UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

 

Filed by the Registrant x

Filed by a Party other than the Registrant o

 

Check the appropriate box:

AMCON Distributing Company

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

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AMCON Distributing Company

7405 Irvington Road

Omaha, Nebraska 68122

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JANUARY 29, 2008

You hereby are notified that the annual meeting of stockholders of AMCON Distributing Company, a Delaware corporation, will be held on Tuesday, January 29, 2008, at 1:00 p.m., local time, in the Embassy Suites Hotel located at 4650 West Airport Freeway, Irving, Texas, for the following purposes:

The proposals referred to above are more fully described in the accompanying proxy statement. Our board of directors has approved the proposals and recommends that you vote “FOR” the election of each nominee for director named in the accompanying proxy statement who is to be voted on by the holders of our common stock, and “FOR” the ratification and approval of McGladrey and Pullen, LLP as our independent registered public accounting firm. Before voting, you should carefully review all of the information contained in the accompanying proxy statement.

Our board of directors has fixed the close of business on December 19, 2007 as the record date for the determination of the holders of our common stock entitled to notice of, and to vote at, the annual meeting of stockholders or any adjournment thereof. Our board of directors solicits you to give your proxy to vote at the annual meeting by following the specific voting instructions appearing on the enclosed proxy card or voting instruction card, regardless of whether you intend to attend the meeting.

 

 

 

January 7, 2008

Omaha, Nebraska

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE FOLLOW THE SPECIFIC VOTING INSTRUCTIONS APPEARING ON THE ENCLOSED PROXY CARD OR VOTING INSTRUCTION CARD AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING.

 

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AMCON Distributing Company

7405 Irvington Road

Omaha, Nebraska 68122

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PROXY STATEMENT

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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING

Although we encourage you to read this proxy statement in its entirety, we include this question and answer section to provide some background information and brief answers to several questions you might have about the annual meeting.

Why am I receiving these materials?

The board of directors of AMCON Distributing Company is providing these materials to you in connection with our annual meeting of stockholders. This proxy statement, the notice of annual meeting of stockholders and the accompanying proxy card or voting instruction card were first sent to our stockholders on or about January 7, 2008. As a stockholder of our company, you are entitled and encouraged to vote on the items of business described in these proxy materials. Your vote is very important. For this reason, our board is requesting that you allow your shares to be represented at the annual meeting by the persons named as proxies on the enclosed proxy card or voting instruction card.

What information is contained in these materials?

The information included in this proxy statement relates to the proposals to be voted on at the annual meeting, the voting process, the compensation of directors and our most highly paid executive officers, and certain other required information. Our annual report on Form 10-K for our 2007 fiscal year, which contains our audited financial statements, a proxy card or voting instruction card, and a return envelope accompany this proxy statement.

When and where will the annual meeting be held?

The annual meeting of stockholders will be held on Tuesday, January 29, 2008, at 1:00 p.m., local time, in the Embassy Suites Hotel located at 4650 West Airport Freeway, Irving, Texas. You do not have to attend the annual meeting to be able to vote.

What matters will be voted on at the annual meeting?

Stockholders will consider and vote upon the following business items at the annual meeting:

How does our board of directors recommend that I vote?

Our board of directors recommends that you vote:

 

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What shares can I vote?

The outstanding voting securities of our company are the shares of our common stock, $0.01 par value. In addition, our Series B Convertible Preferred Stock, $0.01 par value, and our Series C Convertible Preferred Stock, $0.01 par value, provide certain limited voting rights in the election of directors. In particular, (i) the holders of our Series B Convertible Preferred Stock, voting separately as a single class, are entitled to elect one member of our board of directors, and (ii) the holder of our Series C Convertible Preferred Stock, voting separately as a single class, also is entitled to elect one member of our board of directors. The holder of our Series B Convertible Preferred Stock will be entitled to exercise this voting right at this annual meeting, and has designated Christopher H. Atayan as the person it will elect as one of the two Class II directors. The holders of our Series C Convertible Preferred Stock will not be entitled to vote at this annual meeting since the term of office of Jeremy W. Hobbs, the person designated for service on the board by the holders of our Series C Convertible Preferred Stock, will continue after the annual meeting.

Each share of our common stock issued and outstanding as of the close of business on the December 19, 2007 record date for the annual meeting is entitled to one vote on each matter submitted to a vote at the annual meeting. As of the record date, we had 537,063 shares of common stock, 80,000 shares of Series B Convertible Preferred Stock and 80,000 shares of Series C Convertible Preferred Stock issued and outstanding. You may vote all shares of our common stock that you held as of the record date. This includes (i) shares held directly in your name as the stockholder of record, and (ii) shares held for you as the beneficial owner through a broker, trustee or other nominee, sometimes referred to as shares held in “street name.” As summarized below, there are some differences between shares held of record and those held in street name.

Stockholder of Record. If your shares are registered directly in your name with our transfer agent, you are considered the stockholder of record, and these proxy materials were sent to you directly. As the stockholder of record, you may vote your shares at the annual meeting in one of two ways. You may attend the annual meeting and vote your shares in person. Alternatively, you may vote your shares by proxy. We have enclosed a proxy card for you to use. The persons designated as proxies were selected by our board of directors and are officers and directors of our company.

Beneficial Owner. If you hold shares in a brokerage account or through some other nominee, you are considered the beneficial owner of the shares held in street name, and these proxy materials were forwarded to you from the broker, trustee or other nominee, together with a voting instruction card. As the beneficial owner, you have the right to direct your broker, trustee or nominee how to vote your shares. Although you are invited to attend the annual meeting, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, trustee or nominee. You may vote your shares by any of the options listed on the voting instruction card.

How do I submit my vote?

Included with this proxy statement is a proxy card or voting instruction card. You may vote your shares by following the specific voting instructions appearing on the card. These voting instructions allow you to vote by completing, signing and returning the card in the enclosed envelope. In addition, the voting instructions you receive may allow you to vote by telephone or by Internet. If you vote by telephone or by Internet, you do not need to return the card.

If you plan to attend the annual meeting and vote in person, we will give you a ballot at the meeting. However, if your shares are held in the name of your broker, bank or other nominee, proof of ownership may be required for you to be admitted to the meeting. A recent brokerage statement or letter from a bank or broker are examples of proof of ownership. If you want to vote your shares of common stock held in street name in person at the meeting, you will have to get a written proxy in your name from the broker, bank or other nominee who holds your shares.

 

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Can I change my proxy vote?

If you are a stockholder of record, you may change your vote or revoke your proxy any time before your vote is used at the annual meeting by:

Attendance at the annual meeting will not in and of itself constitute a revocation of your proxy.

If you hold shares as the beneficial owner in street name, you may change your vote by submitting new voting instructions to your broker, trustee or other nominee or, if you have obtained a legal proxy from your broker, trustee or nominee, by voting in person at the annual meeting.

How many votes are needed to conduct business at the annual meeting?

A majority of all outstanding shares of our common stock entitled to vote at the annual meeting must be present or represented by proxy in order to satisfy the quorum requirement for the transaction of business at the annual meeting. Both abstentions and broker non-votes (described below under “What is the effect of a broker non-vote?”) are counted as present and entitled to vote for purposes of determining a quorum. If a quorum should not be present, the annual meeting may be adjourned from time to time until a quorum is obtained.

How are votes counted?

If you are a stockholder of record and you give your proxy, the shares represented by the proxy will be voted in accordance with your instructions. However, if you are a stockholder of record and you give your proxy without providing voting instructions on one or more proposals, your proxy will be voted for those proposals in accordance with the recommendation of our board of directors (which recommendation is identified above under “How does our board of directors recommend that I vote?”).

If your shares are held in street name through a broker or other nominee, they will be voted in accordance with the voting instructions that you provide. If you do not provide voting instructions, your broker or other nominee is permitted to vote your shares on proposals that are considered routine, including the election of directors and ratification of the appointment of our independent registered public accounting firm.

What vote is required to approve the proposals at the annual meeting?

Election of Directors. Directors are elected by a plurality of the votes cast, in person or by proxy, by stockholders entitled to vote at the annual meeting for that purpose. This means that the Class II nominee receiving the highest number of votes at the annual meeting will be elected. The holder of our Series B Convertible Preferred Stock, voting separately as a single class, will be entitled to elect one additional member of our board of directors at this annual meeting, and has designated Christopher H. Atayan as the person it will elect as a Class II director. Stockholders can withhold authority to vote for one or more nominees for director. Shares not voted, whether by specifically withholding authority to vote on your proxy card or voting instruction card or otherwise, will have no impact on the election of directors except to the extent the failure to vote for an individual results in another individual receiving a larger proportion of the total votes. No shares may be voted for more than one Class II nominee at the annual meeting. Stockholders do not have cumulative voting rights in the election of directors.

Selection of Accounting Firm and Other Matters. Approval of the proposal to ratify and approve the selection of McGladrey and Pullen, LLP as our independent registered public accounting firm and all other proposals that properly may come before the annual meeting require the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the particular proposal. Stockholders may abstain from voting on any proposal at the meeting. If you abstain from voting on any proposal, it has the same effect as a vote against the proposal.

 

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What is the effect of a broker non-vote?

A “broker non-vote” occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker or other nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. Broker non-votes are counted as present or represented for purposes of determining the presence or absence of a quorum for the annual meeting, if such shares are otherwise properly represented at the meeting in person or by proxy. Broker non-votes are not counted for purposes of determining the number of shares entitled to vote on any proposal for which the broker or other nominee lacks discretionary authority, and therefore would reduce the number of affirmative votes that are necessary to approve that proposal.

Are there any other matters that will be considered at the annual meeting?

The only items of business that may be properly brought before the annual meeting are the matters set forth herein or those brought before the meeting by or at the direction of our board of directors. We are not aware of any business to be acted upon at the annual meeting other than the items described in this proxy statement. Your signed proxy, however, will entitle the persons named as proxy holders to vote in their discretion for any other matter that is properly presented at the meeting.

Who pays the cost of soliciting votes at the annual meeting?

This proxy solicitation is being made by our board of directors. All costs of this solicitation will be borne by our company. In addition to the use of the mails, proxies may be solicited personally or by telephone by some of the regular employees of our company. Our company may reimburse brokers, banks and other persons holding stock in their names, or in the names of nominees, for their expenses incurred in sending proxy materials to their principals and obtaining their proxies. Our company requests that brokerage houses and other custodians, nominees and fiduciaries forward the soliciting materials to the beneficial owners of the shares of common stock held of record by such persons.

Where can I find the voting results of the annual meeting?

We will announce preliminary voting tabulations at the annual meeting and publish the final results in our quarterly report on Form 10-Q for the quarter ending March 31, 2008.

What should I do if I receive more than one set of proxy materials?

Each stockholder at a given address will receive a separate proxy card or voting instruction card. You may receive multiple sets of proxy materials if you hold shares in more than one brokerage account or if you are a stockholder of record and have shares registered in more than one name. Please vote the shares on each proxy card or voting instruction card you receive.

The Securities and Exchange Commission or “SEC” has adopted rules that permit companies and intermediaries (including brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

We have adopted a “householding” procedure that you may wish to follow. If you are receiving multiple sets of proxy materials and wish to have your accounts householded, contact our corporate secretary, Andrew C. Plummer, at (402) 331-3727, or send written instructions to our corporate secretary at AMCON Distributing Company, 7405 Irvington Road, Omaha, NE 68122. If you no longer wish to participate in householding, you must provide written notification to our corporate secretary to withhold your consent for householding.

Many brokerage firms participate in householding as well. If you have a householding request for your brokerage account, please contact your broker.

 

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MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING

ITEM 1: ELECTION OF DIRECTORS

What am I voting on?

One of the purposes of this annual meeting is to elect two directors. You will be asked to elect one director in Class II to serve for a three-year term expiring at the 2011 annual meeting of stockholders and until his successor is duly elected and qualified or until his earlier resignation or removal. The holder of our Series B Convertible Preferred Stock, voting separately as a single class, will be entitled to elect one additional member of our board of directors at this annual meeting, and has designated Christopher H. Atayan as the person it will elect as a Class II director.

What is the structure of our board and how often are directors elected?

Our board of directors currently consists of eight directors. As a result of the death of Allen D. Petersen in October 2007, the size of our board was reduced from nine to eight directors in December 2007. Our articles of incorporation divides the board into three classes of directors, with directors serving staggered terms of three years and until their respective successors are duly elected and qualified or until their respective earlier resignation or removal. The present terms of Christopher H. Atayan and Raymond F. Bentele, the two directors in Class II, expire at this annual meeting. Directors in Class I (Jeremy W. Hobbs, Stanley Mayer and William F. Wright) and in Class III (Kathleen M. Evans, John R. Loyack and Timothy R. Pestotnik) have terms expiring at the time of the annual meeting of stockholders in 2010 and 2009, respectively. Our board of directors has determined that Messrs. Bentele, Hobbs, Loyack, Mayer and Pestotnik each satisfy the independence requirements of the American Stock Exchange or “AMEX”.

Who are this year’s nominees?

The nominating and corporate governance committee of our board of directors has designated Raymond F. Bentele as the nominee proposed for election as a Class II director at the annual meeting. Unless authority to vote for the nominee is withheld, it is intended that the shares represented by properly executed proxies in the form enclosed will be voted for the election as a director of the above-named nominee. In addition, the holder of our Series B Convertible Preferred Stock, voting separately as a single class, is entitled to elect one additional member of our board of directors at this annual meeting and has designated Christopher H. Atayan as the person it will elect.

The following table sets forth certain information with respect to the person nominated for election as a director at the annual meeting, the director designee of the holder of our Series B Convertible Preferred Stock and each director whose term of office will continue after the annual meeting.

 

 

 

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There is no arrangement or understanding between any director and any other person pursuant to which such director was selected as a director except that the respective holders of our Series B Convertible Preferred Stock and Series C Convertible Preferred Stock each are entitled to vote separately as a single class in electing one member of our board of directors. Spencer Street Investments, Inc., the holder of our Series B Convertible Preferred Stock, has designated Christopher H. Atayan as the person elected by the holders of our Series B Convertible Preferred Stock to serve on our board of directors. Draupnir Capital, LLC, the holder of our Series C Convertible Preferred Stock, has designated Jeremy W. Hobbs as the person elected by the holders of our Series C Convertible Preferred Stock to serve on our board of directors.

What is the business experience of the nominees and of our continuing board members?

The business experience during the last five years of each person nominated for election as a director at the annual meeting and each director whose term of office will continue after the annual meeting is as follows:

Christopher H. Atayan has served as our company’s Chief Executive Officer since October 2006 and as its Vice Chairman since March 2006. Mr. Atayan served as our company’s Chief Corporate Officer from March 2006 through September 2006 and has been a director of our company since 2004. He also is a consultant to Draupnir, LLC, the parent of Draupnir Capital, LLC. Mr. Atayan has served as the Senior Managing Director of Slusser Associates, a New York investment banking firm since 1988 and is a director of AMCON Corporation and Hotlink, Incorporated.

Raymond F. Bentele served as President and Chief Executive Officer of Mallincrodt, Inc. from 1981 until his retirement in 1992. He currently serves as a director of The Mosaic Company and Leggett & Platt, Incorporated.

Kathleen M. Evans became President of our company in February 1991. Prior to that time she served as Vice President of AMCON Corporation from 1985 to 1991. From 1978 until 1985, Ms. Evans acted in various capacities with AMCON Corporation and its operating subsidiaries.

Jeremy W. Hobbs is the President and Chief Executive Officer of Draupnir, LLC, and has served as a founding member and executive officer of Draupnir, LLC from 2002 through December 2005. From 1987 to 2002, Mr. Hobbs was an attorney in the law firm of Krasnow, Cornbath and Hobbs in Chicago, Illinois where he served as managing partner from 1997 to 2002.

John R. Loyack currently is President and Chief Executive Officer of EnergyCo, LLC. Prior to serving in his current position, Mr. Loyack served as President and Chief Executive Officer of CPG International, Inc., as Senior Vice President and Chief Financial Officer and Vice President and Chief Accounting Officer at PNM Resources.

Stanley Mayer currently is the General Manager of CMC Rebar - Albuquerque. Prior to serving in his current position, Mr. Mayer served as Vice President of CMC Capitol City Steel, as a consultant to various companies regarding financial and strategic planning matters since 2002, as Chief Financial Officer for Donruss Playoff, Inc. from 2001 to 2002 and as Vice President of Southern Union Company from 1998 through 2001.

Timothy R. Pestotnik is an attorney and a partner in the law firm of Pestotnik + Gold, LLP. Prior to this, he was a partner and chair of the business litigation department at the law firm of Luce, Forward, Hamilton & Scripps, LLP. Mr. Pestotnik also serves as a director of AMCON Corporation.

William F. Wright has served as the Chairman and Chief Executive Officer of AMCON Corporation since 1976, as Chief Executive Officer of our company from 1986 until October 2006, and as Chairman of our company since 1986. From 1968 to 1984, Mr. Wright practiced corporate and securities law in Lincoln, Nebraska.

What if a nominee is unwilling or unable to serve?

Each of the nominees listed in this proxy statement has indicated his willingness to serve as a director if elected, and the board of directors has no reason to believe that any nominee will be unavailable for election. If, for some unforeseen reason, a nominee who is to be voted on by the holders of our common stock becomes unwilling or unable to serve, it is intended that shares represented by the proxies will be voted for the election of such substitute nominee as may be designated by our nominating and corporate governance committee, unless the authority to vote for all nominees or for the particular nominee who has ceased to be a candidate has been withheld. If the nominee to be voted on by the

 

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holder of our Series B Convertible Preferred Stock becomes unwilling or unable to serve, the holder of our Series B Convertible Preferred Stock would be entitled to designate a substitute nominee.

How does our board of directors recommend that I vote?

Our board of directors recommends that you vote “FOR” the election of Raymond F. Bentele as a Class II director.

ITEM 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR

What am I voting on?

Stockholders are being asked to ratify and approve the selection of McGladrey and Pullen, LLP as our independent registered public accounting firm for our 2008 fiscal year. The selection of McGladrey and Pullen, LLP was made by the audit committee of our board of directors. McGladrey and Pullen, LLP has served as our independent auditors since August 30, 2006. In connection with the audit of our 2008 fiscal year financial statements, our company entered into an engagement agreement with McGladrey and Pullen, LLP which sets forth the terms by which McGladrey and Pullen, LLP will perform audit services for our company. The ratification and approval by stockholders of the selection of McGladrey and Pullen, LLP effectively would also be a ratification of that agreement.

What services do the independent registered public accountants provide?

Audit services provided by McGladrey and Pullen, LLP for our 2007 fiscal year included the examination of the consolidated financial statements of our company and services related to our periodic filings with the SEC. These services are more fully described in this proxy statement under the captions “Audit Committee Report” and “Independent Auditor Fees and Services.”

Will a representative of McGladrey and Pullen, LLP be present at the meeting?

One or more representatives of McGladrey and Pullen, LLP are expected to be present at the annual meeting. Any such representative will have an opportunity to make a statement if he or she desires to do so and is expected to be available to respond to appropriate questions from stockholders.

What if this proposal is not approved?

Stockholder ratification and approval of the audit committee’s selection of McGladrey and Pullen, LLP as our independent registered public accounting firm is not required by any statute or regulation or by our bylaws. Nevertheless, if the stockholders do not ratify and approve the selection of McGladrey and Pullen, LLP at the annual meeting, the audit committee will reconsider the appointment. Submission of our selection of McGladrey and Pullen, LLP to the stockholders for ratification and approval will not limit the authority of the audit committee to appoint another independent certified public accounting firm to serve as independent auditors if the present auditors resign or their engagement otherwise is terminated.

How does our board of directors recommend that I vote?

Our board of directors recommends that you vote “FOR” approval of the selection of McGladrey and Pullen, LLP.

CORPORATE GOVERNANCE AND BOARD MATTERS

Communication with the Board

Our board of directors has established a process for stockholders to follow in sending communications to our board or its members. Stockholders who wish to communicate with our board or any of our directors, including the Chairman of the Board and the chairman of any committee of the board, may do so. Such communications must be addressed to our board or any such director in care of our corporate secretary at Amcon Distributing Company, 7405

 

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Irvington Road, Omaha, NE 68122. All such communications will be compiled by our corporate secretary and submitted to our board or the individual director, as applicable, on a periodic basis.

Neither our board of directors nor a specific director is required to respond to a stockholder communication. To avoid selective disclosure, our board or the individual director may respond to a stockholder’s communication only if the communication involves information which is not material or which is already public. In such case, our board of directors, as a whole, or the individual director may respond, if at all:

If the communication involves material non-public information, our board of directors or the individual director will not provide a response to the stockholder concerning such information. Our company may, however, publicly provide information responsive to such communication if (following consultation with our advisors, as our board determines appropriate) our board determines disclosure is appropriate. In that case, the responsive information will be provided in compliance with SEC Regulation FD and other applicable laws and regulations.

Consideration of Director Nominees

In identifying and evaluating director nominees, the nominating and corporate governance committee of our board of directors may receive recommendations from our directors, management and stockholders, including the holders of our Series B Convertible Preferred Stock and Series C Convertible Preferred Stock. The committee reviews and considers information on each candidate and evaluates it in light of the needs of our company. The committee has not established specific minimum qualifications for recommended nominees. The committee believes that it is not always in the best interests of our company or its stockholders to attempt to create an exhaustive list of such qualifications or criteria, as determining the specific qualifications or criteria against which to evaluate the fitness or eligibility of potential director candidates is necessarily dynamic and an evolving process. Appropriate flexibility is needed to evaluate all relevant facts and circumstances in context of the needs of our board and our company at a particular point in time. Accordingly, the committee reserves the right to consider such factors as it deems relevant and appropriate, including the current composition of our board and its committees, the balance of management and independent directors, the need for audit committee expertise and the evaluations of other prospective nominees. As a matter of practice, the committee evaluates recommended nominees for directors based on their integrity, judgment, independence, financial and business acumen, relevant experience, and their ability to represent and act on behalf of all stockholders. Further, the committee evaluates each potential nominee in the context of our board as a whole, with the objective of recommending a group that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas. In general, the committee would expect to re-nominate incumbent directors who express an interest in continuing to serve on our board. However, in determining whether a director should be retained and stand for re-election, the committee may consider the director’s past attendance at meetings and participation in and contributions to the activities of our board and each committee on which such director serves. In connection with this annual meeting, the committee received from Spencer Street Investments, Inc., the holder of our Series B Convertible Preferred Stock, its designation of Christopher H. Atayan as the person to be elected by the holder of our Series B Convertible Preferred Stock to serve on our board of directors. The holder of our Series B Convertible Preferred Stock, is entitled to vote separately as a single class to elect one member of our board of directors. We refer you to the discussion below under the captions “Ownership of Our Common Stock by Our Directors and Executive Officers and Other Principal Stockholders” and “Certain Relationships and Related Transactions” for more information concerning Spencer Street Investments’ ownership interest in our company and the issuance and sale of our Series B Convertible Preferred Stock.

Stockholders who wish the nominating and corporate governance committee to consider their recommendations for nominees for the position of director should submit their recommendations in writing to the nominating and corporate governance committee in care of our corporate secretary at AMCON Distributing Company, 7405 Irvington Road,

 

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Omaha, NE 68122. All nominees, including those submitted by stockholders in accordance with these procedures, will be evaluated using generally the same methods and criteria described above, although those methods and criteria are not standardized and may vary from time to time. Stockholders also may submit director nominations to our company in accordance with the procedures described below under “Advance Notice of Stockholder Proposals.”

Committees of the Board

Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. There currently are no other standing committees of our board of directors. Members of the audit committee, compensation committee and nominating and corporate governance committee serve at the pleasure of our board of directors.

Audit Committee . The audit committee of our board of directors currently is comprised of John R. Loyack, its chairman, Timothy R. Pestotnik and Stanley Mayer. Our board of directors has determined that all members of the audit committee are independent directors under the listing standards adopted by the AMEX. In addition, our board of directors has determined that Mr. Loyack and Mr. Mayer each meets the SEC’s definition of an “audit committee financial expert.” The audit committee is responsible for reviewing our financial statements, audit reports, internal financial controls and the services performed by the independent registered public accounting firm, and for making recommendations with respect to those matters to our board of directors. A more complete description of the audit committee’s functions is provided in its charter, a copy of which is available on our internet website (www.amcon.com) under “Investor Relations.” The audit committee met nine times during our 2007 fiscal year.

Compensation Committee. The compensation committee of our board of directors currently is comprised of Stanley Mayer, its chairman, Raymond F. Bentele and John R. Loyack. Our board of directors has determined that all members of our compensation committee are independent under the AMEX listing standards. The committee is responsible for reviewing and making recommendations to our board of directors with respect to compensation of executive officers and other compensation matters and awards. Our chief executive officer assists the committee from time to time on a variety of compensation matters, including making recommendations for the appropriate salaries and bonuses of our executive officers (other than our chief executive officer). The committee has the authority to consult with management and to engage the services of outside advisors, experts and others to assist it in its efforts. A more complete description of the committee’s functions is provided in its charter, a copy of which is available on our internet website (www.amcon.com) under “Investor Relations.” Our compensation committee met five times during our 2007 fiscal year.

Nominating and Corporate Governance Committee. The members of our nominating and corporate governance committee are Raymond F. Bentele, its chairman, John R. Loyack and Timothy R. Pestotnik, each of whom our board of directors has determined to be independent under the AMEX listing standards. The committee is responsible for the director nomination process, including evaluating and recommending director nominees and committee and chair appointments. It also is responsible for various corporate governance matters, including the development of ethical conduct standards for our directors, officers and employees and an annual board assessment. A more complete description of the committee’s functions is provided in its charter, a copy of which is available on our internet website (www.amcon.com) under “Investor Relations.” The nominating and corporate governance committee met three times during our 2007 fiscal year.

Meetings of the Board

During our 2007 fiscal year, our board of directors held nine meetings. Each director attended at least 75% of the total meetings of the board of directors and of the committees of the board on which he or she served during the fiscal year. Our company’s directors discharge their responsibilities throughout the year, not only at such board of directors and committee meetings, but through personal meetings and other communications with members of management and others regarding matters of interest and concern to our company.

Directors are encouraged by our company to attend our annual meeting of stockholders if their schedules permit, but our company does not otherwise have a policy regarding such attendance. With the exception of Mr. Wright, all directors were present at the annual meeting of the stockholders held on April 17, 2007.

 

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Code of Ethics

Our board of directors has adopted a code of ethical conduct that applies to our executive officers, including our principal executive officer and our principal financial officer. This code of ethical conduct is available without charge to any person who requests it by writing to our corporate secretary. It also is available on our internet website (www.amcon.com) under “Investor Relations.” Any substantive amendment to, or waiver from, a provision of this code that applies to our principal executive officer or principal financial officer will be disclosed on our internet website.

Director Compensation

Only outside (non-employee) members of our board of directors receive compensation for their service to our company as a director. Directors who are not employees of our company are paid according to the following annual scale:

 

 

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There is no payment of any meeting fees; however, all directors are reimbursed for their reasonable out of pocket expenses incurred in connection with their attendance at board and committee meetings.

Non-employee directors are eligible to receive awards of nonqualified stock options which entitle them to purchase shares of our common stock at an exercise price equal to the fair market value of the stock on the date of grant. Option grants may be recommended from time to time by our compensation committee, subject to approval by our board of directors. These stock options have vesting schedules of up to five years and expire ten years after the date of grant. Non-employee directors also are eligible to receive equity-based awards under our 2007 omnibus incentive plan described below under “Executive Compensation and Related Matters—2007 Omnibus Incentive Plan”.

Compensation earned in our 2007 fiscal year by each person serving as a director during such fiscal year (other than those who are named executive officers in the summary compensation table under “Executive Compensation and Related Matters” below) for service on our board and its committees is presented in the table below.

 

 

 

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Compensation Committee Interlocks and Insider Participation

During our 2007 fiscal year, Messrs. Mayer, Bentele and Loyack served on the compensation committee of our board of directors. None of the members of our compensation committee is currently or was formerly a company officer or employee. There are no compensation committee interlocks and no insider participation in compensation decisions that are required to be reported under the SEC’s rules and regulations.

EXECUTIVE COMPENSATION AND RELATED MATTERS

Compensation Discussion and Analysis

General

The following compensation discussion and analysis explains how our compensation programs are designed and operate in practice with respect to each of the named executive officers listed in the summary compensation table appearing below. This discussion should be read in conjunction with the information appearing under the caption “Committees of the Board -- Compensation Committee,” the summary compensation table, and the additional tabular and narrative disclosure that follows the summary compensation table.

Compensation Philosophy and Objectives

Our executive compensation programs reflect our results-oriented corporate culture that rewards individual performance and achievement of our goals. Our compensation program for executive officers is designed to attract, retain, motivate and reward talented executives who will advance our strategic, operational and financial objectives and thereby enhance stockholder value. Our company’s executive compensation programs are designed and approved by the compensation committee of our board of directors. The following principles are considered by the committee in establishing executive compensation programs and individual compensation packages:

 

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Determining Compensation

Our compensation committee’s process for determining compensation levels for executive officers differs depending upon the position of the individual being considered. For each executive officer other than our chief executive officer, the committee annually reviews each element of compensation described below in consultation with our chief executive officer. Our chief executive officer develops for the committee’s consideration a proposed compensation package for each of these executive officers based on his subjective judgment of the executive’s past performance and of his or her expected future contributions to our company. Each executive’s compensation package is modified as deemed appropriate by our compensation committee, and the final determination of the compensation package is made by the committee. With respect to our chief executive officer’s compensation, our compensation committee meets in executive session. The committee develops a compensation package for our chief executive officer based on its subjective assessment of his past performance, of his leadership in establishing performance standards in the conduct of our company’s business, and of his expected future contributions in directing the long-term success of our company and its businesses. For all executive officers, including our chief executive officer, the structure and level of executive compensation needed to promote the principles of our executive compensation program for each executive is determined by the committee by considering all elements of the compensation package in total, rather than any one component in isolation This process is based upon the committee’s subjective judgment. Finally, some components of the compensation package our named executive officers are determined in accordance with the agreements described below under the captions “Employment and Other Compensatory Agreements” and “Change of Control Agreements.”

Compensation Components

As separately discussed below, the principal components of compensation for our executive officers currently are:

 

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Base Salary. We provide base salary to our named executive officers and other employees to reward them for performing the requirements of their position on a day-to-day basis, and is viewed by our compensation committee as a key aspect of our attraction and retention efforts. Base salaries are not established on the basis of any specific performance criteria, but a number of factors are considered in determining individual salary levels, including each executive’s existing salary relative to that of other employees of our company, a subjective assessment of the performance of the executive and of the business unit or function under his or her leadership, the executive’s length of service with our company, and the perceived increase in the cost of living. The factors impacting base salary levels are not independently assigned specific weights. Competitive market data may be considered from time to time, but we currently do not set compensation levels at a targeted percentile relative to compensation data for a particular peer, competitor or industry group. While our compensation committee may be guided by the various market and performance metrics, the committee’s determination and approval of individual compensation packages have been made almost exclusively through the exercise its subjective judgment.

For our 2008 fiscal year, our compensation committee reviewed the base salary levels for our named executive officers and established base salaries as follows: Mr. Atayan, $400,000; Ms. Evans, $375,000; Mr. Plummer, $149,000; Mr. Campbell, $110,000; and Mr. Hinkefent, $150,000. These base salaries collectively reflected an average base salary increase for these executives of approximately 3.85% over their base salary rates for our 2007 fiscal year. For our 2008 fiscal year, Mr. Wright’s salary will be established in accordance with his agreement described below under the caption “Employment and Other Compensatory Agreements,” which provides that his salary is subject to increase to take into account increases (but not decreases) in the cost of living from January 1, 2006.

Performance-Based Compensation. Performance bonus awards may be provided to our named executive officers and other employees in the discretion of our compensation committee. Bonus awards currently are not provided on the basis of specified targets or pre-established performance metrics. Instead, bonus awards are made on a discretionary basis following the end of our fiscal year if the committee deems it to be appropriate based upon its subjective assessment of the executive’s individual performance and the overall performance of our company during the most recently completed fiscal year with respect to stockholder value, stock price, sales growth, net income and timely filing of all periodic SEC reports. Performance bonuses reward exceptional performance and are viewed by our compensation committee as a key aspect of our retention efforts. In the case of the performance bonus for our chief executive officer, the committee also considered Mr. Atayan’s role in successfully mitigating various risks related to pending litigation matters in which our company was involved. For our 2007 fiscal year, our compensation committee awarded cash bonuses to the following named executive officers based on its assessment of the factors referred to above: Mr. Atayan, $385,000; Ms. Evans, $75,000; Mr. Plummer, $30,000; Mr. Campbell, $30,000; and Mr. Hinkefent, $100,000. The terms of his agreement described below under the caption “Employment and Other Compensatory Agreements” do not provide Mr. Wright with the opportunity to receive a performance bonus.

Equity Incentives. We promote the long-term interests of our company and the alignment of our named executive officers’ interests with those of our stockholders by providing meaningful equity ownership opportunities to our executives. Our equity compensation program also is designed to encourage our named executive officers to remain employed with us despite a competitive labor market. We may grant equity-based incentives under our stockholder-approved 2007 omnibus incentive plan. In addition, in December 2006 we granted a non-qualified stock option to purchase 25,000 shares of our common stock to our chief executive officer, which grant was approved by stockholders at our 2007 annual meeting. Because equity compensation awards typically vest over a period of several years, the value to recipients of any immediate increase in the price of our common stock following a grant will be attenuated. The periodic vesting provisions are in place to encourage the named executive officers to remain with our company. The terms of his agreement described below under the caption “Employment and Other Compensatory Agreements” do not provide Mr. Wright with the opportunity to receive any equity compensation and, in light of his significant ownership interest in our company, our compensation committee did not find it necessary to award him any equity compensation.

 

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On December 12, 2006, our compensation committee awarded a non-qualified stock option to our chief executive officer. This award was made in recognition of Mr. Atayan’s assumption of increased responsibilities as our chief executive officer and was intended to provide a meaningful stock ownership and growth opportunity linked directly to the success of our company. Stock options only have value if our stock price appreciates after the options are granted. The option will be exercisable for a total of 25,000 shares of our common stock at an exercise price of $18.00 per share, which represents the closing trading price for our common stock on AMEX on the day immediately prior to the December 12, 2006 grant date. The option vests ratably over a three-year period ending December 12, 2009, subject to certain limitations relating to the termination of his employment as more fully discussed below under the caption “CEO Option Award.”

On December 6, 2007, our compensation committee awarded shares of restricted stock to the following executives: Mr. Atayan, 15,000 shares; Mr. Plummer, 2,000 shares; Mr. Campbell, 2,000 shares; and Mr. Hinkefent, 5,000 shares. These awards were made under our 2007 omnibus incentive plan and vest in equal installments on October 16, 2008, 2009 and 2010, subject to certain limitations relating to the termination of employment. The amount of each grant was designed to provide each executive with an equity incentive commensurate with his responsibilities and a meaningful stock ownership and growth opportunity linked directly to the success of our company.

Perquisites and other Personal Benefits. Each of our executive officers is entitled to participate in our employee benefit plans that are made available to all of our employees on a non-discriminatory basis. These benefits consist of medical and group life insurance for which our company pays a portion of the premiums. Our company also makes matching contributions under our 401(k) profit sharing plan of up to 4% of each executive’s compensation.

Our company generally does not provide special perquisites to our executive officers. However, Mr. Wright, and Mr. Hinkefent each receive an auto allowance and Ms. Evans is provided the use of a company vehicle. In addition, Mr. Wright is provided a split dollar life insurance policy for which our company pays the premiums. Additional information concerning these perquisites is provided in the tabular and narrative disclosure that follows the summary compensation table.

Termination and Change in Control Arrangements

As discussed below under the caption “Change of Control Agreements,” we have entered into change of control agreements with Mr. Atayan and Ms. Evans. In addition, we have entered into employment agreements with Mr. Wright and Mr. Hinkefent, as discussed below under the caption “Employment and Other Compensatory Agreements.” These agreements provide that, upon certain termination of employment events, including termination events following a change of control of our company, these named executive officers may be entitled to receive specified severance benefits. These benefits are discussed in more detail under the caption “Change of Control Agreements.” The provisions in these agreements regarding severance benefits are designed, among other things, to provide for stability and continuity of management in the event of any actual or threatened change in control, to encourage the executives to remain in service after a change in control and ensure that the executives are able to devote their entire attention to maximizing stockholder value in the event of a change in control. Our compensation committee has determined that the amounts payable under the agreements are necessary to achieve those objectives.

Policy Regarding Tax Deduction for Compensation Under Internal Revenue Code Section 162(m)

Section 162(m) of the Internal Revenue Code limits our tax deduction to $1 million for compensation paid to certain executive officers named in this proxy statement unless the compensation is performance based. Our compensation committee’s present intention is to comply with the requirements of Section 162(m), unless the committee determines that it is in our interests to do otherwise.

Compensation Committee Report

The compensation committee of our board of directors has reviewed and discussed with management the above Compensation Discussion and Analysis required by Item 402(b) of the SEC’s Regulation S-K. Based on such review and discussions, our compensation committee recommended to our board of directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

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Compensation Committee

 

 

Summary Compensation Table

The following summary compensation table summarizes the compensation paid or accrued by our company in our 2007 fiscal year with respect to our chief executive officer, our former chief executive officer, our principal financial officer, our three other executive officers. In this proxy statement, these individuals are referred to as our “named executive officers.”

 

 

 

 

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Grants of Plan Based Awards

The following table sets forth information concerning grants of plan based awards during our 2007 fiscal year to the only named executive officer who was a recipient of such an award in that fiscal year.

 

 

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Option Exercises and Stock Vesting

None of the named executive officers exercised any stock options, or acquired shares on vesting, during our 2007 fiscal year.

Outstanding Equity Awards at Fiscal Year End

The following table sets forth information with respect to each named executive officer concerning equity awards held as of September 30, 2007.

 

 

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Equity Compensation Plan Information

The following equity compensation plan information summarizes plans and securities approved and not approved by security holders as of September 30, 2007:

 

 

 

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2007 Omnibus Incentive Plan

We have adopted our 2007 omnibus incentive plan or “Equity Plan” to encourage employees of our company, affiliates and subsidiaries to acquire a proprietary and vested interest in the growth and performance of our company. The Equity Plan also is designed to assist our company in attracting and retaining employees and non-employee directors by providing them with the opportunity to participate in the success and profitability of our company. Equity-based awards also are intended to further align the interests of award recipients and with the interests of our stockholders.

Eligible Participants. The eligible participants in the Equity Plan are all employees of our company, affiliates and subsidiaries, including employees who are officers or members of our board of directors, and members of our board who are not employees of our company. Currently, there are approximately 875 directors, officers and employees of our company, affiliates and subsidiaries who are eligible to participate in the Equity Plan.

Equity Plan Administration. The Equity Plan may be administered by our board of directors or a committee consisting of two or more directors. Currently, our compensation committee administers the Equity Plan and has the sole discretion to administer and interpret the Equity Plan and determine who will be granted awards under the Equity Plan, the size and types of such awards and the terms and conditions of such awards.

Shares Subject to the Equity Plan. The Equity Plan permits the issuance of up to 150,000 shares of our common stock pursuant to awards granted under the Equity Plan such as 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 share and dividend share awards payable in the form of common stock or cash.

Stock Options. Both incentive stock options and nonqualified stock options may be granted under the Equity Plan. The per-share exercise price of an option is set by our compensation committee and generally may not be less than the fair market value of a share of our common stock on the date of grant. Options granted under the Equity Plan are exercisable at the times and on the terms established by our compensation committee. The maximum term of an option is ten years from the date of grant.

Stock Appreciation Rights. A stock appreciation right or “SAR” is the right to receive payment of an amount equal to the excess of the fair market value of a share of common stock on the date of exercise of the stock appreciation right over the grant price of the stock appreciation right. The Equity Plan permits the grant of two types of SARs: freestanding SARs, tandem SARs, or any combination of the two. A freestanding SAR is a SAR that is granted independent of any stock option. A tandem SAR is a SAR that is granted in connection with a related stock option, the exercise of which requires a forfeiture of the right to purchase a share under the related option (and when a share is purchased under the option, the SAR is similarly canceled). Our compensation committee has complete discretion to determine the number of SARs granted to any participant and the terms and conditions pertaining to such SARs.

Restricted Stock and Restricted Stock Unit Grants. The Equity Plan permits the grant of restricted stock or restricted stock unit awards. Restricted stock and restricted stock units may be issued or transferred for consideration or for no consideration, as determined by our compensation committee. Our compensation committee may establish conditions under which restrictions on shares of restricted stock or restricted stock units lapse over a period of time or according to such other criteria as our compensation committee deems appropriate, including the achievement of specific performance goals.

Performance Unit and Performance Shares. The Equity Plan permits the grant of performance units and performance share awards which are bonuses payable in cash, common stock or a combination thereof. Each performance unit and performance share will represent the right of the participant to receive an amount based on the value of the performance unit/share, if performance goals established by our compensation committee are met. A performance unit will have a value based on such measurements or criteria as our compensation committee determines. A performance share will have a value equal to the fair market value of a share of our common stock. When an award of these are granted, our compensation committee will establish a performance period during which performance will be measured. At the end of each performance period, our compensation committee will determine to what extent the performance goals and other conditions of the performance units/shares are met.

Bonus Shares and Deferred Shares. The Equity Plan permits the grant of shares to participants from time-to-time as a bonus. Such shares may be paid on a current basis or may be deferred and paid in the future. Our board of

 

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directors or our compensation committee may impose such conditions or restrictions on any such deferred shares as it may deem advisable, including time-vesting restrictions and deferred payment features.

Restrictions on Transfer. Awards under the Equity Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution and generally are exercisable, during the recipient’s lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient’s beneficiary or representative.

Changes in Capital or Corporate Structure. If, without the receipt of consideration by our company, there is any change in the number or kind of shares of our common stock outstanding by reason of a stock dividend or any other distribution upon the shares payable in stock, or through a stock split, subdivision, consolidation, combination, reclassification or recapitalization, the maximum number of shares of our common stock available for grants, the maximum number of shares of our common stock that any individual participating in the Equity Plan may be granted in any year, and the number of shares covered by outstanding grants may be appropriately adjusted to reflect any increase or decrease in the number of issued shares of our common stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under such grants. Any fractional shares resulting from such adjustment will be rounded up to the nearest whole share. The purchase or exercise price payable by any plan participant with respect to any award also will be adjusted upon the occurrence of any of the events referred to above so that there will be no change in the aggregate price payable by such participant. Adjustments determined by our compensation committee are final, binding and conclusive.

If our company undergoes a “change of control,” as that term is defined in the Equity Plan, each option, share of restricted stock and other grant held by a non-employee director will, without regard to any vesting schedule, restriction or performance target, automatically become fully exercisable or payable, as the case may be, as of the date of the change of control.

CEO Option Award

On December 12, 2006, our company entered into a Nonqualified Stock Option Agreement or “Option Agreement” with our Chief Executive Officer, Christopher H. Atayan, under which he was granted a non-qualified stock option to purchase shares of our common stock. Our stockholders approved the grant of this option at our 2007 annual meeting of stockholders.

The aggregate number of shares of our common stock that may be issued pursuant to the exercise of this option is limited to 25,000 shares, subject to increase or decrease in the event of any change in our company’s capital structure, including a stock dividend, stock split, recapitalization, combination or reclassification of shares. The exercise price of the option is $18.00 per share, which represents the closing trading price for our common stock on AMEX on the day immediately prior to the December 12, 2006 grant date. The option price may be paid in full in cash, or may be paid by Mr. Atayan’s tender of previously acquired shares of our common stock.

Generally, the exercise of this option is permitted only as follows: (i) no portion of the option may be exercised before December 12, 2007, (ii) up to one-third of the option (8,333.33 shares) may be exercised after December 12, 2007, (iii) an additional one-third of the option (8,333.33 shares) may be exercised after December 12, 2008, and (vi) the entire option may be exercised after December 12, 2009. In the event of a change of control (as that term is defined in the Option Agreement) the time at which the option may be exercised may be accelerated. In no event may the option be exercised after December 12, 2016.

If Mr. Atayan’s employment with our company is terminated for cause (generally any act or failure to act by Mr. Atayan that constitutes willful misconduct or gross negligence), the option will expire immediately. If Mr. Atayan dies while he is our employee, the option may be exercised by his beneficiaries within twelve months after his death, to the extent it is exercisable. If Mr. Atayan becomes disabled while he is our employee, the option may be exercised by him within twelve months following the date of the disability, to the extent it is exercisable. If Mr. Atayan ceases to be our employee due to (i) his voluntary resignation, or (ii) the termination of his employment without cause, the option may be exercised by him within three months following the date of employment termination.

 

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Employment and Other Compensatory Agreements

On September 26, 2006, our company entered into an agreement with William F. Wright replacing his January 1, 1998 employment agreement. This new agreement provides that Mr. Wright would cease to be our Chief Executive Officer (which occurred on October 4, 2006), but that he would continue as Chairman of the Board through December 31, 2007, and then as Vice Chairman through December 31, 2009. Mr. Wright continued to receive compensation and other benefits under the 1998 employment agreement until December 31, 2006. Beginning January 1, 2007, Mr. Wright was entitled to be paid the same salary and benefits (including health insurance and auto allowance) as were paid on an annual basis as of the date of the new agreement, subject to increase as described below. Mr. Wright’s salary for 2007, 2008 and 2009 is subject to increase to take into account increases (but not decreases) in the cost of living from January 1, 2006 by increasing his salary as of the first day of 2007, 2008 and 2009 to an amount equal to $448,000 multiplied by the ratio of (a) the Consumer Price Index Seasonally Adjusted U.S. City Average For All Items For All Urban Consumers (1982–1984 = 100), which we refer to as the “CPI”, for the month ending before such first day to (b) the CPI as in effect on January 1, 2006. The CPI is published in the “Monthly Labor Review” of the Bureau of Labor Statistics of the United States Department of Labor.

Our company has entered into an employment agreement with Eric J. Hinkefent, the President of Health Food Associates, Inc. and Chamberlin Natural Foods, Inc. The agreement has a term which automatically is extended for one year each September 30th unless either our company or Mr. Hinkefent delivers a notice of non-extension at least 90 days prior to the scheduled automatic renewal date. The agreement provides for a base salary in each year of the agreement term and provides that Mr. Hinkefent will be eligible to receive a bonus of up to 75% of his base salary based upon performance as determined by our compensation committee. If the employment agreement terminates due to Mr. Hinkefent’s disability or death, he or his personal representative is entitled to receive his base salary for a period of six months following the termination. If the employment agreement is terminated for reasons other than serious misconduct (as defined in the agreement), Mr. Hinkefent is entitled to receive a severance package equal to his current base salary plus his previous year’s bonus. Mr. Hinkefent was also eligible to participate in our company’s 1994 Stock Option Plan, prior to its expiration on June 1, 2004, and in other employee benefit plans maintained by our company, including health and life insurance plans. The agreement contains provisions under which Mr. Hinkefent has agreed to maintain the confidentiality of information concerning our company and its affairs and a covenant not to compete with our company for a period of one year after his employment with our company terminates.

Change of Control Agreements

On December 29, 2006, we entered into a change of control agreement with each of Christopher H. Atayan, our Chief Executive Officer, and Kathleen M. Evans, our President. Each such agreement is referred to in this section as an “Agreement.” The initial term of the Agreement extends for two years until December 31, 2008. Beginning on December 31, 2007 and each December 31 following, the Agreement term automatically will be extended for one additional year unless we give the applicable officer notice by September 30 of that year. In addition, if a change in control (as that term is defined in the Agreement) occurs during the term of the Agreement, the term of the Agreement will continue for a period of 24 months after the month in which such change in control occurred.

The Agreement requires Mr. Atayan or Ms. Evans, as applicable, to remain in our employ for a period of six months after a change in control, unless involuntarily terminated by us other than for cause (as that term is defined in the Agreement) or terminated by the officer for good reason (as that term is defined in the Agreement).

If a change of control occurs and the term of the Agreement has not expired, we will owe the applicable officer the following:

 

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The following table shows the potential payments upon certain termination events, including termination events following a change of control of our company, for each of the named executive officers (excluding Mr. Plummer and Mr. Campbell, who would not be eligible for such payments) if the termination and change of control had occurred on September 30, 2007. Fully vested and accrued benefits are not included in the table unless the form, amount or terms of the benefit would be enhanced or accelerated by the termination event.

 

 

This amount would be payable in a lump sum on the first day following the six month anniversary of the date of employment termination.

 

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This amount would be payable in a lump sum on the first day following the six month anniversary of the date of employment termination.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

AMCON Corporation. During our 2007 fiscal year, William F. Wright, Jeremy W. Hobbs and, prior to his death, Allen D. Petersen, each were officers, directors or stockholders of AMCON Corporation, which is engaged in the beer distribution business in eastern Nebraska through a wholly owned subsidiary. Christopher H. Atayan and Timothy R. Pestotnik serve as directors of AMCON Corporation. Through June 2007, Kathleen M. Evans was also an officer, director and stockholder of AMCON Corporation. AMCON Corporation provides our company with offices and administrative services and our company reimburses AMCON Corporation for a proportionate share of the costs of these offices and services based upon our respective usages. Our company paid AMCON Corporation $72,000 during our 2007 fiscal year under this arrangement. In fiscal 2008, it is anticipated that our company will pay AMCON Corporation $72,000 under this arrangement. Our company believes the terms on which AMCON Corporation supplies these offices and services to our company are no less favorable than would otherwise be available from unaffiliated parties.

Lending Arrangements. Our company’s Chairman, William F. Wright, has personally guaranteed repayment of our revolving credit facility and term loans with LaSalle Bank. However, the amount of his guaranty is capped at $10.0 million and is automatically reduced by the amount of the repayment on Term Loan B and certain other deductions, which resulted in the guaranteed principal outstanding being reduced to $5.4 million as of September 30, 2007. Our company pays Mr. Wright an annual fee equal to 2% of the guaranteed principal in return for the personal guarantee, which fee totaled $122,000 for our 2007 fiscal year. Mr. Wright also has personally guaranteed a note payable in the amount of $0.7 million issued in conjunction with a legal settlement pursuant to which our company pays a 2% guarantee fee. During our 2007 fiscal year there were no payments to Mr. Wright under this guarantee. Mr. Wright also has personally guaranteed certain payments in connection with our company’s acquisition of Trinity Springs, Inc. in fiscal 2004, but is not being paid a fee in connection with this guarantee.

During fiscal 2006, Draupnir, LLC extended a $750,000 loan to our company’s subsidiary, Trinity Springs, Inc. Draupnir, LLC is a private equity firm whose members include Jeremy W. Hobbs and, prior to his death, Allen D. Petersen. The total outstanding balance of this loan as of September 30, 2007 was $750,000 plus accrued interest. During our 2007 fiscal year, no payments of principal or interest were made on this loan.

AMCON Corporation (referred to above), Aristide Investments, L.P. and Draupnir, LLC (referred to above) lent $500,000, $250,000 and $250,000, respectively, to Trinity Springs, Inc. during fiscal 2005. During our 2007 fiscal year, the largest amount of principal outstanding under these loans were $500,000, $250,000 and $250,000, respectively. The total outstanding balance of these loans as of September 30, 2007 were $500,000, $250,000 and $250,000, plus accrued interest, respectively. During our 2007 fiscal year, no payments of principal or interest were made on the loan from AMCON Corporation, on the loan from Aristide Investments, or on the loan from Draupnir, LLC. Aristide Investments, L.P. is a California limited partnership of which our Chairman, William F. Wright, is a partner.

 

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During fiscal 2005, Allen D. Petersen extended a $1,000,000 revolving line of credit to Trinity Springs. During our 2007 fiscal year, the largest amount of principal outstanding under this line of credit was $1,000,000. The total outstanding balance of this line of credit as of September 30, 2007 was $1,000,000 plus accrued interest. During our 2007 fiscal year, no payments of principal or interest were made on this line of credit.

Our company’s policy is that all transactions between us and our officers, directors and/or five percent stockholders will be on terms no more favorable to those related parties than the terms provided to independent third parties.

INDEPENDENT AUDITOR FEES AND SERVICES

Independent Auditor Fees and Services

The following table presents fees for professional audit services rendered by our independent registered public accounting firms for the audit of our annual financial statements for our 2006 and 2007 fiscal years, and fees billed for other services rendered by our independent registered public accounting firms during such fiscal years. All audit and non-audit services provided to our company by our independent registered public accounting firms were approved by our audit committee.

 

 

 

In making its determination regarding the independence of McGladrey and Pullen, LLP, our audit committee considered whether the provision of the services for which we incurred the “Audit-Related Fees,” “Tax Fees,” and “All Other Fees” was compatible with maintaining such independence.

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services

Pursuant to its charter, the audit committee of our board of directors is responsible for reviewing and approving, in advance, any audit and any permissible non-audit engagement or relationship between our company and its independent auditor. Our engagement of McGladrey and Pullen, LLP to conduct the audit of our company for our 2007 fiscal year was approved by the audit committee on January 16, 2007. Additionally, each permissible non-audit engagement or relationship between our company and our independent registered public accounting firm entered into since September 30, 2006 has been reviewed and approved by the audit committee. All audit-related, tax and all other fees were pre-approved by the audit committee. We have been advised by McGladrey and Pullen, LLP that substantially all of the work done in conjunction with its audit of our financial statements for the most recently completed fiscal year was performed by permanent full time employees and partners of McGladrey and Pullen, LLP.

 

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The audit committee of our board of directors has adopted the following guidelines regarding the engagement of our independent registered public accounting firm to perform services for our company:

The audit committee will pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for our company by its independent registered public accounting firm, subject to the exceptions for non-audit services described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934 which must be approved by the audit committee prior to the completion of the audit.

Change in our Independent Auditor

On August 30, 2006, our audit committee appointed McGladrey and Pullen, LLP as our independent registered public accounting firm to audit our financial statements as of and for the fiscal year ended September 30, 2006.

On August 28, 2006, our independent registered public accounting firm at that time, Deloitte & Touche, LLP provided the chairman of our audit committee with the oral communication that it would decline to stand for re-election as our independent registered accounting firm if asked to do so by our company. Deloitte & Touche did not perform the audit of our company’s financial statements for our 2006 and 2007 fiscal years, and therefore did not provide a report on our financial statements for those fiscal years that contained an adverse opinion or a disclaimer of opinion or that was qualified or modified as to uncertainty, audit scope or accounting principles. During our 2006 and 2007 fiscal years there were no disagreements with Deloitte & Touche on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Deloitte & Touche, would have caused it to make a reference to the subject matter of the disagreement in connection with its reports. During our 2006 and 2007 fiscal years, there have been no events of the type required to be reported pursuant to Item 304(a)(1)(v) of the SEC’s Regulation S-K, except that Deloitte & Touche and our company identified material weaknesses in our company’s internal control over financial reporting with respect to our 2005 fiscal year related to (i) inventory accounting errors that occurred at one of our subsidiaries, (ii) the application of accounting literature for discontinued operations, (iii) insufficient levels of appropriately qualified and trained personnel in the accounting office of a subsidiary, (iv) insufficient oversight and review of disclosure controls and procedures of our subsidiaries and (v) our company’s disclosure controls and procedures with respect to the application of accounting guidance in certain Emerging Issues Task Force applications and other accounting standards relating to financing transactions, including the transaction’s impact on diluted earnings per share.

AUDIT COMMITTEE REPORT

The audit committee of our board of directors currently is composed of three members of our board of directors, all of whom meet the independence requirements of the SEC and the AMEX. The audit committee operates under a written charter adopted by our board of directors, and assists the board in fulfilling its responsibilities with respect to accounting and financial reporting practices and the scope and expense of audit and related services provided by our independent registered public accounting firm. The audit committee also selects our company’s independent registered public accounting firm, which selection is then submitted to our stockholders for ratification.

Management is responsible for our company’s internal controls and the financial reporting process. Our independent registered public accounting firm, McGladrey and Pullen, LLP, is responsible for performing an independent audit of our company’s consolidated financial statements and issuing an opinion on the conformity of those audited consolidated financial statements with U. S. generally accepted accounting principles. The audit committee’s responsibility is to monitor and oversee these processes and to report to our board of directors on its findings.

In this context, the audit committee has met and held discussions with management and the independent registered public accounting firm. Management represented to the audit committee that our company’s September 30, 2007 consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles. The audit committee has reviewed and discussed these consolidated financial statements with management and the independent registered public accounting firm. The audit committee discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61, Professional Standards, and the SEC’s Rule 2-02 under Regulation S-X.

Our company’s independent registered public accounting firm also provided to the audit committee the written disclosures and letter required by Independence Standards Board Standard No. 1, Independence Discussions with Audit

 

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Committees, and the audit committee discussed with the independent registered public accounting firm that firm’s independence. The audit committee has considered whether the services provided under other non-audit services are compatible with maintaining the independence of McGladrey and Pullen, LLP.

The members of the audit committee are not professionally engaged in the practice of auditing or accounting. Members of the audit committee rely without independent verification on the information provided to them and on the representations made by management and the independent accountants. Accordingly, the audit committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the audit committee’s considerations and discussions referred to above do not assure that the audit of our company’s financial statements have been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally accepted accounting principles, or that our company’s auditors are in fact “independent”.

Based upon the audit committee’s discussion with management and the independent registered public accounting firm, and the audit committee’s review of the representation of management and the report of the independent registered public accounting firm to the audit committee, the audit committee recommended that our board of directors include the audited consolidated financial statements in our company’s annual report on Form 10-K for the fiscal year ended September 30, 2007 for filing with the SEC.

The Audit Committee

 

 

OWNERSHIP OF OUR COMMON STOCK BY OUR DIRECTORS AND EXECUTIVE OFFICERS AND OTHER PRINCIPAL STOCKHOLDERS

The table below sets forth information, as of November 21, 2007 (unless otherwise indicated below), with respect to the beneficial ownership of shares of all series of our common stock by:

Also reported as of that date is the beneficial ownership by such persons of our Series B Convertible Preferred Stock, for which limited voting rights may be exercised at this annual meeting. Each of the persons, or group of persons, in the table below has sole voting power and sole dispositive power as to all of the shares of our common stock shown as beneficially owned by them, except as otherwise indicated.

 

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____________________

 

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owned by Alexander Dawson Foundation). The information provided is based on the Schedule 13D filed with the SEC on November 12, 2004. The holder’s address is 4045 South Spencer Street, Suite 312, Las Vegas, NV 89119.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than 10% of any class of equity securities of our company registered pursuant to Section 12 of the Exchange Act, to file with the SEC initial reports of ownership and reports of changes in ownership in such securities and other equity securities of our company. SEC regulations require directors, executive officers and greater than 10% stockholders to furnish our company with copies of all Section 16(a) reports they file.

To our knowledge, based solely on review of the copies of such reports furnished to our company and written representations that no other reports were required, during our 2007 fiscal year, all Section 16(a) filing requirements applicable to its directors, executive officers and greater than 10% stockholders were complied with on a timely basis, except that Mr. Petersen was late in filing a Form 4 report for a transaction that occurred on March 6, 2006, and Mr. Petersen and Mr. Wright each was late in filing a Form 4 report for a transaction that occurred on August 31, 2006.

STOCKHOLDER PROPOSALS FOR 2009 ANNUAL MEETING

It is anticipated that our 2009 annual meeting of stockholders will be held on January 26, 2009. Stockholders may propose actions for consideration at the 2009 annual meeting either by presenting them for inclusion in our company’s proxy statement or by undertaking the solicitation of votes independent of our proxy statement. Any stockholder who intends to present a proposal at the 2009 annual meeting must deliver the proposal to our company at AMCON Distributing Company, 7405 Irvington Road, Omaha, NE 68122, Attention Secretary by the applicable deadline below:

 

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addition, the stockholder must comply with the other advance notice provisions of our company’s bylaws. See “Advance Notice of Stockholder Proposals” below.

Proxies solicited in connection with our 2009 annual meeting of stockholders will confer on the appointed proxies discretionary voting authority to vote on stockholder proposals that are not presented for inclusion in the proxy materials unless the proposing stockholder notifies our company by December 22, 2008 that such proposal will be made at the meeting.

ADVANCE NOTICE OF STOCKHOLDER PROPOSALS

Under our bylaws, any stockholder wishing to submit a proposal for presentation at an annual meeting may do so by complying with its provisions, including proving written notice to our corporate secretary of the proposal within the specified time period (on or prior to January 14, 2008 for this annual meeting). Any nominations, other than those made by or on behalf of our board of directors, and any proposal by any stockholder to transact any business at an annual or special stockholders’ meeting, must be made by written notice mailed by certified mail to our corporate secretary. In the case of an annual meeting of stockholders, such notice must be received by our corporate secretary no later than 35 days prior to the date of the annual meeting; except that if less than 35 days’ notice of the annual meeting is given to the stockholders, such notice must be received by our corporate secretary not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. In the case of a special meeting of stockholders, the stockholder’s written notice of proposed business or nomination must be received by our corporate secretary not later than the close of business on the tenth day following the day on which (i) notice of the date of the special meeting was mailed or (ii) public disclosure of the date of the special meeting was made, whichever occurs first. A stockholder’s proposal to transact any business at an annual or special stockholders’ meeting should set forth: (i) a brief description of the business desired to be brought before the annual meeting and the reason for conducting such business at the annual meeting; (ii) the name and address of the stockholder proposing such business; (iii) the number of shares of our company’s stock beneficially owned by such stockholder; and (iv) any material interest of such stockholder in the business matter being proposed. A notice of nominations by stockholders must set forth as to each proposed nominee who is not an incumbent director (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares of our company’s stock which are beneficially owned by each such nominee and the nominating stockholder and (iv) any other information concerning the nominee that must be disclosed regarding nominees in proxy solicitations pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended, and the rules under such section. Only stockholders of record as of the record for the annual meeting are entitled to bring business before the annual meeting or make nominations for directors. We urge you to examine our bylaws for the advance notice provisions, including a complete listing of the information required to be included in any such notice. You may request a copy of our bylaws by following the instructions for obtaining exhibits to our annual report below under “Additional Information.” You may contact our corporate secretary at AMCON Distributing Company, 7405 Irvington Road, Omaha, NE 68122, Attention Secretary.

 

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ADDITIONAL INFORMATION

We filed our annual report on Form 10-K for our 2007 fiscal year with the SEC on November 9, 2007. A copy of our annual report, including audited financial statements and the report thereon by McGladrey and Pullen, LLP, accompanies this proxy statement.

We are sending without charge to each stockholder as of the record date for the annual meeting a copy of our annual report on Form 10-K for our fiscal year ended September 30, 2007, including the financial statements and the schedules thereto but excluding exhibits. Our company will provide a copy of any exhibit to the Form 10-K report to any such person upon written request and the payment of our reasonable expenses in furnishing such exhibits. A request for such exhibits should be sent in writing to AMCON Distributing Company, 7405 Irvington Road, Omaha, NE 68122, Attention: Secretary. Such request must set forth a good faith representation that the requesting party was a holder of record or a beneficial owner of common stock of our company on the December 19, 2007 record date for the annual meeting. You may read and download our Form 10-K, including exhibits, as well as our other SEC filings over the internet from several commercial document retrieval services as well as from the SEC’s internet website (www.sec.gov).

 

 

 

Omaha, Nebraska

January 7, 2008

 

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Detach above card, sign, date and mail in postage paid envelope provided.

AMCON DISTRIBUTING COMPANY

 

 

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