requirements of any Environmental Law by any Borrower or the generation, use, storage, treatment, transportation, manufacture handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter which affects any Borrower or its business operations or assets or any properties at which any Borrower has transported, stored or disposed of any Hazardous Materials.
(vii) Default; Material Adverse Change. Promptly advise Agent of any material adverse change in the business, property, assets, prospects, operations or condition, financial or otherwise, of any Borrower, the occurrence of any Event of Default hereunder or the occurrence of any event which, if uncured, will become an Event of Default after notice or lapse of time (or both).
All of the foregoing notices shall be provided by Borrower Representative to Agent in writing.
(c) Compliance with Laws and Maintenance of Permits. Each Borrower shall maintain all governmental consents, franchises, certificates, licenses, authorizations, approvals and permits, the lack of which would have a Material Adverse Effect on such Borrower and each Borrower shall remain in compliance with all applicable federal, state, local and foreign statutes, orders, regulations, rules and ordinances (including, without limitation, Environmental Laws and statutes, orders, regulations, rules and ordinances relating to taxes, employer and employee contributions and similar items, securities, ERISA or employee health and safety) the failure with which to comply would have a Material Adverse Effect on such Borrower. Following any determination by Agent that there is non-compliance, or any condition which requires any action by or on behalf of a Borrower in order to avoid non-compliance, with any Environmental Law, in each case where such non compliance would have a Material Adverse Effect on such Borrower, at such Borrowers expense cause an independent environmental engineer acceptable to Agent to conduct such tests of the relevant site(s) as are appropriate and prepare and deliver a report setting forth the results of such tests, a proposed plan for remediation and an estimate of the costs thereof.
(d) Inspection and Audits. Each Borrower shall permit Agent and Lenders, or any Persons designated by Agent, to call at such Borrowers places of business at any reasonable times, and, without hindrance or delay, to inspect the Collateral and to inspect, audit, check and make extracts from such Borrowers books, records, journals, orders, receipts and any correspondence and other data relating to such Borrowers business, the Collateral or any transactions between the parties hereto, and shall have the right to make such verification
concerning such Borrowers business as Agent may consider reasonable under the circumstances. Each Borrower shall furnish to Agent such information relevant to Agents and/or any Lenders rights under this Agreement and the Other Agreements as Agent shall at any time and from time to time request. Agent, through its officers, employees or agents shall have the right, at any time and from time to time, in Agents name, to verify the validity, amount or any other matter relating to any of such Borrowers Accounts, by mail, telephone, telecopy, electronic mail, or otherwise. Each Borrower authorizes Agent and Lenders to discuss the affairs, finances and business of such Borrower with any officers, employees or directors of such Borrower or with its Parent or any Affiliate or the officers, employees or directors of its Parent or any Affiliate, and to discuss the financial condition of such Borrower with such Borrowers independent public accountants. Any such discussions shall be without liability to Agent or any Lender or to Borrowers independent public accountants. Borrowers shall pay to Agent all customary fees and all costs and out-of-pocket expenses incurred by Agent in the exercise of its rights hereunder, and all of such fees, costs and expenses shall constitute Liabilities hereunder, shall be payable on demand and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder. Notwithstanding the foregoing, provided no Event of Default has occurred, the Agent shall be limited to two (2) inspections per calendar year.
(e) Insurance. Each Borrower shall:
(i) Keep the Collateral properly housed and insured for the full insurable value thereof against loss or damage by fire, theft, explosion, sprinklers, collision (in the case of motor vehicles) and such other risks as are customarily insured against by Persons engaged in businesses similar to that of such Borrower, with such companies, in such amounts, with such deductibles, and under policies in such form, as shall be satisfactory to Agent. Original (or certified) copies of such policies of insurance have been or shall be, within ninety (90) days of the date hereof, delivered to Agent, together with evidence of payment of all premiums therefor, and shall contain an endorsement, in form and substance acceptable to Agent, showing loss under such insurance policies payable to Agent, for the benefit of Agent and Lenders. Such endorsement, or an independent instrument furnished to Agent, shall provide that the insurance company shall give Agent at least thirty (30) days written notice before any such policy of insurance is altered or canceled and that no act, whether willful or negligent, or default of such Borrower or any other Person shall affect the right of Agent to recover under such policy of insurance in case of loss or damage. In addition, each Borrower shall cause to be executed and delivered to Agent an assignment of proceeds of its business interruption insurance policies. Each Borrower hereby directs all insurers under all policies of insurance to pay all proceeds payable thereunder in excess of $100,000.00 for any occurrence directly to Agent, such proceeds to be applied on account of the Liabilities in accordance with the terms of this Agreement. Any proceeds of insurance paid directly to Borrowers shall be used by Borrowers to repair or restore the damaged or lost property which gave rise to the insurance claim. Each Borrower irrevocably makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent) as such Borrowers true and lawful attorney (and agent-in-fact) for the purpose of making, settling and adjusting claims under such policies of insurance, endorsing the name of such Borrower on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance and making all determinations and decisions with respect to such policies of insurance.
(ii) Maintain, at its expense, such public liability and third party property damage insurance as is customary for Persons engaged in businesses similar to that of such Borrower with such companies and in such amounts, with such deductibles and under policies in such form as shall be satisfactory to Agent and original (or certified) copies of such policies have been or shall be, within ninety (90) days after the date hereof, delivered to Agent, together with evidence of payment of all premiums therefor; each such policy shall contain an endorsement showing Agent and Lenders as additional insureds thereunder and providing that the insurance company shall give Agent at least thirty (30) days written notice before any such policy shall be altered or canceled.
If a Borrower at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay any premium relating thereto, then Agent, without waiving or releasing any obligation or default by Borrowers hereunder, may (but shall be under no obligation to) obtain and maintain such policies of insurance and pay such premiums and take such other actions with respect thereto as Agent deems advisable. Such insurance, if obtained by Agent, may, but need not, protect such Borrowers interests or pay any claim made by or against such Borrower with respect to the Collateral. Such insurance may be more expensive than the cost of insurance such Borrower may be able to obtain on its own and may be cancelled only upon Borrower Representative providing evidence that it has obtained the insurance as required above. All sums disbursed by Agent in connection with any such actions, including, without limitation, court costs, expenses, other charges relating thereto and reasonable attorneys fees, shall constitute Loans hereunder, shall be payable on demand by Borrowers to Agent and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder.
(f) Collateral. Each Borrower shall keep the Collateral in good condition, repair and order and shall make all necessary repairs to the Equipment and replacements thereof so that the operating efficiency and the value thereof shall at all times be preserved and maintained. Each Borrower shall permit Agent and Lenders to examine any of the Collateral at any time and wherever the Collateral may be located and, each Borrower shall, immediately upon request therefor by Agent, deliver to Agent any and all evidence of ownership of any of the Equipment including, without limitation, certificates of title and applications of title. Each Borrower shall, at the request of Agent, indicate on its records concerning the Collateral a notation, in form satisfactory to Agent, of the security interest of Agent hereunder.
(g) Use of Proceeds. All monies and other property obtained by a Borrower from Agent and Lenders pursuant to this Agreement shall be used solely for business purposes of such Borrower.
(h) Taxes. Each Borrower shall file all required tax returns and pay all of its taxes when due, including, without limitation, taxes imposed by federal, state or municipal agencies, and shall cause any liens for taxes to be promptly released; provided, that such Borrower shall have the right to contest the payment of such taxes in good faith by appropriate proceedings so long as (i) the amount so contested is shown on such Borrowers financial statements; (ii) the contesting of any such payment does not give rise to a lien for taxes; (iii) such
Borrower keeps on deposit with Agent (such deposit to be held without interest) an amount of money which, in the sole judgment of Agent, is sufficient to pay such taxes and any interest or penalties that may accrue thereon; and (iv) if such Borrower fails to prosecute such contest with reasonable diligence, Agent may apply the money so deposited in payment of such taxes. If a Borrower fails to pay any such taxes and in the absence of any such contest by such Borrower, Agent may (but shall be under no obligation to) advance and pay any sums required to pay any such taxes and/or to secure the release of any lien therefor, and any sums so advanced by Agent shall constitute Loans hereunder, shall be payable by such Borrower to Agent on demand, and, until paid, shall bear interest at the highest rate then applicable to Loans hereunder.
(i) Intellectual Property. Each Borrower shall maintain adequate licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications, tradestyles and trade names to continue its business as heretofore conducted by it or as hereafter conducted by it.
(j) Checking Accounts and Cash Management Services. Borrowers shall maintain their general checking and controlled disbursement accounts with BofA. Normal charges shall be assessed thereon. Although no compensating balance is required, each Borrower must keep monthly balances in order to merit earnings credits which will cover BofAs service charges for demand deposit account activities. In addition, Borrowers shall enter into agreements with BofA for standard cash management services. Borrowers shall be responsible for all normal charges assessed thereon.
(k) Patriot Act, Bank Secrecy Act and Office of Foreign Assets Control. As required by federal law and the Agents, BofAs and each Lenders policies and practices, the Agent, BofA and each Lender may need to obtain, verify and record certain customer identification information and documentation in connection with opening or maintaining accounts, or establishing or continuing to provide services and each Borrower agrees to provide such information. In addition, and without limiting the foregoing sentence, each Borrower shall (a) ensure, and cause each Subsidiary to ensure, that no Person who owns a controlling interest in or otherwise controls any Borrower or any Subsidiary is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (OFAC), the Department of the Treasury or included in any Executive Orders, (b) not use or permit the use of the proceeds of the Loans to violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive Order relating thereto, and (c) comply, and cause each Subsidiary to comply, with all applicable Bank Secrecy Act (BSA) laws and regulations, as amended.
13. NEGATIVE COVENANTS.
Until payment and satisfaction in full of all, Liabilities and termination of this Agreement, unless Borrowers obtain Requisite Lenders prior written consent waiving or modifying any of Borrowers covenants hereunder in any specific instance, each Borrower agrees as follows:
(a) Guaranties. No Borrower shall assume, guarantee or endorse, or otherwise become liable in connection with, the obligations of any Person, except by
endorsement of instruments for deposit or collection or similar transactions in the ordinary course of business.
(b) Indebtedness. No Borrower shall create, incur, assume or become obligated (directly or indirectly), for any loans or other indebtedness for borrowed money other than the Loans, except that a Borrower may (i) borrow money from a Person other than Agent and Lenders on an unsecured and subordinated basis if a subordination agreement in favor of Agent for its benefit and the benefit of the other Lenders and in form and substance satisfactory to the Agent is executed and delivered to Agent relative thereto; (ii) maintain its present indebtedness listed on Schedule 11(n) hereto; (iii) incur unsecured indebtedness to trade creditors in the ordinary course of business; (iv) incur purchase money indebtedness or capitalized lease obligations in connection with Capital Expenditures; (v) together with each other Borrower, incur operating lease obligations requiring payments not to exceed Six Million and No/100 Dollars ($6,000,000.00) in the aggregate for all Borrowers during any Fiscal Year of Borrowers; and (vi) incur Rate Hedging Obligations and (vii) incur indebtedness in an amount not to exceed $500,000 payable to Harps Food Stores, Inc. (Harp) pursuant to a promissory note in form and substance acceptable to the Bank amortized on a straight-line basis over two years bearing interest at 5% per annum subject to quarterly principal and interest payments; provided, however, that no payments of principal or interest may be made to Harp under such indebtedness in the event (a) any Default or Event of Default has occurred or would be caused by the making of such payment after giving effect thereto and (b) the Borrowers do not have Average Excess Availability greater than or equal to Five Million Dollars ($5,000,000) for the thirty day period immediately prior to such payment and after giving effect to such payment.
(c) Liens. No Borrower shall grant or permit to exist (voluntarily or involuntarily) any lien, claim, security interest or other encumbrance whatsoever on any of its assets, other than Permitted Liens.
(d) Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions Outside the Ordinary Course of Business. No Borrower shall (i) enter into any merger or consolidation; (ii) change its state of organization or enter into any transaction which has the effect of changing its state of organization (iii) sell, lease, transfer or otherwise dispose of any of its assets other than in the ordinary course of business, provided that AMCON may sell and dispose of assets with a value of less than $250,000.00 in any transaction, or series of related transactions, provided that the proceeds thereof, net of reasonable out of pocket disposition expenses, are applied to the Liabilities; (iv) purchase the stock, other equity interests or all or a material portion of the assets of any Person or division of such Person; or (v) enter into any other transaction outside the ordinary course of such Borrowers business, including, without limitation, any issuance of any shares of, or warrants or other rights to receive or purchase any shares of, any class of its stock or any other equity interest other than such issuances pursuant to the terms of such Borrowers stock option plan and the 2007 Omnibus Incentive Plan. Notwithstanding anything in this Agreement to the contrary, no Borrower shall redeem, retire, purchase or otherwise acquire any shares of any class or series of its stock or any other equity interest (including, without limitation, any shares of AMCONs Series A Convertible Preferred Stock or Series B Convertible Preferred Stock); provided, however, that AMCON (i) may redeem odd lot stock in an aggregate amount not to exceed $50,000.00 in any calendar year and other stock up to $100,000.00 in the aggregate during any calendar year, (ii) purchase shares of
its common stock only so long as (I) no Event of Default is in existence at the time of, or would occur after giving effect to, any such purchase, and (II) Borrowers shall have Average Excess Availability of not less than Ten Million Dollars ($10,000,000.00) for the thirty (30) day period immediately prior to such purchase and after giving effect to any such purchase and (iii) redeem shares of AMCONs Series A and Series B Convertible Preferred Stock only so long as (I) no Event of Default is in existence at the time of, or would occur after giving effect to, any such redemption, and (II) Borrowers shall have Average Excess Availability of not less than Five Million Dollars ($5,000,000.00) for the thirty (30) day period immediately prior to such redemption and after giving effect to any such redemption. No Borrower shall form any Subsidiaries or enter into any joint ventures or partnerships with any other Person. For purposes herein, Average Excess Availability shall be determined by dividing (i) the total of each days Excess Availability for such thirty (30) day period by (ii) thirty (30).
In addition to the foregoing, Borrowers may enter into Acquisitions solely to the extent the following conditions are satisfied:
(i) the business or division acquired are for use, or the Person acquired is engaged, in the businesses engaged in by a Borrower on the Closing Date;
(ii) immediately before and after giving effect to such Acquisition, no Event of Default shall exist;
(iii) immediately after giving effect to such Acquisition, Borrowers have a pro-forma ratio of EBITDA to Fixed Charges of at least 1.10 to 1.0;
(iv) the Borrowers have Excess Availability greater than or equal to twenty percent (20%) of the Maximum Loan Limit on a pro-forma basis for the thirty day period immediately prior to the closing of such Acquisition (as if such Acquisition had already occurred) and immediately after giving effect to such Acquisition;
(v) in the case of the Acquisition of any Person, the board of directors or similar governing body of such Person has approved such Acquisition and such Acquisition is not considered to be hostile;
(vi) reasonably prior to such Acquisition, the Agent shall have received complete executed or conformed copies of each material document, instrument and agreement to be executed in connection with such Acquisition together with (a) all lien search reports and lien release letters and other documents as the Agent may require to evidence the termination of Liens on the assets or business to be acquired and (b) subordination agreements with respect to all Seller notes and contingent payments;
(vii) not less than ten Business Days prior to such Acquisition, the Agent shall have received an acquisition summary with respect to the Person and/or business or division to be acquired, such summary to include a reasonably detailed description thereof (including financial information requested by Agent) and operating results, the terms and conditions, including economic terms, of the proposed Acquisition, and Borrowers calculation of pro forma EBITDA relating thereto; and
(viii) if the Acquisition is structured as a merger, the surviving entity is either a Borrower or, following the merger, a domestic wholly-owned Subsidiary which is a Borrower hereto and such Borrower becomes a party to this Agreement pursuant to an amendment or joinder agreement in form and substance acceptable to the Agent.
(e) Dividends and Distributions. No Borrower shall declare or pay any dividend or other distribution (whether in cash or in kind) on any class of its stock (if such Borrower is a corporation) or on account of any equity interest in such Borrower (if such Borrower is a partnership, limited liability company or other type of entity). Notwithstanding the foregoing and provided that (i) each such dividend payment is permitted under all applicable laws; and (ii) no Event of Default shall have occurred prior to, or would occur as a result of, any such dividend payment, AMCON may pay the regularly scheduled dividends on its (w) Common Stock in an aggregate amount not to exceed $1.00 per share in any Fiscal Year, (x) Series A Preferred Stock in accordance with the terms of such stock in an aggregate amount not to exceed $172,000 in any Fiscal Year and (y) Series B Preferred Stock in accordance with the terms of such stock in an aggregate amount not to exceed $140,000 in any Fiscal Year, and (z) Series C Convertible Preferred Stock in accordance with the terms of the Series C Certificate of Designations (as defined below) in an aggregate amount not to exceed $120,000 in any Fiscal Year. Without limitation of the foregoing, AMCON hereby agrees not to accelerate, increase or prepay said dividends with respect to its Series A Preferred Stock, Series B Preferred Stock or Series C Convertible Preferred Stock.
(f) Investments; Loans; Transfers. No Borrower shall purchase or otherwise acquire, or contract to purchase or otherwise acquire, the obligations or stock of any Person, other than direct obligations of the United States; nor shall a Borrower lend or otherwise advance funds or transfer any assets to any Person (including, but not limited to, any Subsidiary which is not a Subsidiary Borrower hereunder) except for advances made to employees, officers and directors for travel and other expenses arising in the ordinary course of business.
(g) Fundamental Changes, Line of Business. Except for the filing by AMCON of (i) a Certificate of Designation for the Series B Preferred Stock and any restatements and amendments to AMCONs certificate of incorporation to physically reflect the Certificates of Designation for the Series A Preferred Stock and the Series B Preferred Stock, and (ii) a Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock of AMCON dated as of March 3, 2006 (the Series C Certificate of Designations) and any restatements and amendments to AMCONs certificate of incorporation to physically reflect the Series C Certificate of Designations for the Series C Convertible Preferred Stock, no Borrower shall amend its organizational documents or change its Fiscal Year or enter into a new line of business materially different from such Borrowers current business.
(h) Equipment. No Borrower shall (i) permit any Equipment to become a Fixture to real property unless such real property is owned by such Borrower and is subject to a mortgage in favor of Agent, or if such real property is leased, is subject to a landlords agreement in favor of Agent on terms acceptable to Agent, or (ii) permit any Equipment to become an accession to any other personal property unless such personal property is subject to a first priority lien in favor of Agent.
(i) Affiliate Transactions. Except as set forth on Schedule 11(i) hereto or as permitted pursuant to subsection 11(c) hereof, no Borrower shall conduct, permit or suffer to be conducted, transactions with Affiliates other than transactions for the purchase or sale of Inventory or services in the ordinary course of business pursuant to terms that are no less favorable to such Borrower than the terms upon which such transactions would have been made had they been made to or with a Person that is not an Affiliate.
(j) Settling of Accounts. Each Borrower shall not settle or adjust any Account identified by such Borrower as an Eligible Account or with respect to which the Account Debtor is an Affiliate without the consent of Agent, provided that such consent shall not be required to the extent that the aggregate amount settled or adjusted by all Borrowers is less than $100,000.00, provided further that following the occurrence of an Event of Default, no Borrower shall settle or adjust any Account without the consent of Agent.
14. FINANCIAL COVENANTS.
Each Borrower shall maintain and keep in full force and effect each of the financial covenants set forth below:
(a) Fixed Charge Coverage Ratio. Borrowers shall not permit the ratio of EBITDA to Fixed Charges tested monthly on a trailing twelve (12) month basis to be less than 1.0 to 1.0. Notwithstanding the foregoing, the Fixed Charge Coverage Ratio shall only apply and be tested in the event Excess Availability is less than ten percent (10%) of the Maximum Loan Limit at any time (a Financial Covenant Trigger Event). Upon the occurrence of a Financial Covenant Trigger Event, the Fixed Charge Coverage Ratio shall be immediately tested as of the date of the most recent Compliance Certificate delivered pursuant to Section 9(c) and on a monthly basis thereafter.
15. DEFAULT.
The occurrence of any one or more of the following events shall constitute an Event of Default by Borrowers hereunder:
(a) Payment. The failure of any Obligor to pay when due, declared due, or demanded by Agent, at the request of the Requisite Lenders, any of the Liabilities.
(b) Breach of this Agreement and the Other Agreements. The failure of any Obligor to perform, keep or observe any of the covenants, conditions, promises, agreements or obligations of such Obligor under this Agreement or any of the Other Agreements; provided that any such failure by a Borrower under subsections 12(b)(i), (iv), (v), (vi), 12(c) and 12(i) of this Agreement shall not constitute an Event of Default hereunder until the fifteenth (15th) day following notice thereof by Agent to such Borrower.
(c) Breaches of Other Obligations. The failure of any Obligor to perform, keep or observe any of the covenants, conditions, promises, agreements or obligations of such Obligor under any other agreement with any Person if such failure might have a Material Adverse Effect on such Obligor.
(d) Breach of Representations and Warranties. The making or furnishing by any Obligor, Agent or any Lender of any representation, warranty, certificate, schedule, report or other communication within or in connection with this Agreement or the Other Agreements or in connection with any other agreement between such Obligor and Agent or any Lender, which is untrue or misleading in any respect.
(e) Loss of Collateral. The loss, theft, damage or destruction of any of the Collateral in an amount in excess of $100,000.00 in the aggregate for all such events during any year of the Original Term or any Renewal Term as determined by Agent in its sole discretion, or (except as permitted hereby) sale, lease or furnishing under a contract of service of, any of the Collateral.
(f) Levy, Seizure or Attachment. The making or any attempt by any Person to make any levy, seizure or attachment upon any of the Collateral.
(g) Bankruptcy or Similar Proceedings. The commencement of any proceedings in bankruptcy by or against any Obligor or for the liquidation or reorganization of any Obligor, or alleging that such Obligor is insolvent or unable to pay its debts as they mature, or for the readjustment or arrangement of any Obligors debts, whether under the United States Bankruptcy Code or under any other law, whether state or federal, now or hereafter existing, for the relief of debtors, or the commencement of any analogous statutory or non-statutory proceedings involving any Obligor; provided, however, that if such commencement of proceedings against such Obligor is involuntary, such action shall not constitute an Event of Default unless such proceedings are not dismissed within sixty (60) days after the commencement of such proceedings, though Agent and Lenders shall have no obligation to make Loans or issue, or cause to be issued, Letters of Credit on behalf of Borrowers during such sixty (60) day period or, if earlier, until such proceedings are dismissed.
(h) Appointment of Receiver. The appointment of a receiver or trustee for any Obligor, for any of the Collateral or for any substantial part of any Obligors assets or the institution of any proceedings for the dissolution, or the full or partial liquidation, or the merger or consolidation, of any Obligor which is a corporation, limited liability company or a partnership; provided, however, that if such appointment or commencement of proceedings against such Obligor is involuntary, such action shall not constitute an Event of Default unless such appointment is not revoked or such proceedings are not dismissed within sixty (60) days after the commencement of such proceedings, though Agent and Lenders shall have no obligation to make Loans or issue, or cause to be issued, Letters of Credit on behalf of Borrowers during such sixty (60) day period or, if earlier, until such appointment is revoked or such proceedings are dismissed.
(i) Judgment. The entry of any judgment or orders aggregating in excess of $100,000.00 against any Obligor which remains unsatisfied or undischarged and in effect for thirty (30) days after such entry without a stay of enforcement or execution.
(j) Death or Dissolution of Obligor. The death of any Obligor who is a natural Person, or of any general partner who is a natural Person of any Obligor which is a partnership, or any member who is a natural Person of any Obligor which is a limited liability
company or the dissolution of any Obligor which is a partnership, limited liability company, corporation or other entity.
(k) Default or Revocation of Guaranty. The occurrence of an event of default under, or the revocation or termination of, any agreement, instrument or document executed and delivered by any Person to Agent or any Lender pursuant to which such Person has guaranteed to Agent and Lenders the payment of all or any of the Liabilities or has granted Agent a security interest in or lien upon some or all of such Persons real and/or personal property to secure the payment of all or any of the Liabilities.
(l) Criminal Proceedings. The institution in any court of a criminal proceeding against any Obligor, or the indictment of any Obligor for any crime.
(m) Change of Control. The failure of AMCON to own and have voting control of at least one hundred percent (100%) of the issued and outstanding voting equity interest of Chamberlin Natural and Health Food.
16. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in subsection 15(g) hereof, all of the Liabilities shall immediately and automatically become due and payable, without notice of any kind. Upon the occurrence of any other Event of Default, all Liabilities may, at the option of Requisite Lenders, and without demand, notice or legal process of any kind, be declared, and immediately shall become, due and payable.
(b) Upon the occurrence of an Event of Default, Agent may exercise from time to time any rights and remedies available to it under the Uniform Commercial Code and any other applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Agreement or in any of the Other Agreements and all of Agents rights and remedies shall be cumulative and non-exclusive to the extent permitted by law. In particular, but not by way of limitation of the foregoing, Agent may, without notice, demand or legal process of any kind, take possession of any or all of the Collateral (in addition to Collateral of which it already has possession), wherever it may be found, and for that purpose may pursue the same wherever it may be found, and may enter onto any of Borrowers premises where any of the Collateral may be, and search for, take possession of, remove, keep and store any of the Collateral until the same shall be sold or otherwise disposed of, and Agent shall have the right to store the same at any of Borrowers premises without cost to Agent or Lenders. At Agents request, each Borrower shall, at Borrowers expense, assemble the Collateral and make it available to Agent at one or more places to be designated by Agent and reasonably convenient to Agent and such Borrower. Each Borrower recognizes that if a Borrower fails to perform, observe or discharge any of its Liabilities under this Agreement or the Other Agreements, no remedy at law will provide adequate relief to Agent and Lenders, and agrees that Agent and Lenders shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. Any notification of intended disposition of any of the Collateral required by law will be deemed to be a reasonable authenticated notification of disposition if given at least ten (10) days prior to such disposition and such notice shall (i) describe Agent and the applicable Borrower(s), (ii) describe the Collateral that is the subject to the intended disposition, (iii) state
the method of the intended disposition, (iv) state that the applicable Borrower(s) is entitled to an accounting of the Liabilities and state the charge, if any, for an accounting and (v) state the time and place of any public disposition or the time after which any private sale is to be made. Agent and Lenders may disclaim any warranties that might arise in connection with the sale, lease or other disposition of the Collateral and has no obligation to provide any warranties at such time. Any Proceeds of any disposition by Agent of any of the Collateral may be applied by Agent to the payment of expenses in connection with the Collateral, including, without limitation, legal expenses and reasonable attorneys fees, and any balance of such Proceeds may be applied by Agent toward the payment of such of the Liabilities, and in such order of application, as Agent may from time to time elect; provided, however, principal and interest on the Revolving Loans shall be fully satisfied prior to applying such proceeds to Borrowers Rate Hedging Obligations owed to BofA.
17. CONDITIONS PRECEDENT.
The obligation of Agent and Lenders to fund the initial Revolving Loan, and to issue or cause to be issued the initial Letter of Credit, is subject to the satisfaction or waiver on or before the date hereof of the following conditions precedent:
(a) Agent shall have received each of the agreements, opinions, reports, approvals, consents, certificates and other documents set forth on the closing document list attached hereto as Schedule 17(a) (the Closing Document List) in each case in form and substance satisfactory to Agent;
(b) Since December 31, 2010, no event shall have occurred which has had or could reasonably be expected to have a Material Adverse Effect on any Obligor, as determined by Agent or Requisite Lenders in its sole discretion;
(c) Agent shall have received payment in full of all fees and expenses payable to it by Borrowers or any other Person in connection herewith, on or before disbursement of the initial Loans hereunder; and
(d) The Obligors shall have executed and delivered to Agent all such other documents, instruments and agreements which Agent determines are reasonably necessary to consummate the transactions contemplated hereby.
18. JOINT AND SEVERAL LIABILITY.
(a) Notwithstanding anything to the contrary contained herein, all Liabilities of each Borrower hereunder shall be joint and several obligations of Borrowers.
(b) Notwithstanding any provisions of this Agreement to the contrary, it is intended that the joint and several nature of the Liabilities of Borrowers and the liens and security interests granted by Borrowers to secure the Liabilities, not constitute a Fraudulent Conveyance (as defined below). Consequently, Agent and Borrowers agree that if the Liabilities of a Borrower, or any liens or security interests granted by such Borrower securing the Liabilities would, but for the application of this sentence, constitute a Fraudulent Conveyance, the Liabilities of such Borrower and the liens and security interests securing such Liabilities shall
be valid and enforceable only to the maximum extent that would not cause such Liabilities or such lien or security interest to constitute a Fraudulent Conveyance, and the Liabilities of such Borrower and this Agreement shall automatically be deemed to have been amended accordingly. For purposes hereof, Fraudulent Conveyance means a fraudulent conveyance under Section 548 of Chapter 11 of Title II of the United States Code (11 U.S.C. Subsection 101, et seq.), as amended (the Bankruptcy Code) or a fraudulent conveyance or fraudulent transfer under the applicable provisions of any fraudulent conveyance or fraudulent transfer law or similar law of any state, nation or other governmental unit, as in effect from time to time.
(c) Each Borrower assumes responsibility for keeping itself informed of the financial condition of the each other Borrower, and any and all endorsers and/or guarantors of any instrument or document evidencing all or any part of such other Borrowers Liabilities and of all other circumstances bearing upon the risk of nonpayment by such other Borrowers of their Liabilities and each Borrower agrees that Agent or Lenders shall not have any duty to advise such Borrower of information known to Agent or Lenders regarding such condition or any such circumstances or to undertake any investigation not a part of its regular business routine. If Agent or any Lender, in their sole discretion, undertakes at any time or from time to time to provide any such information to a Borrower, Agent or such Lender, as applicable, shall not be under any obligation to update any such information or to provide any such information to such Borrower on any subsequent occasion.
(d) Agent and the Lenders are hereby authorized, without notice or demand and without affecting the liability of a Borrower hereunder, to, at any time and from time to time, (i) renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to a Borrowers Liabilities or otherwise modify, amend or change the terms of any promissory note or other agreement, document or instrument now or hereafter executed by a Borrower and delivered to Agent or the Lenders; (ii) accept partial payments on a Borrowers Liabilities; (iii) take and hold security or collateral for the payment of a Borrowers Liabilities hereunder or for the payment of any guaranties of a Borrowers Liabilities or other liabilities of a Borrower and exchange, enforce, waive and release any such security or collateral; (iv) apply such security or collateral and direct the order or manner of sale thereof as Agent, in its sole discretion, may determine; and (v) settle, release, compromise, collect or otherwise liquidate a Borrowers Liabilities and any security or collateral therefor in any manner, without affecting or impairing the obligations of the other Borrowers. Agent shall have the exclusive right to determine the time and manner of application of any payments or credits, whether received from a Borrower or any other source, and such determination shall be binding on such Borrower. All such payments and credits may be applied, reversed and reapplied, in whole or in part, to any of a Borrowers Liabilities as Agent shall determine in its sole discretion without affecting the validity or enforceability of the Liabilities of the other Borrowers.
(e) Each Borrower hereby agrees that, except as hereinafter provided, its obligations hereunder shall be unconditional, irrespective of (i) the absence of any attempt to collect a Borrowers Liabilities from any Borrower or any guarantor or other action to enforce the same; (ii) the waiver or consent by Agent or any Lender with respect to any provision of any instrument evidencing Borrowers Liabilities, or any part thereof, or any other agreement heretofore, now or hereafter executed by a Borrower and delivered to Agent or any Lender; (iii) failure by Agent to take any steps to perfect and maintain its security interest in, or to
preserve its rights to, any security or collateral for Borrowers Liabilities; (iv) the institution of any proceeding under the Bankruptcy Code, or any similar proceeding, by or against a Borrower or Agents election in any such proceeding of the application of Section 1111(b)(2) of the Bankruptcy Code; (v) any borrowing or grant of a security interest by any Borrower as debtor-in-possession, under Section 364 of the Bankruptcy Code; (vi) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of Agents or any Lenders claim(s) for repayment of any of Borrowers Liabilities; or (vii) any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.
(f) No payment made by or for the account of a Borrower including, without limitations, (i) a payment made by such Borrower on behalf of another Borrowers Liabilities or (ii) a payment made by any other person under any guaranty, shall entitle such Borrower, by subrogation or otherwise, to any payment from such other Borrower or from or out of such other Borrowers property and such Borrower shall not exercise any right or remedy against such other Borrower or any property of such other Borrower by reason of any performance of such Borrower of its joint and several obligations hereunder.
19. SETTLEMENTS, DISTRIBUTIONS AND APPORTIONMENT OF PAYMENTS.
On a weekly basis (or more frequently if requested by Agent (a Settlement Date), Agent shall provide each Lender with a statement of the outstanding balance of the Liabilities as of the end of the Business Day immediately preceding the Settlement Date (the Pre-Settlement Determination Date) and the current balance of the Loans funded by each Lender (whether made directly by such Lender to Borrowers or constituting a settlement by such Lender of a previous Disproportionate Advance made by Agent on behalf of such Lender to Borrowers). If such statement discloses that such Lenders current balance of the Loans as of the Pre-Settlement Determination Date exceeds such Lenders Pro Rata Share of the Liabilities outstanding as of the Pre-Settlement Determination Date, then Agent shall, on the Settlement Date, transfer, by wire transfer, the net amount due to such Lender in accordance with such Lenders instructions, and if such statement discloses that such Lenders current balance of the Loans as of the Pre-Settlement Determination Date is less than such Lenders Pro Rata Share of the Liabilities outstanding as of the Pre-Settlement Determination Date, then such Lender shall, on the Settlement Date, transfer, by wire transfer the net amount due to Agent in accordance with Agents instructions. In addition, payments actually received by Agent with respect to the following items shall be distributed by Agent to Lenders as follows:
(a) Within one (1) Business Day of receipt thereof by Agent, payments to be applied to interest on the Loans shall be paid to each Lender in proportion to its Pro Rata Share, subject to any adjustments for any Disproportionate Advances as provided in subsection 2(a)(i), so that Agent shall receive interest on the Disproportion Advances and each Lender shall only receive interest on the amount of funds actually advanced by such Lender;
(b) Within one (1) Business Day of receipt thereof by Agent, payments to be applied to the Letter of Credit fee set as provided in Section 3(a) hereof shall be paid to each Lender in proportion to its Pro Rata Share;
(c) Within one (1) Business Day of receipt thereof by Agent, payments to be applied to the closing fee set forth in subsection 4(c)(i) hereof shall be paid to each Lender as follows: (66.67%) to BofA and (33.33%) to M&I Bank; and
(d) Within one (1) Business Day of receipt thereof by Agent, payments to be applied to the unused line fee set forth in subsection 4(c)(ii) hereof shall be paid to each Lender in proportion to its Pro Rata Share; and
(e) Within one (1) Business Day of receipt thereof by Agent, payments to be applied to the prepayment fee set forth in Section 10 hereof shall be paid to each Lender in proportion to its Pro Rata Share.
Notwithstanding the foregoing, Agent shall not be obligated to transfer to any Defaulting Lender any payment made by Borrowers to Agent, nor shall such Defaulting Lender be entitled to share any interest, fees or other payment hereunder, until payment is made by such Defaulting Lender to Agent as required in this Agreement.
20. AGENT.
(a) Appointment of Agent.
(i) Each Lender hereby designates BofA as Agent to act as herein specified. Each Lender hereby irrevocably authorizes Agent to take such action on its behalf under the provisions of this Agreement and the notes and any other instruments and agreements referred to herein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. Except as otherwise provided herein, Agent shall hold all Collateral and all payments of principal, interest, fees, charges and expenses received pursuant to this Agreement or any of the Other Agreements for the benefit of Lenders. Agent may perform any of its duties hereunder by or through its agents or employees.
(ii) The provisions of this Section 20 are solely for the benefit of Agent and Lenders, and neither Borrowers nor any other Obligor shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for any Obligor.
(b) Nature of Duties of Agent. Agent shall not have duties, obligations or responsibilities except those expressly set forth in this Agreement and the Other Agreements. Neither Agent nor any of its officers, directors, employees or agents shall be liable for any action taken or omitted by it as such hereunder or in connection herewith, unless caused by its or their gross negligence or willful misconduct. The duties of Agent shall be mechanical and administrative in nature; Agent shall not have by reason of this Agreement or the Other Agreements a fiduciary relationship in respect of any Lender; and nothing in this Agreement or the Other Agreements, expressed or implied, is intended to or shall be so construed as to impose
upon Agent any obligations in respect of this Agreement or the Other Agreements except as expressly set forth herein.
(c) Lack of Reliance on Agent.
(i) Independently and without reliance upon Agent, each Lender, to the extent it deems appropriate, has made and shall continue to make (A) its own independent investigation of the financial or other condition and affairs of Agent, each Obligor and any other Lender in connection with the taking or not taking of any action in connection herewith and (B) its own appraisal of the creditworthiness of Agent, each Obligor and any other Lender, and, except as expressly provided in this Agreement, Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter.
(ii) Agent shall not be responsible to any Lender for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, collectability, priority or sufficiency of this Agreement or the Other Agreements or any notes or the financial or other condition of any Obligor. Agent shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or the Other Agreements, or the financial condition of any Obligor, or the existence or possible existence of any Event of Default.
(d) Certain Rights of Agent. Agent shall have the right to request instructions from Requisite Lenders or all Lenders, as applicable, pursuant to this Agreement, by notice to each Lender. If Agent shall request instructions from Requisite Lenders or all Lenders, as applicable, with respect to any act or action (including the failure to act) in connection with this Agreement, Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from Requisite Lenders or all Lenders, as applicable, and Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting hereunder in accordance with the instructions of Requisite Lenders or all Lenders, as applicable.
(e) Reliance by Agent. Agent shall be under no duty to examine, inquire into, or pass upon the validity, effectiveness or genuineness of this Agreement, any of the Other Agreements or any instrument, document or communication furnished pursuant hereto or thereto or in connection herewith or therewith. Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order, electronic mail or other documentary, teletransmission or telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person. Agent may consult with legal counsel (including counsel for any Obligor with respect to matters concerning any Obligor), independent public accountants and other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.
(f) Indemnification of Agent. To the extent Agent is not promptly reimbursed and indemnified by Borrowers, each Lender will reimburse and indemnify Agent, in proportion to its Pro Rata Share, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agent in performing its duties hereunder, in any way relating to or arising out of this Agreement; provided, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agents gross negligence or willful misconduct. If any indemnity furnished to Agent for any purpose shall, in the opinion of Agent, be insufficient or become impaired, Agent may call for additional indemnities and cease to do, or not commence, the acts to be indemnified against, even if so directed by Requisite Lenders or all Lenders, as applicable, until such additional indemnification is provided. The obligations of Lenders under this subsection 20(f) shall survive the payment in full of the Liabilities and the termination of this Agreement.
(g) Agent in its Individual Capacity. With respect to the Loans made by it pursuant hereto, Agent shall have the same rights and powers hereunder as any other Lender or holder of a note or participation interest and may exercise the same as though it was not performing the duties specified herein; and the terms Lenders, Requisite Lenders or any similar terms shall, unless the context clearly otherwise indicates, include Agent in its individual capacity. Agent may accept deposits from, lend money to, acquire equity interests in, and generally engage in any kind of banking, trust, financial advisor or other business with Borrowers or any Affiliate of Borrowers as if it were not performing the duties specified herein, and may accept fees and other consideration from Borrowers for services in connection with this Agreement and otherwise without having to account for the same to Lenders, to the extent such activities are not in contravention of the terms of this Agreement.
(h) Holders of Notes. Agent may deem and treat the payee of any promissory note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any promissory note, shall be conclusive and binding on any subsequent holder, transferee or assignee of such promissory note or of any promissory note or notes issued in exchange therefor.
(i) Successor Agent. Agent may, upon five (5) Business Days notice to Lenders and Borrower Representative, resign at any time (effective upon the appointment of a successor Agent pursuant to the provisions of this subsection 20(i)) by giving written notice thereof to Lenders and Borrower Representative. Upon any such resignation, Requisite Lenders shall have the right, upon five (5) days notice, to appoint a successor Agent. If no successor Agent shall have been so appointed by Requisite Lenders and accepted such appointment, within thirty (30) days after the retiring Agents giving of notice of resignation, then, upon five (5) days notice, the retiring Agent may, on behalf of Lenders, appoint a successor Agent, which
shall be a bank or a trust company or other financial institution which maintains an office in the United States, or a commercial bank organized under the laws of the United States of America or of any State thereof, or any affiliate of such bank or trust company or
(i) other financial institution which is engaged in the banking business, having a combined capital and surplus of at least Fifty Million and No/100 Dollars ($50,000,000.00).
(ii) Upon the acceptance of any appointment as an Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agents resignation hereunder as Agent, the provisions of this Section 20 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement.
(j) Collateral Matters.
(i) Each Lender authorizes and directs Agent to enter into the Other Agreements for the benefit of Lenders. Each Lender hereby agrees that, except as otherwise set forth herein, any action taken by Requisite Lenders in accordance with the provisions of this Agreement or the Other Agreements, and the exercise by the Requisite Lenders of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all Lenders. Agent is hereby authorized on behalf of all Lenders, without the necessity of any notice to or further consent from any Lender to take any action with respect to any Collateral or Other Agreements which may be necessary to perfect and maintain perfected the security interest in and liens upon the Collateral granted pursuant to this Agreement and the Other Agreements.
(ii) Agent will not, without the verbal consent of all Lenders, which consent shall (a) be confirmed promptly thereafter in writing and (b) not be unreasonably withheld or delayed, execute any release of Agents security interest in any Collateral except for releases relating to dispositions of Collateral (x) permitted by this Agreement and (y) in connection with the repayment in full of all of the Liabilities by Borrowers and the termination of all obligations of Agent and Lenders under this Agreement and the Other Agreements; provided, that with the consent of Requisite Lenders, Agent may release its liens on Collateral having a book value not greater than ten percent (10%) of the total book value of all Collateral, as determined by Agent, either in a single transaction or series of related transactions, not to exceed twenty percent (20%) of the book value of all Collateral in any Fiscal Year. Agent shall not be required to execute any such release on terms which, in Agents opinion, would expose Agent to liability or create any obligation or entail any consequence other than the release of such liens without recourse or warranty. In the event of any sale or transfer of any of the Collateral, Agent shall be authorized to deduct all of the expenses reasonably incurred by Agent from the proceeds of any such sale or transfer.
(iii) Lenders hereby agree that the lien granted to Agent in any property sold or disposed of in accordance with the provisions of the Agreement shall be automatically released; provided, however that Agents lien shall attach to and continue for the benefit of Agent and Lenders in the proceeds and products of such property arising from any such sale or disposition.
(iv) To the extent, pursuant to the provisions of this subsection 20(j), Agents execution of a release is required to release its lien upon any sale and transfer of Collateral which is consented to in writing by Requisite Lenders or all Lenders, as applicable, and upon at least five (5) business days prior written request by Borrower Representative, Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the liens granted to Agent for the benefit of Lenders herein or pursuant hereto upon the Collateral that was sold or transferred.
(v) Agent shall not have any obligation whatsoever to Lenders or to any other Person to assure that the Collateral exists or is owned by Borrowers or any other Obligor or is cared for, protected or insured or that the liens granted to Agent herein or pursuant hereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise or to continue exercising at all or in any manner or under any duty of care, disclosure or fidelity any of the rights, authorities and powers granted or available to Agent in this Section 20 or in any of the Other Agreements, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its sole discretion, given Agents own interest in the Collateral as one of Lenders and that Agent shall have no duty or liability whatsoever to Lenders, except for its gross negligence or willful misconduct.
(vi) In the event that any Lender receives any Proceeds of any Collateral by setoff, exercise of any bankers lien or otherwise, in an amount in excess of such Lenders Pro Rata Share of such Proceeds, such Lender shall purchase for cash (and other Lenders shall sell) interests in each of such other Lenders Pro Rata Share of the Liabilities as would be necessary to cause all Lenders to share the amount so set off or otherwise received with each other Lender in accordance with their respective Pro Rata Shares. No Lender shall exercise any right of set off or bankers lien without the prior written consent of Agent.
(k) Actions with Respect to Defaults. In addition to Agents right to take actions on its own accord as permitted under this Agreement, Agent shall take such action with respect to an Event of Default as shall be directed by Requisite Lenders or all Lenders, as applicable, under this Agreement; provided, that until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable and in the best interests of Lenders. No Lender shall have any right individually to enforce or seek to enforce this Agreement or any Other Agreement or to realize upon any Collateral, unless instructed to do so by Agent.
(l) Delivery of Information. Agent shall not be required to deliver to any Lender originals or copies of any documents, instruments, notices, communications or other information received by Agent from any Borrower or any other Obligor, Requisite Lenders, any Lender or any other Person under or in connection with this Agreement or any Other Agreement except (i) as specifically provided in this Agreement or any Other Agreement and (ii) as specifically requested from time to time in writing by any Lender with respect to a specific document, instrument, notice or other written communication received by and in the possession of Agent at the time of receipt of such request and then only in accordance with such specific request.
(m) Demand. Subject to the terms of this Agreement, Agent shall make demand for repayment by Borrowers of all Liabilities owing by Borrowers hereunder, after the occurrence of an Event of Default, upon the written request of Requisite Lenders. Agent shall make such demand in such manner as it deems appropriate, in its sole discretion, to effectuate the request of the Requisite Lenders. Nothing contained herein shall limit the discretion of Agent to take reserves, to deem certain Accounts and Inventory ineligible, or to exercise any other discretion granted to Agent in this Agreement.
(n) Notice of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default or any event which, with passage of time or giving of notice, could become an Event of Default, except with respect to Events of Default arising as a result of any Borrower failure to pay principal, interest or fees required to be paid to Agent for the benefit of Lenders, unless Agent shall have received written notice from a Lender or Borrower Representative describing such Event of Default or event which, with the passage of time or giving of notice, could become an Event of Default, and which identifies such event as a notice of default. Upon receipt of any such notice or Agent becoming aware of Borrowers failure to pay principal, interest or fees required to be paid to Agent for the benefit of Lenders, Agent will notify each Lender of such receipt.
21. ASSIGNABILITY.
(a) Borrowers shall not have the right to assign this Agreement or any interest therein except with the prior written consent of Agent and all Lenders.
(b) Any Lender may make, carry or transfer Loans at, to or for the account of, any of its branch offices or the office of an Affiliate of such Lender except to the extent such transfer would result in increased costs to Borrowers.
(c) Each Lender may, with the consent of Agent which consent shall not be unreasonably withheld, but without the consent of any other Lender nor Borrower Representative, assign to one or more banks or other financial institutions all or a portion of its rights and obligations under this Agreement and the Other Agreements; provided, that (i) for each such assignment, the parties thereto shall execute and deliver to Agent, for its acceptance and recording in the Register (as defined below), an Assignment and Acceptance Agreement in the form attached hereto as Exhibit D (the Assignment and Acceptance), and a processing and recordation fee of Three Thousand Five Hundred and No/100 Dollars ($3,500.00) to be paid by the assignee, and (ii) no such assignment shall be for less than Five Million and No/100
Dollars ($5,000,000.00). Upon such execution and delivery of the Assignment and Acceptance to Agent, from and after the date specified as the effective date in the Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto, and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, such assignee shall have the rights and obligations of a Lender hereunder and (y) the assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than any rights it may have pursuant to Section 23 of this Agreement which will survive) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a party hereto).
(d) By executing and delivering an Assignment and Acceptance, the assignee thereunder confirms and agrees as follows: (i) other than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement and the Other Agreements or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any of the Other Agreements, (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrowers or any other Obligor or the performance or observance by Borrowers or any other Obligor of its obligations under this Agreement and the Other Agreement, (iii) such assignee confirms that it has received a copy of this Agreement and the Other Agreements, together with copies of the financial statements referred to in Section 9 of this Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (iv) such assignee will, independently and without reliance upon Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement, (v) such assignee appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to Agent by the terms hereof, together with such powers as are reasonably incidental thereto and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender.
(e) Agent shall, maintain at its address referred to in Section 24 of the Agreement a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of Lenders and the Revolving Loan Commitments of, and principal amount of the Loans owing to, each Lender from time to time (the Register). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrowers, Agent and Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register and copies of each Assignment and Acceptance shall be available for inspection by Borrowers, Agent or any Lender at any reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender, Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit D hereto, (i) accept such Assignment and Acceptance,
(ii) record the information contained therein in the Register and (iii) give prompt notice thereof to Borrower Representative. Within five (5) Business Days after Borrower Representatives receipt of such notice, Borrowers shall execute and deliver to Agent in exchange for the surrendered promissory note or notes, a new promissory note or notes to the order of the assignee in amounts equal to such assignees commitments and outstanding Loans hereunder and, if the assigning Lender has retained a portion of the Loans, a new promissory note or notes to the order of the assigning Lender in an amount equal to the remaining commitments and outstanding Loans hereunder of such assigning Lender under the terms of this Agreement. Such new promissory note or notes shall re-evidence the indebtedness outstanding under the old promissory note or notes and shall be in the aggregate principal amount of such surrendered promissory note or notes, shall be dated of even date herewith and shall otherwise be in substantially the form of the promissory note or notes subject to such assignment.
(g) Each Lender may sell participations (without the consent of Agent, Borrowers or any other Lender) to one or more parties, in or to all (or a portion) of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Revolving Loan Commitment, or the Loans owing to it); provided, that (i) such Lenders obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) Borrowers, Agent, and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement and (iv) such Lender shall not transfer, grant, assign or sell any participation under which the participant shall have rights to approve any amendment or waiver of this Agreement.
(h) Each Lender agrees that, without the prior written consent of Borrowers and Agent, it will not make any assignment hereunder in any manner or under any circumstances that would require registration or qualification of, or filings in respect of, any Loan or other Liabilities under the securities laws of the United States of America or of any jurisdiction.
(i) In connection with the efforts of any Lender to assign its rights or obligations or to participate interests, such Lender may disclose any information in its possession regarding Borrowers.
22. AMENDMENTS, ETC.
No amendment or waiver of any provision of this Agreement or any of the Other Agreements, nor consent to any departure by any Obligor therefrom, shall in any event be effective unless the same shall be in writing and signed by Requisite Lenders, or if Lenders shall not be parties thereto, by the parties thereto and consented to by Requisite Lenders, and each such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that no amendment, waiver or consent shall, unless in writing and signed by all Lenders, do any of the following: (i) increase the Revolving Loan Commitments of Lenders or subject Lenders to any additional obligations to extend credit to Borrowers, (ii) reduce the principal of, or interest on, the Loans (other than as expressly permitted herein) or any fees hereunder, (iii) postpone any date fixed for any payment in respect of principal of, or interest on, the Loan or any fees hereunder, (iv) change the Pro Rata Shares of Lenders, or any minimum requirement necessary for Lenders or Requisite Lenders to take any
action hereunder, (v) amend or waive this Section 22, or change the definition of Requisite Lenders, (vi) increase the advance rates set forth in subsection 2(a) hereof or (vii) except in connection with the financing, refinancing, sale or other disposition of any asset of Borrowers permitted under this Agreement (or to the extent Requisite Lender approval only is required with any such release pursuant to subsection 20(j) hereof), release or subordinate any liens in favor of Agent, for the benefit of Agent and Lenders, on any of the Collateral and provided further, that no amendment, waiver or consent affecting the rights or duties of Agent under this Agreement or any Other Agreement shall in any event be effective, unless in writing and signed by Agent in addition to Lenders required hereinabove to take such action. Notwithstanding any of the foregoing to the contrary, (a) for purposes of voting or consenting to matters with respect to this Agreement and the Other Agreements, a Defaulting Lender shall not be considered a Lender and such Defaulting Lenders Revolving Loan Commitment shall each be deemed to be $0 until such Defaulting Lender makes the payments required in this Agreement and (b) the consent of Borrowers shall not be required for any amendment, modification or waiver of the provisions of this Section 22.
In the event that any consent, waiver or amendment requiring the agreement of all Lenders as set forth above is agreed to by the Requisite Lenders, but not all Lenders, Agent may, in its sole discretion, cause any non-consenting Lender to assign its rights and obligations under this Agreement and the Other Agreements to one or more new Lenders or existing Lenders in the manner and according to the terms set forth in Section 21 of this Agreement; provided, that (i) no Lender may be required to assign its rights and obligations to a new Lender because such lender is unwilling to increase its own loan commitments, (ii) such new Lender must be willing to consent to the proposed amendment, waiver or consent and (iii) in connection with such assignment the new Lender pays the assigning Lender an amount equal to the Liabilities owing to such assigning Lender, including all principal, accrued and unpaid interest and accrued and an unpaid fees to the date of assignment. Such assignment shall occur within thirty (30) days of notice by Agent to such non-consenting Lender of Agents intent to cause such non-consenting Lender to assign its interests hereunder.
23. NONLIABILITY OF AGENT AND LENDERS.
The relationship between Borrowers, Agent and Lenders shall be solely that of borrowers and lender. Neither Agent nor any Lender shall have any fiduciary responsibilities to Borrowers. Neither Agent nor any Lender undertakes any responsibility to Borrowers to review or inform Borrowers of any matter in connection with any phase of Borrowers business or operations.
24. INDEMNIFICATION.
Borrowers agrees to defend (with counsel satisfactory to Agent), protect, indemnify and hold harmless Agent and each Lender, each affiliate or subsidiary of Agent and each Lender, and each of their respective officers, directors, employees, attorneys and agents (each an Indemnified Party) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature (including, without limitation, the disbursements and the reasonable fees of counsel for each Indemnified Party in connection with any investigative, administrative or judicial proceeding, whether or not the Indemnified Party shall be designated a party thereto), which may
be imposed on, incurred by, or asserted against, any Indemnified Party (whether direct, indirect or consequential and whether based on any federal, state or local laws or regulations, including, without limitation, securities laws and regulations, Environmental Laws and commercial laws and regulations, under common law or in equity, or based on contract or otherwise) in any manner relating to or arising out of this Agreement or any Other Agreement, or any act, event or transaction related or attendant thereto, the making or issuance and the management of the Loans or any Letters of Credit or the use or intended use of the proceeds of the Loans or any Letters of Credit; provided, however, that Borrowers shall not have any obligation hereunder to any Indemnified Party with respect to matters caused by or resulting from the willful misconduct or gross negligence of such Indemnified Party. To the extent that the undertaking to indemnify set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Borrowers shall satisfy such undertaking to the maximum extent permitted by applicable law. Any liability, obligation, loss, damage, penalty, cost or expense covered by this indemnity shall be paid to each Indemnified Party on demand, and, failing prompt payment, shall, together with interest thereon at the highest rate then applicable to Loans hereunder from the date incurred by each Indemnified Party until paid by Borrowers, be added to the Liabilities of Borrowers and be secured by the Collateral. The provisions of this Section 24 shall survive the satisfaction and payment of the other Liabilities and the termination of this Agreement.
25. NOTICE.
All written notices and other written communications with respect to this Agreement shall be sent by ordinary, certified or overnight mail, by telecopy or delivered in person, and in the case of Lender shall be sent to it at 135 South LaSalle Street, Chicago, Illinois 60603-4105, attention: James Fallahay, facsimile number: (312) 904-7190, and in the case of Lender shall be sent to it at the address set forth below its name on the signature page hereto or in the Assignment and Acceptance Agreement and in the case of Borrower Representative or any Borrower shall be sent to it at its principal place of business set forth on Exhibit A hereto or as otherwise directed by such Borrower in writing. All notices shall be deemed received upon actual receipt thereof or refusal of delivery.
26. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.
This Agreement and the Other Agreements are submitted by Borrowers to Agent and Lenders for their acceptance or rejection at Agents principal place of business as an offer by Borrowers to borrow monies from Agent and Lenders now and from time to time hereafter, and shall not be binding upon Agent or any Lender or become effective until accepted by Agent and Lenders, in writing, at said place of business. If so accepted by Agent and Lenders, this Agreement and the Other Agreements shall be deemed to have been made at said place of business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL LOCATED OUTSIDE OF THE STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED. If any
provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or remaining provisions of this Agreement.
To induce Agent and Lenders to accept this Agreement, each Borrower irrevocably agrees that, subject to Agents sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. EACH BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY AND STATE. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH BORROWER, AT THE ADDRESS SET FORTH FOR NOTICE IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED. Agent agrees to endeavor to provide a copy of such process to the law firm of Stinson, Morrison, Hecker, LLP by mail at the address of 1201 Walnut Street, Suite 2900, Kansas City, Missouri 64106-2150, Attn. James W. Allen, or by facsimile transmission at facsimile number (816) 412-1002. Failure of Agent to provide a copy of such process shall not impair Agents rights hereunder, create a cause of action against Agent or create any claim or right on behalf of Borrower or any third party. EACH BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST SUCH BORROWER BY AGENT OR LENDERS IN ACCORDANCE WITH THIS SECTION.
27. HEADINGS OF SUBDIVISIONS.
The headings of subdivisions in this Agreement are for convenience of reference only, and shall not govern the interpretation of any of the provisions of this Agreement.
28. POWER OF ATTORNEY.
Each Borrower acknowledges and agrees that its appointment of Agent as its attorney and agent-in-fact for the purposes specified in this Agreement is an appointment coupled with an interest and shall be irrevocable until all of the Liabilities are satisfied and paid in full and this Agreement is terminated.
29. CONFIDENTIALITY.
Borrowers, Agent and each Lender hereby agree to use commercially reasonable efforts to assure that any and all information relating to Borrowers which are (i) furnished by Borrowers to Agent or any Lender (or to any affiliate of Agent or any Lender); and (ii) non-public, confidential or proprietary in nature, shall be kept confidential by Agent and such Lender or such affiliate in accordance with applicable law; provided, however, that such information and other credit information relating to Borrowers may be distributed by such party to such partys
directors, officers, employees, attorneys, affiliates, assignees, participants, auditors, agents and regulators, to Agent and any other Lender and upon the order of a court or other governmental agency having jurisdiction over Agent or such Lender or such affiliate, to any other party. In addition such information and other credit information may be distributed by Agent or any Lender to potential participants or assignees of any portion of the Liabilities, provided, that such potential participant or assignee agrees to follow the confidentiality requirements set forth herein. Borrowers, Agent and each Lender further agree that this provision shall survive the termination of this Agreement. Notwithstanding the foregoing, Borrowers hereby consent to Agent publishing a tombstone or similar advertising material relating to the financing transaction contemplated by this Agreement.
30. COUNTERPARTS.
This Agreement, any of the Other Agreements and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, shall be deemed an original, but all of which counterparts together shall constitute but one agreement.
31. ELECTRONIC SUBMISSIONS.
Upon not less than thirty (30) days prior written notice (the Approved Electronic Form Notice), Agent may permit or require that any of the documents, certificates, forms, deliveries or other communications, authorized, required or contemplated by this Agreement or the Other Agreements, be submitted to Agent in Approved Electronic Form (as hereafter defined), subject to any reasonable terms, conditions and requirements in the applicable Approved Electronic Forms Notice. For purposes hereof Electronic Form means e-mail, e-mail attachments, data submitted on web-based forms or any other communication method that delivers machine readable data or information to Agent, and Approved Electronic Form means an Electronic Form that has been approved in writing by Agent (which approval has not been revoked or modified by Agent) and sent to Borrower Representative in an Approved Electronic Form Notice. Except as otherwise specifically provided in the applicable Approved Electronic Form Notice, any submissions made in an applicable Approved Electronic Form shall have the same force and effect that the same submissions would have had if they had been submitted in any other applicable form authorized, required or contemplated by this Agreement or the Other Agreements.
32. EFFECT OF AMENDMENT AND RESTATEMENT.
Upon the date of this Agreement, the Original Agreement (and, except as otherwise set forth in the following proviso, all obligations and rights of any party thereunder), shall be amended and restated by this Agreement; provided, however, that the obligation to repay the loans and advances arising under the Original Agreement shall continue in full force and effect and the liens and security interests securing payment thereof shall be continuing but shall now be governed by the terms of this Agreement and the Other Agreements. No action or inaction by Agent or BofA prior to the date of this Agreement shall be deemed to have established a course of conduct between the parties hereto. All rights and obligations of Borrowers, Agent and any Lender shall be solely as set forth in this Agreement and the Other Agreements.
33. WAIVER OF JURY TRIAL; OTHER WAIVERS.
(a) EACH BORROWER, AGENT AND EACH LENDER EACH HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY A BORROWER, AGENT OR SUCH LENDER OR WHICH, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP AMONG BORROWER, AGENT AND LENDERS. IN NO EVENT SHALL AGENT OR ANY LENDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
(b) Each Borrower hereby waives demand, presentment, protest and notice of nonpayment, and further waives the benefit of all valuation, appraisal and exemption laws.
(c) Each Borrower hereby waives the benefit of any law that would otherwise restrict or limit Agent or any Lender or any affiliate of Agent or any Lender in the exercise of its right, which is hereby acknowledged and agreed to, to set-off against the Liabilities, without notice at any time hereafter, any indebtedness, matured or unmatured, owing by Agent or any Lender or such affiliate of Agent or any Lender to such Borrower, including, without limitation any Deposit Account at Agent or any Lender or such affiliate.
(d) EACH BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF SUCH BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL.
(e) Agents and/or Lenders failure, at any time or times hereafter, to require strict performance by a Borrower of any provision of this Agreement or any of the Other Agreements shall not waive, affect or diminish any right of Agent or any Lender thereafter to demand strict compliance and performance therewith. Any suspension or waiver by Agent or any Lender of an Event of Default under this Agreement or any default under any of the Other Agreements shall not suspend, waive or affect any other Event of Default under this Agreement or any other default under any of the Other Agreements, whether the same is prior or subsequent thereto and whether of the same or of a different kind or character. No delay on the part of Agent or any Lender in the exercise of any right or remedy under this Agreement or any Other Agreement shall preclude other or further exercise thereof or the exercise of any right or remedy. None of the undertakings, agreements, warranties, covenants and representations of Borrowers contained in this Agreement or any of the Other Agreements and no Event of Default under this Agreement or default under any of the Other Agreements shall be deemed to have been suspended or waived by Agent and/or Lenders unless such suspension or waiver is in writing, signed by a duly authorized officer of Agent, Requisite Lenders or all Lenders, as required herein, and directed to Borrower Representative specifying such suspension or waiver.
34. AMENDMENT AND RESTATEMENT.
This Agreement and the Other Agreements executed and delivered in connection herewith are entered into and delivered to the Agent in replacement of and substitution for, and not in payment of or satisfaction for, the following documents: (i) the Original Agreement and (ii) each Other Agreement evidencing the obligations under the Original Agreement (collectively, with the Original Agreement, the Prior Agreements). All other documents, including, the other instruments, documents and agreements executed and delivered in connection with the Prior Agreements, are hereby reaffirmed and shall continue in full force and effect, as may be amended, restated or otherwise modified in connection herewith. The Borrowers acknowledge that the loans and other obligations evidenced by the Prior Agreements have not been satisfied but instead have become part of the Loans and liabilities under this Agreement and under the Other Agreements executed in connection herewith. The Borrowers further acknowledge that all of the Liens granted by the Borrowers under the Prior Agreements and all instruments, documents and agreements executed in connection therewith are hereby reaffirmed and shall continue hereafter to secure the Borrowers Liabilities under this Agreement and the other Loan Documents, until all the Borrowers Liabilities are repaid in full in cash (other than unasserted contingent indemnification obligations) and this Agreement is terminated.
(Signature Page Follows)
(Signature Page to Second Amended and Restated Loan and Security Agreement)
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above.
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AMCON DISTRIBUTING COMPANY | |
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By: |
/s/ Andrew C. Plummer |
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Title: |
CFO / VP |
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CHAMBERLIN NATURAL FOODS, INC. | |
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By: |
/s/ Clifford Ginn |
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Title: |
VP |
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THE HEALTH FOOD ASSOCIATES, INC. | |
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By: |
/s/ Clifford Ginn |
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Title: |
VP |
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BANK OF AMERICA, N.A., as Agent and a Lender | |
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By: |
/s/ Brian J. Wright |
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Title: |
SR. VP |
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Revolving Loan Commitment: $36,666,667.00 | |
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M&I MARSHALL & ILSLEY BANK, as a Lender | |
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By: |
/s/ Brian Rathke |
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Title: |
VP |
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Revolving Loan Commitment:$18,333,333.00 |
EXHIBIT 10.2
AMCON DISTRIBUTING COMPANY
2007 OMNIBUS INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
Date of Grant: |
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Number of Shares to Which Option Relates: |
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Option Exercise Price per Share: |
(Representing 100% of the Fair Market Value on the Date of Grant) |
This Agreement dated , 20 , is made by and between AMCON Distributing Company, a Delaware corporation (the Company), and (the Optionee).
RECITALS:
A. Effective April 17, 2007, the Companys stockholders approved the AMCON Distributing Company 2007 Omnibus Incentive Plan (the Plan) pursuant to which the Company may, from time to time, grant options to key employees and non-employee directors of the Company to purchase shares of the Companys common stock.
B. The Optionee is an employee of the Company and the Company desires to grant to the Optionee an incentive stock option to purchase shares of the Companys common stock on the terms and conditions reflected in this Option Agreement, the Plan and as otherwise established by the Committee.
AGREEMENT:
In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows:
1. Incorporation of Plan. All provisions of this Option Agreement and the rights of the Optionee are subject in all respects to the provisions of the Plan and the powers of the Committee therein provided. Capitalized terms used in this Option Agreement but not defined will have the meaning set forth in the Plan.
2. Grant of Incentive Stock Option. As of the Date of Grant identified above, the Company grants the Optionee, subject to this Agreement and the Plan, the right, privilege and option (the Option) to purchase, in one or more exercises, all or any part of that number of Shares of Stock identified above opposite the heading Number of Shares to Which Option Relates (the Option Shares), at the per Share price specified above opposite the heading Option Exercise Price per Share. This Option is intended to qualify as an incentive stock option within the meaning of Section 422 of the Code, and shall be so construed; provided, however, that nothing in this Agreement shall be interpreted as a representation, guarantee or other undertaking on the part of the Company that this Option is or will be determined to be an incentive stock option within such section or any other section of the Code.
3. Consideration to the Company. In consideration of the granting of this Option by the Company, the Optionee agrees to render faithful and efficient services as an employee of the Company. Nothing in this Agreement or in the Plan will confer upon the Optionee any right to continue as an employee of the Company or will interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to terminate the Optionees employment with the Company at any time for any reason whatsoever, with or without cause.
4. Exercisability of Option. During the Optionees lifetime, this Option may be exercised only by the Optionee. This Option, except as specifically provided elsewhere under the terms of the Plan, shall vest and become exercisable as follows:
Years Elapsed from Date of Grant |
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Percentage Exercisable |
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1 Year |
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20% |
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2 Years |
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40% |
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3 Years |
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60% |
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4 Years |
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80% |
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5 Years or More |
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100% |
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For purposes of this Section 4, a year shall mean a period of 365 days (or 366 days in the event of a leap year). Notwithstanding the above Option vesting schedule, this Option will become fully exercisable upon the Optionees death or Disability provided the Option has not otherwise expired, been cancelled or terminated.
5. Method of Exercise. Provided this Option has not expired, been terminated or cancelled in accordance with the terms of the Plan, the portion of this Option which is otherwise exercisable pursuant to Section 4 may be exercised in whole or in part, from time to time by delivery to the Company or its designee a written notice which will:
(a) set forth the number of Shares with respect to which the Option is to be exercised;
(b) if the person exercising this Option is not the Optionee, be accompanied by satisfactory evidence of such persons right to exercise this Option; and
(c) be accompanied by payment in full of the Option Exercise Price in the form of cash, or a certified bank check made payable to the order of the Company or any other means allowable under the Plan which the Company in its sole discretion determines will provide legal consideration for the Shares.
6. Expiration of Option. Unless terminated earlier in accordance with the terms of this Option Agreement or the Plan, the Option granted herein will expire at 5:00 P.M., Central Time, on the 10th Anniversary of the Date of Grant (the Expiration Date). If the Expiration Date is a day on which the Company is not open for business, then the Option granted herein will expire, unless earlier terminated in accordance with the terms of this Option Agreement or the Plan, at 5:00 P.M., Central Time, on the first business day before such Expiration Date.
7. Effect of Separation from Service. If the Optionee ceases to be an employee of the Company for any reason, including cessation by death or Disability, the effect of such termination of employment on all or any portion of this Option is as provided below. Notwithstanding anything below to the contrary, in no event may the Option be exercised after the Expiration Date.
(a) If the Optionees employment is terminated for Cause, the Option will immediately be forfeited as of the time of such termination.
(b) If the Optionee ceases to be an employee of the Company due to the Optionees resignation or termination of employment by the Company not for Cause, the portion of this Option which was otherwise exercisable pursuant to Section 4 on the date of such termination of employment may be exercised by the Optionee at any time prior to 5:00 P.M., Central Time, on the ninetieth (90th) calendar day following the effective date of the Optionees termination of employment. If such ninetieth (90th) day is not a business day, then the Option will expire at 5:00 P.M., Central Time, on the first business day immediately following such ninetieth (90th) day.
(c) If the Optionee ceases to be an employee of the Company due to the Optionees death or Disability, the Option may be exercised by the Optionee at any time prior to 5:00 P.M., Central Time, on the 365th calendar day following the effective date of the Optionees termination of employment. If such 365th day is not a business day, then the Option will expire at 5:00 P.M., Central Time, on the first business day immediately following such 365th day.
8. Notices. Any notice to be given under the terms of this Agreement to the Company will be addressed to the Secretary of the Company at AMCON Distributing Company, 7405 Irvington Road, Omaha, Nebraska 68122, and any notice to be given to the
Optionee will be addressed to him or her at the address given beneath his or her signature hereto. By a notice given pursuant to this Section 8, either party may hereafter designate a different address for notices to be given to him or her. Any notice which is required to be given to the Optionee will, if the Optionee is then deceased, be given to the Optionees personal representative if such representative has previously informed the Company of his or her status and address by written notice under this Section 8. Any notice will be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
9. Nontransferability. Except as otherwise provided in this Agreement or in the Plan, the Option and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to execution, attachment, or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the Option, or of any right or privilege conferred hereby, or upon the levy of any attachment or similar process upon the rights and privileges conferred hereby, contrary to the provisions hereby, this Option and the rights and privileges conferred hereby will immediately become null and void.
10. Status of Optionee. The Optionee shall not be deemed a stockholder of the Company with respect to any of the Shares subject to this Option, except for those Shares that have been purchased and issued to him or her. The Company shall not be required to issue or transfer any certificates for Shares purchased upon exercise of this Option until all applicable requirements of law have been complied with and, if applicable, such Shares shall have been duly listed on any securities exchange on which the Shares may then be listed.
11. Notice of Disqualifying Disposition. In order to enable the Company to avail itself of any income tax deduction to which it may be entitled, the Optionee shall notify the Company of his or her intent to dispose of any of the Shares purchased pursuant to this Option within two (2) years from the Date of Grant and one (1) year from the date of exercise of the Option. Promptly after such disposition the Optionee shall notify the Company of the number of shares of Stock disposed of, the dates of acquisition and disposition of such shares, and the consideration, if any, received on such disposition.
12. Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
13. Amendment. This Agreement may be amended only by a writing executed by the parties hereto which specifically states that it is amending this Agreement.
14. Investment Intent.
(a) This Agreement is granted to, and the shares issuable upon exercise of this Option will be issued to the Optionee, in reliance on the exemption from registration provided in Section 4(2) of the Securities Act and Regulation D promulgated thereunder. Any stock certificates issued upon exercise of this Option may bear the following legend and stop transfer instructions may be given to the transfer agent for the Companys common stock that are consistent with such legend:
The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the Act), or any state securities laws. These shares have been acquired for investment and not with a view to distribution or resale, and may not be sold, pledged, hypothecated, donated or otherwise transferred, whether or not for consideration, without an effective registration statement under the Act, and any applicable state securities laws, or an opinion of counsel satisfactory to the Corporation that such registration is not required with respect to the proposed disposition thereof and that such disposition will not cause the loss of the exemption upon which the Corporation relied in selling such shares to the original purchaser.
(b) The Company may, but in no event shall be required to, bear any expenses of complying with the 1933 Act, other applicable securities laws or the rules and regulations of any national securities exchange or other regulatory authority in connection with the registration, qualification, or transfer, as the case may be, of this Option or any Common Stock acquired upon the exercise thereof. The foregoing restrictions on the transfer of the Common Stock will be inoperative if (i) the Company has been furnished with an opinion of counsel, satisfactory to it, stating that the transfer will not involve any violation of the Securities Act and other applicable securities laws or (ii) the Common Stock has been duly registered in compliance with the Securities Act and other applicable securities laws.
15. Governing Law. The laws of the State of Delaware will govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
16. Binding Effect. Except as expressly stated herein to the contrary, this Agreement will be binding upon and inure to the benefit of the respective heirs, legal representatives, successors and assigns of the parties hereto.
This Agreement has been executed and delivered by the parties hereto.
The Company: |
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The Optionee: | ||
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AMCON Distributing Company |
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Title: |
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Address of the Optionee: | |
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SCHEDULE OF AWARDS
In April 2010, the following stock option awards were made to key personnel of AMCON Distributing Company utilizing the foregoing form of Incentive Stock Option Agreement, which awards are summarized below. In the event that any future awards are made utilizing the foregoing form of Incentive Stock Option Agreement, AMCON Distributing Company undertakes to provide disclosure concerning such awards to the extent that it is required to do so under the Securities Exchange Act of 1934, or the rules and regulations there under.
Name |
|
Shares |
|
Clem O Donnell |
|
500 |
|
Chuck Schmaderer |
|
500 |
|
Dennis Herweyer |
|
500 |
|
Glenn Berger |
|
500 |
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Rick Vance |
|
500 |
|
Bill Bailey |
|
500 |
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Chuck Fosnaugh |
|
500 |
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Dan Johnson |
|
500 |
|
Dave Clem |
|
500 |
|
John Job |
|
500 |
|
Clifford Ginn |
|
500 |
|
Mark Parette |
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500 |
|
(1) Shares were granted on April 27, 2010 and vest 20% annually on April 27, 2011 through April 27, 2015.
EXHIBIT 10.3
AMCON DISTRIBUTING COMPANY
2007 OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT
Date of Grant: |
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Number of Restricted Stock Units Granted: |
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This Restricted Stock Unit Agreement dated , 20 (this Award Agreement), is made by and between AMCON Distributing Company, a Delaware corporation (the Company), and (Participant).
RECITALS:
A. Effective April 17, 2007, the Companys stockholders approved the AMCON Distributing Company 2007 Omnibus Incentive Plan (the Plan) pursuant to which the Company may, from time to time, grant Restricted Stock Units to eligible Service Providers of the Company.
B. Participant is a Service Provider of the Company or one of its Affiliates and the Company desires to encourage him to own an equity interest in the Company and to give him added incentive to advance the interests of the Company, and desires to grant Participant Restricted Stock Units under the terms and conditions established by the Committee.
AGREEMENT:
In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows:
1. Incorporation of Plan. All provisions of this Award Agreement and the rights of Participant hereunder are subject in all respects to the provisions of the Plan and the powers of the Committee therein provided. Capitalized terms used in this Award Agreement but not defined shall have the meaning set forth in the Plan.
2. Grant of Restricted Stock Units. Subject to the conditions and restrictions set forth in this Award and in the Plan, the Company hereby grants to Participant and credits to a separate account maintained on the books of the Company (Account) that number of Restricted Stock Units identified above opposite the heading Number of Restricted Stock Units Granted (the RSUs). On any date, the value of each RSU shall equal the Fair Market Value of a Share. All amounts credited to Participants Account under this Award Agreement shall continue for all purposes to be a part of the general assets of the Company. Participants interest in the Account shall make him or her only a general, unsecured creditor of the Company. The RSUs may not be sold, transferred, gifted, bequeathed, pledged, assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily. The rights of Participant with respect to the RSUs shall remain forfeitable at all times prior to the date on which such rights are settled (the Settlement Date, as defined below).
3. Settlement of RSUs. The RSUs may be settled by delivering to Participant or his or her beneficiary, as applicable, either, as elected by the Participant, (i) an amount of cash equal to the Fair Market Value of a Share as of the Settlement Date multiplied by the number of Shares underlying the RSUs held by Participant (or a specified portion in the event of any partial settlement), or (ii) a number of Shares equal to the whole number of Shares underlying the RSUs then held by Participant (or a specified portion in the event of any partial settlement). To the extent a Participant elects settlement in shares, any fractional Shares underlying RSUs remaining on the Settlement Date will be distributed in cash in an amount equal to the Fair Market Value of a Share as of the Settlement Date multiplied by the remaining fractional RSUs.
Except as specifically provided elsewhere under the Plan, the restrictions on RSUs subject to this Award Agreement will lapse and be settled on the date (the Settlement Date) set forth below, but only if Participant is, and at all times from the Date of Grant, has been a Service Provider to the Company, or one of its Affiliates, and the RSUs have not otherwise been cancelled:
Settlement Date of RSUs |
|
Percentage of RSUs on |
|
, 20 |
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% |
|
, 20 |
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% |
|
, 20 |
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% |
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Notwithstanding the foregoing, (i) the Committee may, in its sole discretion, accelerate the Settlement Date for any or all of the RSUs, if in its judgment the performance of Participant has warranted such acceleration and/or such acceleration is in the best interests of the Company, and (ii) if Participants position as a Service Provider with the Company or any of its Affiliates is terminated prior to the Settlement Date by the Company without Cause, or due to Participants death or Disability, or there is a Change of Control, all unsettled RSUs shall be settled effective as of the date of the such event. For purposes of this Award Agreement, Cause means any act or failure to act by Participant that constitutes willful misconduct or gross negligence.
Payment of the cash and/or Shares following the Settlement Date shall be made by the Company to the Participant no later than the earlier of the end of the calendar year in which the Settlement Date occurs or the 30th day after the Settlement Date.
4. Cancellation of RSUs. Unless otherwise provided in this Section 4 or in the Plan, if, prior to the final Settlement Date, Participants position as a Service Provider to the Company or any of its Affiliates is terminated by the Company for Cause, or if Participant voluntarily terminates his position as a Service Provider with the Company, Participant shall thereupon immediately forfeit any and all unsettled RSUs, all such unsettled RSUs shall be cancelled and Participant shall have no further rights under this Award Agreement. For purposes of this Award Agreement, the transfer of employment between the Company and any of its Affiliates (or between Affiliates) shall not constitute a termination of Participants position as a Service Provider.
5. Securities Law Compliance. The Company may impose such restrictions, conditions or limitation as it determines appropriate as to the timing and manner of any resales by Participant or other subsequent transfers by Participant of any Shares issued as a result of or under this Award, including without limitation (i) restrictions under an insider trading policy, (ii) restrictions that may be necessary in the absence of an effective registration statement under the Securities Act of 1933, as amended, covering the Award and/or the Shares underlying the Award and (iii) restrictions as to the use of a specified brokerage firm or other agent for such resales or other transfers. Any sale of the Shares must also comply with other applicable laws and regulations governing sale of such shares.
6. Dividends and Voting. Prior to an RSUs Settlement Date, Participant shall be entitled to receive dividend equivalent payments for any dividends paid by the Company on Shares, whether payable in stock, in cash or in kind, or other distributions, declared as of a record date that occurs on or after the Date of Grant hereunder and prior to any cancellation of such RSUs, provided that any such dividend equivalent payments shall be held in escrow by the Company and, be subject to the same rights, restrictions on transfer and conditions applicable to the underlying RSUs. In the event of cancellation of any or all of the RSUs, Participant will forfeit all dividend equivalent payments held in escrow and relating to the underlying cancelled RSUs. Participant will have no voting rights with respect to any of the RSUs.
7. Beneficiary Designation. The Participant shall have the right to designate, on a beneficiary designation form satisfactory to the Committee which shall be filed with the Company, a beneficiary or beneficiaries to receive any unsettled RSUs and/or Dividend Equivalent Payments under this Agreement in the event of the Participants death or Disability. In the event that the Participant shall not file a beneficiary designation form with the Company or if none of the designated beneficiaries survive the Participant, then any unsettled RSUs and/or Dividend Equivalent Payments under this Agreement shall be paid to the estate of the Participant.
8. Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Award Agreement.
9. Amendment. This Award Agreement may be amended only by a writing executed by the parties hereto which specifically states that it is amending this Award Agreement; provided, however, the Company may unilaterally amend this Award Agreement if it determines that a ministerial amendment is necessary which does not adversely affect the rights of Participant or the potential economic benefit intended to be conveyed hereunder.
10. Taxes. Participant understands and agrees that, at the time any tax withholding obligation arises in connection with the settlement of any of the RSUs, the Company may withhold, in Shares if a valid election applies under this Section 9 or in cash from payroll or other amounts the Company owes or will owe Participant, any applicable withholding, payroll and other required tax amounts due upon such RSU settlement. Such tax withholding may be made by any means permitted under the Plan, as approved by the Committee, and as permitted under the law. In the absence of the satisfaction of tax obligations, Company may refuse to issue the Shares. Unless otherwise determined by the Committee or its delegate in their sole discretion and unless otherwise prohibited by law, Participant (or his or her guardian, legal representative or successor) may, in the manner determined by the Committee or its delegate, irrevocably elect in writing on a Company designated form to satisfy any income tax withholding obligation in connection with the RSUs by requesting Company to retain whole Shares which would otherwise have been issued, which Shares shall not belong to Participant upon such retention. If withholding is not effected by the Company for any reason at the time of the taxation event, then Participant agrees to pay Company any withholding amounts due within the deadline imposed by the Company. If, within the deadline imposed by Company, Participant has not paid any withholding amounts due or has not elected, if allowed by the Committee or its delegate in their sole discretion, whether to have Shares retained for taxes or to pay cash for the tax withholding, then the Company may, at its sole discretion (a) retain whole Shares which would otherwise have been issued (including without limitation withdrawal of Shares that had previously been placed into Participants book entry account), (b) deduct such amounts in cash from payroll or other amounts the Company owes or will owe Participant, or (c) effect some combination of Share retention and cash deduction.
11. Governing Law. The laws of the State of Delaware will govern the interpretation, validity and performance of this Award Agreement regardless of the law that might be applied under principles of conflicts of laws.
12. Section 409A Compliance. It is the intent of the Company that all payments made under this Award Agreement will be exempt from Section 409A of the Code and the Treasury regulations and guidance issued thereunder (Section 409A) pursuant to the short-term deferral exemption. Notwithstanding any provision of the Plan or this Award Agreement to the contrary, (i) this Award Agreement shall not be amended in any manner that would cause any amounts payable hereunder that are not subject to Section 409A to become subject thereto (unless they also are in compliance therewith), and the provisions of any purported amendment that may reasonably be expected to result in such non-compliance shall be of no force or effect with respect to this Award Agreement and (ii) the Company, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify this Award Agreement to reflect the intention that the Plan qualifies for exemption from or complies with Section 409A in a manner that as closely as practicable achieves the original intent of this Award Agreement and with the least reduction, if any, in overall benefit to a Participant to comply with Section 409A on a timely basis, which may be made on a retroactive basis, in accordance with regulations and other guidance issued under Section 409A. Neither the Company nor the Board makes any representation that this Award Agreement shall be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to this Award Agreement.
13. Binding Effect. Except as expressly stated herein to the contrary, this Award Agreement will be binding upon and inure to the benefit of the respective heirs, legal representatives, successors and assigns of the parties hereto.
This Award Agreement has been executed and delivered by the parties hereto.
The Company: |
Participant: | |||
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AMCON DISTRIBUTING COMPANY |
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By: |
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Name: |
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Title: |
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SCHEDULE OF AWARDS
In November 2010, the following restricted stock unit awards were made to executives of AMCON Distributing Company utilizing the foregoing form of Restricted Stock Award Agreement, which awards are summarized below. In the event that any future awards are made utilizing the foregoing form of Restricted Stock Award Agreement, AMCON Distributing Company undertakes to provide disclosure concerning such awards to the extent that it is required to do so under the Securities Exchange Act of 1934, or the rules and regulations there under.
Name |
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Grant Date |
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Shares Granted |
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Vesting Date |
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Percentage of |
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|
|
|
|
|
|
|
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|
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Chris Atayan |
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11/22/2010 |
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30,900 |
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11/26/2010 |
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33 1/3% |
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|
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10/26/2011 |
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33 1/3% |
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10/26/2012 |
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33 1/3% |
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Andy Plummer |
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11/22/2010 |
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3,750 |
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11/26/2010 |
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33 1/3% |
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10/26/2011 |
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33 1/3% |
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10/26/2012 |
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33 1/3% |
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Philip Campbell |
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11/22/2010 |
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1,650 |
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11/26/2010 |
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33 1/3% |
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10/26/2011 |
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33 1/3% |
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10/26/2012 |
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33 1/3% |
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Eric Hinkefent |
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11/22/2010 |
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2,100 |
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11/26/2010 |
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33 1/3% |
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|
|
|
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10/26/2011 |
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33 1/3% |
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10/26/2012 |
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33 1/3% |
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Name |
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Grant Date |
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Shares Granted |
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Vesting Date |
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Percentage of |
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|
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|
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|
|
|
|
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Chris Atayan |
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11/22/2010 |
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8,100 |
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11/22/2011 |
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33 1/3% |
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|
|
|
|
|
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11/22/2012 |
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33 1/3% |
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|
|
|
|
|
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11/22/2013 |
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33 1/3% |
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|
|
|
|
|
|
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Andy Plummer |
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11/22/2010 |
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1,600 |
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11/22/2011 |
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33 1/3% |
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|
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11/22/2012 |
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33 1/3% |
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11/22/2013 |
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33 1/3% |
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Philip Campbell |
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11/22/2010 |
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900 |
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11/22/2011 |
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33 1/3% |
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11/22/2012 |
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33 1/3% |
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11/22/2013 |
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33 1/3% |
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Eric Hinkefent |
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11/22/2010 |
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1,400 |
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11/22/2011 |
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33 1/3% |
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|
|
|
|
|
|
11/22/2012 |
|
33 1/3% |
|
|
|
|
|
|
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11/22/2013 |
|
33 1/3% |
|
EXHIBIT 31.1
CERTIFICATION
I, Christopher H. Atayan, certify that:
1. I have reviewed this report on Form 10-Q of AMCON Distributing Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fiscal fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: April 19, 2011 |
/s/ Christopher H. Atayan |
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Christopher H. Atayan, |
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Chief Executive Officer and Chairman |
EXHIBIT 31.2
CERTIFICATION
I, Andrew C. Plummer, certify that:
1. I have reviewed this report on Form 10-Q of AMCON Distributing Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fiscal fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: April 19, 2011 |
/s/ Andrew C. Plummer |
|
Andrew C. Plummer, Vice President, |
|
Chief Financial Officer and Secretary |
EXHIBIT 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Quarterly Report on Form 10-Q (the Report) of AMCON Distributing Company (the Company) for the fiscal quarter ended March 31, 2011, I, Christopher H. Atayan, Chief Executive Officer and Principal Executive Officer of the Company, have executed this certification for furnishing to the Securities and Exchange Commission. I hereby certify that, to the best of my knowledge and belief:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: April 19, 2011 |
/s/ Christopher H. Atayan |
|
Title: Chief Executive Officer and Chairman |
A signed original of this written statement required by Section 906 has been provided to AMCON Distributing Company and will be retained by AMCON Distributing Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Quarterly Report on Form 10-Q (the Report) of AMCON Distributing Company (the Company) for the fiscal quarter ended March 31, 2011, I, Andrew C. Plummer, Vice President and Chief Financial Officer of the Company, have executed this certification for furnishing to the Securities and Exchange Commission. I hereby certify that, to the best of my knowledge and belief:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: April 19, 2011 |
/s/ Andrew C. Plummer |
|
Title: Vice President, |
|
Chief Financial Officer and Secretary |
A signed original of this written statement required by Section 906 has been provided to AMCON Distributing Company and will be retained by AMCON Distributing Company and furnished to the Securities and Exchange Commission or its staff upon request.
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