SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential; for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AMCON Distributing Company
------------------------------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
/1/ Title of each class of securities to which transaction applies:
/2/ Aggregate number of securities to which transaction applies:
/3/ Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
/4/ Proposed maximum aggregate value of transaction:
/5/ Total fee paid:
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2)and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number or
the Form or Schedule and the date of its filing.
/1/ Amount Previously Paid:
/2/ Form, Schedule or Registration Statement No.:
/3/ Filing Party:
/4/ Date Filed:
AMCON DISTRIBUTING COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MARCH 11, 2004
The Annual Meeting of Stockholders of AMCON Distributing Company (the
"Company") will be held at LaSalle Bank, 135 South LaSalle Street, 43rd
Floor, Chicago, IL 60603 on Thursday, March 11, 2004, at 10:00 a.m., Central
Standard Time, for the following purposes:
(1) To elect three Class I directors for terms ending in 2007;
(2) To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditor for the fiscal year ending September 24,
2004.
(3) To amend the Company's Certificate of Incorporation in order to
effect a one-for-six reverse stock split and to provide for the
cash payment for fractional shares, and
(4) To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
All stockholders of record as of January 19, 2004 will be entitled to vote at
the Annual Meeting. In order to facilitate voting and to help ensure the
presence of a quorum at the meeting, the Board of Directors is asking for
your proxy to vote your shares at the Annual Meeting.
Whether or not you expect to attend the Annual Meeting, we ask you to
complete, sign and date the enclosed proxy and return it to us promptly using
the enclosed envelope. If you decide to attend the meeting in person, you
may withdraw your proxy at any time and vote in person.
Proxy Statement containing important information about the election of
directors, the ratification of the appointment of our independent auditor and
the amendment to the Certificate of Incorporation is also enclosed. You
should read the Proxy Statement carefully and completely before returning
your proxy card.
By Order of the Board of Directors
/s/ Michael D. James
-----------------------------------
Michael D. James, Secretary
Omaha, Nebraska
February , 2004
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER SOLICITATION FOR PROXIES TO ENSURE A QUORUM AT THE ANNUAL MEETING.
AMCON Distributing Company
7405 Irvington Road
Omaha, Nebraska 68122
--------------------------
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
of
COMMON STOCK
THE ANNUAL MEETING
Our Board of Directors is asking for your proxy to use at our Annual Meeting
of Stockholders which is scheduled to be held at 10:00 a.m. Central Standard
Time on Thursday, March 11, 2004 at LaSalle Bank, 135 South LaSalle Street,
43rd Floor, Chicago, IL 60603. At the Annual Meeting we will be electing
three Class I directors for terms ending in 2007, ratifying the appointment
of our independent auditor and approving amendments to our Certificate of
Incorporation to allow for a one-for-six reverse stock split and to provide
for cash payment for fractional shares. Other business properly brought
before the Annual Meeting may also be conducted, but we do not know of any
additional business at this time. This proxy statement contains important
information about the election of directors, the ratification of the
appointment of our independent auditor and amending our Certificate of
Incorporation. You should read it carefully and completely.
All record holders of our common stock at the close of business on January
19,2004 (the "Record Date") will be entitled to vote at the Annual Meeting.
There were 3,169,154 shares of our common stock issued and outstanding on the
Record Date. In order to establish a quorum at the Annual Meeting, the
holders of a majority of our outstanding common stock must be present at the
Annual Meeting in person or by proxy. Each share of common stock is entitled
to one vote on each matter to be voted on at the Annual Meeting.
Stockholders do not have the right to cumulate votes in the election of
directors.
Even if you plan to attend the Annual Meeting in person, we ask you to
complete, sign and date the enclosed proxy and return it to us promptly using
the enclosed envelope. This will help ensure that a quorum is present at the
Annual Meeting and will save us the cost of additional proxy solicitations.
Any share of our common stock that is represented by a properly executed and
unrevoked proxy will be considered present at the Annual Meeting for purposes
of establishing a quorum. This includes proxies in which votes are withheld,
abstentions are cast or which represent broker nonvotes. If you decide to
attend the meeting in person, you may withdraw your proxy at any time and
vote in person. You can also withdraw your proxy at any time before the
Annual Meeting by sending a written notice of termination to our corporate
secretary or by filing a later-dated proxy with him.
Our Board of Directors will vote your proxy at the Annual Meeting according
to your instructions as long as it is properly executed and has not been
revoked by you. If you simply sign and date the proxy, but do not provide
any instructions as to how the proxy should be voted, your proxy will be
voted "FOR" each of the nominees for the Board of Directors, "FOR" the
ratification of Deloitte & Touche LLP as our independent auditor and "FOR"
the amendment of our Certificate of Incorporation.
This Proxy Statement and the proxy cards are first being mailed to our
stockholders on or about February 9, 2004.
OWNERSHIP OF OUR COMMON STOCK BY OUR DIRECTORS AND OFFICERS AND OTHER
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the Record Date, the shares of common
stock beneficially owned by each director, each nominee for director, each of
the executive officers named in the Summary Compensation Table in this proxy
statement, and all present executive officers and directors as a group. The
shares beneficially owned by our executive officers and directors, excluding
options, account for approximately 44.6% of the total shares outstanding on
the Record Date and entitled to vote at the Annual Meeting. We believe that
all of these shares will be voted "FOR" each of the proposals set forth in
this proxy statement. In addition to outstanding shares, executive officers
and directors are deemed to beneficially own shares that they may acquire by
exercising vested stock options or options that will vest within 60 days of
the Record Date. While these additional shares are included in the following
table, none of these additional shares are eligible to vote at the Annual
Meeting even if the options were to be exercised prior to the date of the
Annual Meeting since the Record Date has already passed. The following table
also sets forth the beneficial ownership by each other person believed by us
to beneficially own 5% or more of our outstanding common stock as of the
Record Date.
Number of
Shares Percent
Beneficially of
Name Owned Class /1/
------------------------ ------------ -------
William F. Wright, Director, Chairman of the Board 783,7582 /2/ 24.68
Kathleen M. Evans, Director, President 185,0363 /3/ 5.77
Michael D. James, Chief Financial Officer,
Secretary and Treasurer 19,180 /4/ *
Eric J. Hinkefent, President of Health Food
Associates, Inc. and Chamberlin Natural Foods, Inc. 4,400 /5/ *
J. Tony Howard, Director 177,446 /6/ 5.55
Allen D. Petersen, Director 259,238 /7/ 8.13
2
Timothy R. Pestotnik, Director 240,298 /8/ 7.56
William R. Hoppner, Director 101,265 /9/ 3.19
Stanley Mayer, Director 5,000 /10/ *
Raymond F. Bentele, Director 5,000 /11/ *
John R. Loyack, Director 5,000 /12/ *
All executive officers and directors
as a group (11 persons) 1,558,523 47.04
OTHER PRINCIPAL STOCKHOLDERS
----------------------------
Wendy M. Wright /13/ 253,252 7.99
Ane Patterson Shields /14/ 160,784 5.07
----------------------------
* Less than 1% of class.
/1/ Unless otherwise noted, each director and executive officer owned his or
her shares directly and has sole voting and investment power over his or her
shares.
/2/ Includes 61,750 shares of common stock held by AMCON Corporation, over
which Mr. Wright has voting and dispositive powers. Also includes options to
purchase 6,600 shares of common stock at an exercise price of $9.00 per share
which may be exercised currently.
/3/ Includes options to purchase 38,500 shares of common stock at an average
exercise price of $3.41 per share which may be exercised currently.
/4/ Includes options to purchase 15,880 shares of common stock at an average
exercise price of $5.14 per share which may be exercised currently. Mr.
James also holds unvested options to acquire 3,920 shares of common stock at
an average exercise price of $6.49 per share.
/5/ Consists of options to purchase 4,400 shares of common stock at an
exercise price of $7.61 per share which may be exercised currently. Mr.
Hinkefent also holds unvested options to acquire 1,100 shares of common stock
at an exercise price of $7.61 per share.
/6/ Includes options to purchase 29,700 shares of common stock at an average
exercise price of $3.68 per share which may be exercised currently.
3
/7/ Includes 227,098 shares of common stock held by the Lifeboat Foundation,
over which Mr. Petersen shares voting power as a director and 13,440 shares
held by the 2003 Allen D. Petersen Irrevocable Trust, over which Mr. Petersen
has sole voting power as sole trustee. Also includes options to purchase
18,700 shares of common stock at an average exercise price of $4.30 per share
which may be exercised currently.
/8/ Includes 227,098 shares of common stock held by the Lifeboat Foundation,
over which Mr. Pestotnik shares voting power as a director, and options to
purchase 7,700 shares of common stock at an average exercise price of $6.72
per share which may be exercised currently.
/9/ Includes options to purchase 7,700 shares of common stock at an average
exercise price of $6.72 per share which may be exercised currently.
/10/ Consists of options to purchase 5,000 shares of common stock at an
exercise price of $4.48 per share which may be exercised currently.
/11/ Consists of options to purchase 5,000 shares of common stock at an
exercise price of $4.50 per share which may be exercised currently.
/12/ Consists of options to purchase 5,000 shares of common stock at an
exercise price of $4.71 per share which may be exercised currently.
/13/ 12660 Carmel County Rd. #83, San Diego, CA 92130.
/14/ 3055 St. Thomas Drive, Missoula, Montana 59803.
ELECTION OF DIRECTORS
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has nominated William F. Wright, William R. Hoppner
and Stanley Mayer to serve additional three-year terms as directors. Messrs.
Wright, Hoppner and Mayer are each current directors of the Company and have
each expressed an intention to continue to serve on the Board, if elected.
The Board of Directors does not know of any reason why any of them might be
unavailable to continue to serve as directors. If Mr. Wright, Hoppner or
Mayer is unable to serve, the shares represented by all valid proxies will be
voted for the election of such substitute nominee as the Board of Directors
may recommend. There are no arrangements or understandings between Messrs.
Wright, Hoppner or Mayer and any other person pursuant to which they were
nominated to be on the Board of Directors.
The election of a director requires the affirmative vote of a plurality of
the shares present in person or represented by proxy at the Annual Meeting
and entitled to vote. Consequently, votes withheld and broker nonvotes with
respect to the election of directors will have no impact on the election of
directors. Proxies submitted pursuant to this solicitation will be voted,
unless specified otherwise, for the election of Messrs. Wright, Hoppner and
Mayer. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ELECTION OF Messrs. Wright, Hoppner and Mayer.
4
THE BOARD OF DIRECTORS
The table below sets forth certain information regarding the directors of the
Company. The Board of Directors has determined that Messrs. Mayer, Bentele,
Pestotnik, Peterson and Loyack are independent directors of the Company under
the new listing standards adopted by the American Stock Exchange. All
members of the Board of Directors have held their positions with the
companies (or their predecessors) set forth under "Principal Occupation" for
at least five years, unless otherwise indicated.
Principal Director Term To
Name Age Occupation Since Expire
------------------ --- ----------------------------------------- -------- -------
NOMINEES
William F. Wright 61 Chairman and Principal Executive 1986 2004
Officer of the Company
William R. Hoppner 53 Attorney/1/ 1994 2004
Stanley Mayer 58 Consultant/2/ 2002 2004
DIRECTORS CONTINUING IN OFFICE
J. Tony Howard 59 President of Nebraska Distributing
Company 1986 2005
Allen D. Petersen 62 Chairman of Draupnir LLC/3/ 1993 2005
Raymond F. Bentele 67 Retired, Former Chairman, President and
Chief Executive Officer Mallinckrodt,
Inc./4/ 2002 2005
Kathleen M. Evans 56 President of the Company 1986 2006
Timothy R. Pestotnik 43 Attorney, Partner in the law firm Luce,
Forward, Hamilton & Scripps, LLP 1998 2006
John R. Loyack 40 Senior Vice President and Chief Financial
Officer of PNM Resources, Inc./5/ 2003 2006
-----------
/1/ Mr. Hoppner is engaged in the private practice of law. Most recently,
from 1999 to 2003, he served in an Of Counsel position to the law firm Rehm
and Bennett, P.C. From 1997 through 1998, Mr. Hoppner pursued a political
career during which he resigned from our Board of Directors.
/2/ Since 2002, Mr. Mayer has been a consultant to various companies
regarding financial and strategic planning matters. Mr. Mayer served as
Chief Financial Officer for Donruss Playoff, Inc. from 2001 to 2002 and as
Vice President of Southern Union Company from 1998 through 2001.
/3/ Mr. Petersen became Chairman of Draupnir LLC in June 2002. For over 10
years prior to that time, Mr. Petersen was Chairman and Chief Executive
Officer of American Tool Companies, Inc. Mr. Petersen is also a director of
Gold Banc Corporation, Inc., a public bank holding company.
5
/4/ Mr. 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 Kellwood Company, IMC Global, Inc. and Leggett &
Platt, Inc.
/5/ Prior to serving in his current position, Mr. Loyack served as Vice
President and Chief Accounting Officer at PNM Resources and Director of
Financial Accounting and Reporting for Union Pacific Corporation. Mr. Loyack
was appointed to the Board of Directors in September 2003.
Information regarding other executive officers of the Company is found in our
Annual Report on Form 10-K, which is available upon request and on our
website at http://www.amcon.com. The Board of Directors has adopted a Code
of Ethical Conduct that applies to principal executive officers and senior
financial officers, as required by Section 406 of the Sarbanes-Oxley Act of
2002. This Code of Ethical Conduct is available on our website at
http://www.amcon.com.
The Board of Directors conducts its business through meetings of the Board
and actions taken by written consent in lieu of meetings and by the actions
of its committees. During the fiscal year ended September 26, 2003, the
Board of Directors held nine meetings. During fiscal year 2003, all
directors attended at least 75% of the meetings of the Board of Directors and
of the committees of the Board of Directors on which they served.
The Board of Directors has established and assigned certain responsibilities
to an Audit Committee, Compensation Committee and a Nominating Committee.
AUDIT COMMITTEE. The primary purpose of the Audit Committee is (i) to select
the Company's independent auditor based on its assessment of the auditor's
qualifications and independence, and (ii) to assist the Board of Directors in
the oversight of (a) the integrity of the Company's financial statements, and
(b) the Company's compliance with legal and regulatory requirements.
Specific functions performed by the Audit Committee include selecting,
compensating and evaluating the independent auditor of the Company, reviewing
periodically with the independent auditor the performance of the services for
which they are engaged, reviewing the scope of the annual audit and its
results, reviewing the adequacy of the Company's internal accounting controls
with management and the independent auditor, and reviewing with management
and the independent auditor the Company's financial statements prior to the
filing of quarterly and annual reports with the Securities and Exchange
Commission. The Audit Committee operates under a written charter. A copy of
the Audit Committee Charter is attached as Exhibit A to this Proxy Statement
and is available on our website at http://www.amcon.com.
The members of the Audit Committee are Timothy R. Pestotnik (chairperson),
John R. Loyack and Stanley Mayer. The Board of Directors has determined that
all members of the Audit Committee are independent directors under the rules
of the Securities and Exchange Commission and under the new listing standards
adopted by the American Stock Exchange. In addition, the Board of Directors
6
has determined that Mr. Loyack and Mr. Mayer qualify as "audit committee
financial experts" under the rules of the Securities and Exchange Commission.
The Audit Committee held five meetings during fiscal year 2003.
COMPENSATION COMMITTEE. The Compensation Committee reviews and approves
compensation policies, benefit plans, employment agreements, salary levels,
bonus payments and awards under the Company's management incentive plans for
our executive officers and recommends compensation for non-employee directors
to the full Board. The Compensation Committee also administers our 1994
Stock Option Plan. The Compensation Committee is specifically responsible
for determining the compensation of the Company's Chairman. The Compensation
Committee operates under a written charter, a copy of which is available on
our website at http://www.amcon.com.
The members of Compensation Committee during fiscal 2003 were J. Tony Howard
(chairperson) and William R. Hoppner. The Board expects to appoint new
directors to the Compensation Committee so that it is made up of persons who
are independent under the new listing standards adopted by the American Stock
Exchange prior to the time these listing standards go into effect. The
Compensation Committee held five meetings in fiscal year 2003.
NOMINATING COMMITTEE. The Nominating Committee is responsible for making
recommendations to the Board of Directors of persons to serve as directors of
the Company and as chairmen and members of committees of the Board of
Directors. The Nominating Committee is also responsible for certain
corporate governance practices, including the development of ethical conduct
standards for our directors, officers and employees and an annual evaluation
to determine whether the Board of Directors and its committees are
functioning effectively. The Nominating Committee operates under a written
charter, a copy of which is available on the Company's website at
http://www.amcon.com.
The members of the Nominating Committee are Raymond F. Bentele (chairperson),
John R. Loyack and Stanley Mayer, each of whom the Board of Directors has
determined to be independent under the new listing standards adopted by the
American Stock Exchange. The Nominating Committee was only recently formed
and held no meetings during fiscal year 2003. The Nominating Committee did
meet on December 23, 2003 for the purpose of reviewing candidates for the
directorships to be voted on at the Annual Meeting.
The Nominating Committee expects to identify nominees to serve as directors
of the Company primarily by accepting and considering the suggestions and
nominee recommendations made by directors, management and stockholders.
Candidates for directors are evaluated based on their character, judgment,
independence, financial or business acumen, diversity of experience, ability
to represent and act on behalf of all stockholders and the needs of the Board
of Directors. In general, the Nominating Committee would expect to re-
nominate incumbent directors who express an interest in continuing to serve
on the Board. For the 2005 Annual Meeting, the Nominating Committee will
consider stockholder recommendations for director nominees that submitted to
our corporate secretary by October 11, 2004. Shareholder nominations must be
in writing and should include sufficient biographical and business experience
information about the nominee so that the Nominating Committee can evaluate
the nominee based on its selection criteria.
7
COMPENSATION OF DIRECTORS
Prior to January 1, 2003, directors who were not employees of the Company
were paid an annual fee of $20,000, plus $500 for each board meeting
(including committee meetings) attended in person or by teleconference.
Beginning January 1, 2003, directors who are not employees of the Company are
paid according to the following annual scale with no payment of meeting fees:
Audit Committee - Chair $40,000
Audit Committee - Member $35,000
Nominating Committee - Chair $35,000
All Other Outside Directors $30,000
In addition, all directors are reimbursed for out-of-pocket expenses related
to attending 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 to non-
employee directors are not issued under the Company's 1994 Stock Option Plan.
Such option grants are recommended on an annual basis by the Compensation
Committee, subject to approval by the Board of Directors. These stock
options also have varying vesting schedules ranging up to five years and
expire ten years after the date of grant. During fiscal year 2003, stock
options to purchase 5,000 shares of common stock were granted to Mr. Loyack
at an exercise price of $4.71 per share.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information regarding the annual and long-term
compensation awarded to, earned by or paid by the Company and its
subsidiaries to the Company's Chairman and the other three highest paid
executive officers of the Company ("Named Officers") for services rendered
during fiscal years 2003, 2002, and 2001. No other executive officers of the
Company earned salary and bonus in fiscal year 2003 in excess of the
disclosure threshold established by federal securities laws.
8
Summary Compensation Table
Long-Term Compensation
---------------------------------
Annual Compensation Awards Payouts
--------------------------------------- ------------------------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
/1/ /2/ /3/
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Position Year ($) ($) ($) ($) (S) ($) ($)
------------ ---- ------- ------- ------------ ---------- ------------ ------- ------------
William F. Wright, 2003 409,450 102,400 63,645 - - - 9,095
Chairman 2002 393,700 40,000 - - - - 9,935
2001 378,560 113,568 - - - - 9,048
Kathleen M. Evans, 2003 321,710 160,900 - - - - 8,907
President 2002 309,340 155,000 - - - - 8,463
2001 297,440 90,000 - - - - 10,657
Michael D. James, 2003 162,500 40,000 - - - - 7,379
Secretary, 2002 155,000 25,000 - - - - 7,333
Treasurer and 2001 145,000 25,000 - - - - 6,612
Chief Financial
Officer
Eric J. Hinkefent, 2003 125,000 - - - - - 5,103
President of Health 2002 102,700 16,000 - - - - 4,045
Food Associates, 2001 100,000 - - - - - 2,240
Inc. and Chamberlin
Natural Foods, Inc.
--------------------
/1/ Amount for fiscal 2003 consists of (i) the value of split dollar life
insurance of $39,645 and (ii) auto allowance of $24,000 for Mr. Wright. No
disclosure is required in this column for any other named executive officer
pursuant to applicable Securities and Exchange Commission regulations, as the
aggregate value of items covered by this column does not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus shown for each respective
executive officer named.
/2/ The Company does not have a long-term incentive plan as defined in
Item 402 of Regulation S-K under the Securities Exchange Act of 1933, as
amended.
/3/ These amounts for fiscal year 2003 consist of (i) contributions to the
Company's Profit Sharing Plan of $8,000, $8,000, $7,379 and $5,103 for Mr.
Wright, Ms. Evans, Mr. James and Mr. Hinkefent, respectively, and (ii) the
values of term life insurance of $1,095 and $907 for Mr. Wright and Ms.
Evans, respectively.
9
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
No options were granted during fiscal year 2003 to the Named Officers listed
in the Summary Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table sets forth certain information concerning options
exercised during fiscal year 2003, the number of unexercised options and the
value of unexercised options at the end of fiscal year 2003 for the Named
Officers listed in the Summary Compensation Table.
(a) (b) ) (d) (e)
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs at
Options/SARs at Fiscal Year
Shares Fiscal Year End(#) End($)/1/
Acquired
on Value Exercisable/ Exercisable/
Name Exercise(#) Realized ($) Unexercisable Unexercisable
----------------- ----------- ------------ ------------------ ------------------
William F. Wright -0- -0- 6,600 / 0 0 / 0
Kathleen M. Evans -0- -0- 38,500 / 0 $68,850 / 0
Michael D. James 2,200 $3,250 15,680 / 4,120 $16,065 / 0
Eric J. Hinkefent -0- -0- 4,400 / 1,100 0 / 0
-------------------
/1/ Based on the difference between the closing sale price of the Company's
common stock on September 26, 2003 and the exercise price of the options.
10
EQUITY COMPENSATION PLAN INFORMATION
The following equity compensation plan information summarizes plans and
securities approved and not approved by security holders as of September 26,
2003:
(a) (b) (c)
Number of securities
Number of securities remaining available
to be issued upon Weighted-average for future issuance
exercise of outstanding exercise price of under equity compensation
options, warrants outstanding options, plans (excluding securities
Plan category and rights warrants and rights reflected in column (a))
------------------------- ----------------------- -------------------- ---------------------------
Equity compensation plans
approved by security
holders/1/ 231,050 $ 5.22 246,780
Equity compensation plans
not approved by security
holders/2/ 83,800 $ 4.55 -
---------------------- -------------------- ---------------------------
Total.................... 314,850 $5.04 246,780
====================== ==================== ===========================
-----------------------
/1/ The Company's 1994 Stock Option Plan allows for the issuance of up to
550,000 shares of common stock. As of December 19, 2003, 246,780 shares of
common stock were available for issuance under the Company's 1994 Stock
Option Plan.
/2/ Represents stock options to purchase 78,800 shares of common stock issued
to non-employee directors as described in "Compensation of Directors" and
stock options to purchase 5,000 shares of common stock issued to an employee
pursuant to an individual compensation arrangement.
LONG-TERM INCENTIVE PLANS AND OTHER MATTERS
The Company does not maintain a long-term incentive plan or pension plan (as
defined in Item 402 of SEC Regulation S-K) for the Named Officers and has not
repriced any options or SARs for any Named Officer during the last fiscal
year.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with William F. Wright,
the Chairman of the Board, and Kathleen M. Evans, President of the Company.
Each such agreement has a term expiring on December 31, 2004 and is
automatically extended each December 31 for one additional year unless either
the Company or the executive delivers a notice of non-extension at least 90
days prior to the scheduled automatic renewal date. Each agreement provides
for the payment of a base salary in each year during the term thereof and
provides that the executive shall be eligible to receive a bonus based upon
performance in an amount determined by the Compensation Committee.
11
The 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 expiring on September 30, 2004 and is
automatically extended each September 30 for one additional year unless
either the Company or the Mr. Hinkefent delivers a notice of non-extension at
lease 90 days prior to the scheduled automatic renewal date. The agreement
provides for a base salary in each year of the term thereof and provides that
Mr. Hinkefent shall be eligible to receive a bonus of up to a maximum of 75%
of his base salary based upon performance as determined by the Compensation
Committee.
If an employment agreement terminates due to an executive's disability or
death, the executive or his or her personal representative are entitled to
receive the executive's base salary for a period of six months following the
termination. If an employment agreement is terminated for reasons other than
serious misconduct (as defined in the agreements), the terminated executive
is entitled to receive a severance package equal to such executive's current
base salary plus his or her previous year's bonus. Each executive is also be
eligible to participate in the Company's 1994 Stock Option Plan and in other
employee benefit plans maintained by the Company, including health and life
insurance plans. Each agreement contains provisions under which the
executive has agreed to maintain the confidentiality of information
concerning the Company and its affairs and a covenant not to compete with the
Company for a period of one year after such executive's employment with the
Company terminates.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
EXECUTIVE OFFICER COMPENSATION. The Compensation Committee endeavors to
establish total compensation packages for each executive officer that fairly
reflects the value of that executive officer's services to the Company and
that will permit the Company to attract, retain and motivate high quality
individuals in its key executive positions, taking into consideration both
the prevailing competitive job market and the current size and expected
growth of the Company.
Executive officer compensation contains three principal components: (i) a
base salary; (ii) a cash bonus; and (iii) grants of options to purchase
common stock under the Company's 1994 Stock Option Plan. Mr. Wright's,
Ms. Evans' and Mr. Hinkefent's base salaries are set forth in their
employment agreements and are subject to annual increases as recommended by
the Compensation Committee. The base salaries of other officers are
determined as a function of their prior base salaries and the Compensation
Committee's view of base salary levels for executive officers with comparable
positions and responsibilities in other companies and are not a function of
any specific performance criteria. The Compensation Committee periodically
compares base salaries paid to the Company's executive officers with those
paid by other public companies engaged in similar industries and that
generate revenues in the same range as the Company. These companies are not
necessarily the same companies that are included in the peer group index
(Standard & Poor's 600 Food Distributors Index) used in the Performance
12
Graph included in this Proxy Statement. In general, the Compensation
Committee determined that the base salaries paid to the Company's executive
officers for fiscal year 2003 fell within the median range of base salaries
paid by such comparable companies.
The Compensation Committee has adopted an executive compensation plan which
established performance goals and criteria relating to the amounts of cash
bonuses paid to its executive officers in future years. Stock option awards
will continue to be determined on an annual basis. The bonus portion of Mr.
Wright's, Ms. Evans's and Mr. Hinkefent's compensation is paid based upon the
performance goals established by the Compensation Committee and approved by
the Board of Directors. In addition to bonuses paid in accordance with the
executive compensation plan, the Compensation Committee may award additional
bonus amounts on a discretionary basis if the Compensation Committee deems it
to be appropriate.
The bonus portion of Mr. James's compensation is paid on a discretionary
basis based upon the Compensation Committee's assessment of his individual
performance and the overall performance of the Company during the most
recently completed fiscal year with respect to stockholder value, stock
price, sales growth and net income. In general, the Compensation Committee's
practice has been to award cash bonuses to the executive officers with
respect to a particular fiscal year in amounts consistent with cash bonuses
awarded in prior fiscal years as long as the Company achieves stock price,
sales and net income levels specified in the Company's budget for such fiscal
year.
Because ownership of the Company's common stock serves to align the economic
interests of its executive officers with those of its stockholders, executive
officers who, in the opinion of the Compensation Committee, contribute to the
growth, development and financial success of the Company may be awarded
options to purchase common stock. Any grant of options to purchase common
stock must be made with an exercise price no less than the closing sale price
of the common stock on the date of grant. Therefore, the compensation value
of these stock options is directly related to the long-term performance of
the Company as measured by its future return to stockholders. The amounts of
stock option awards granted to executive officers are also determined on a
discretionary basis by the Compensation Committee considering the same
criteria used to award cash bonuses.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE. The current tax
law imposes an annual, individual limit of $1 million on the deductibility of
the Company's compensation payments to the Chairman and to the four most
highly compensated executive officers other than the Chairman. Specified
compensation is excluded for this purpose, including performance-based
compensation, provided that certain conditions are satisfied. The
Compensation Committee has determined to preserve, to the maximum extent
practicable, the deductibility of all compensation payments to the Company's
executive officers.
13
COMPENSATION OF CHAIRMAN. Mr. Wright's base salary is set by his employment
agreement and is subject to annual increases as recommended by the
Compensation Committee. It is the view of the Compensation Committee, based
upon its periodic review of base salaries paid to chief executive officers of
similarly situated companies, that Mr. Wright's base salary is reasonable and
within the median range paid by such other companies. Based on the
performance criteria set forth in the executive compensation plan, Mr. Wright
was awarded a cash bonus of $102,400, which was equal to 25% of his base
salary for fiscal year 2003. No stock option grants were awarded to Mr.
Wright in fiscal year 2003.
J. Tony Howard, chairperson
William R. Hoppner
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
There were no compensation committee interlocks and no insider participation
in compensation decisions during fiscal 2003 that are required to be reported
under the rules and regulations of the Securities Exchange Act of 1934.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
William F. Wright, Kathleen M. Evans, J. Tony Howard and Allen D. Petersen
are officers, directors or stockholders of AMCON Corporation which is engaged
in the beer distribution business in eastern Nebraska through a wholly owned
subsidiary. AMCON Corporation provides the Company with offices and
administrative services and the Company reimburses AMCON Corporation for a
proportionate share of the costs of these offices and services based upon our
respective usages. The Company paid AMCON Corporation $60,000 during fiscal
2003 under this arrangement. In fiscal 2004, the Company will pay AMCON
Corporation $66,000 under this arrangement. The Company believes the terms
on which AMCON Corporation supplies these offices and services to the Company
are no less favorable than would otherwise be available from unaffiliated
parties.
The Company has an agreement with William R. Hoppner, one of our directors,
for consulting services in connection with our retail health food operations.
During fiscal 2003, the Company paid Mr. Hoppner $90,000 for his services
under this agreement, plus reimbursement for his out-of-pocket expenses. Mr.
Hoppner is currently providing consulting services to the Company on a month-
by-month basis and receives a fee of $7,500 per month.
REPORT OF THE AUDIT COMMITTEE
The Company's management is responsible for the preparation of the Company's
financial statements and for maintaining an adequate system of internal
controls and processes for that purpose. Deloitte & Touche LLP ("D&T") acts
as the Company's independent auditor, and D&T is responsible for conducting
an independent audit of the Company's annual financial statements in
accordance with generally accepted auditing standards and issuing a report on
the results of their audit. The Audit Committee is responsible for providing
independent, objective oversight of both of these processes.
14
The Audit Committee has reviewed and discussed the audited financial
statements for the year ended September 26, 2003 with management of the
Company and with representatives of D&T. As a result of these discussions,
the Audit Committee believes that the Company maintains an effective system
of accounting controls that allows the Company to prepare financial
statements that fairly present its financial position and results of its
operations. Our discussions with D&T also included the matters required by
the Statement on Auditing Standards No. 61 (Communications with Audit
Committees).
In addition, the Audit Committee reviewed the independence of D&T. We have
discussed D&T's independence with them and have received written disclosures
and a letter from D&T regarding its independence as required by Independence
Standard Board Standard No. 1.
Based on the foregoing, the Audit Committee recommended to the full Board of
Directors that the audited financial statements of the Company for the year
ended September 26, 2003 be included in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission.
Timothy R. Pestotnik, chairperson
John R. Loyack
Stanley Mayer
COMPANY PERFORMANCE
The following stock performance graph and table provide a comparison over the
five-year period ending September 26, 2003 of the cumulative total return
from a $100 investment in the Company's common stock with the stocks listed
on the American Stock Exchange Composite Total Return Index and the Standard
& Poor's 600 Food Distributors Index.
[GRAPH OMITTED]
9/25/98 9/24/99 9/29/00 9/28/01 9/27/02 9/26/03
------- ------- ------- ------- ------- -------
AMCON Distributing Company 100.00 127.55 87.84 72.16 85.55 76.73
American Stock Exchange
Total Return Index 100.00 129.01 159.00 114.74 101.02 129.70
S&P 600 Food Distributors Index 100.00 85.18 111.64 211.48 140.52 159.23
15
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
Deloitte & Touche LLP ("D&T") has been appointed by the Audit Committee as
independent auditor for the Company and its subsidiaries for the fiscal year
ending September 24, 2004. This appointment is being presented to the
stockholders for ratification. The ratification of the appointment of
auditor requires the affirmative vote of the holders of a majority of the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote. Abstentions will have the same effect as a vote against
ratification. Broker nonvotes will not be considered shares entitled to vote
with respect to ratification of the appointment and will not be counted as
votes for or against the ratification.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT BY THE AUDIT COMMITTEE OF DELOITTE & TOUCHE
LLP AS THE COMPANY'S INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING SEPTEMBER
24, 2004.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting and will be provided an opportunity to make a statement and to
respond to appropriate inquiries from stockholders.
Accounting Fees and Services
The following fees were paid to D&T by the Company for professional
services for fiscal 2003 and 2002, respectively.
AUDIT FEES. D&T billed the Company a total $168,000 and $110,000 in fiscal
2003 and 2002, respectively, for professional services rendered for the audit
of the Company's annual financial statements for those fiscal years and to
review the Company's interim financial statements included in its Quarterly
Reports on Form 10-Q filed with the SEC during those years.
AUDIT-RELATED FEES. D&T billed the Company $16,090 and $16,000 in fiscal
2003 and 2002, respectively, for audit-related services. Audit-related
services generally include fees for the audits of the Company's employee
benefit plans and fees incurred in connection with business acquisitions and
compliance with the Sarbanes-Oxley Act and related regulatory matters.
TAX FEES. In fiscal 2003 and 2002, D&T billed the Company $41,786 and
$26,660, respectively, for tax services. Tax services consisted primarily of
preparation of tax returns and general advice relating to tax issues and
compliance.
ALL OTHER FEES. D&T billed the Company $64,595 and $0 in fiscal 2003 and
2002, respectively, for services rendered to the Company, other than the
services described under the above captions. These services consisted
primarily of advice relating to internal control documentation, review of
valuation reports and audit workpaper review by other accountants.
The Audit Committee approved all services provided by D&T during fiscal
year 2003 and has determined that the provision of these services did not
adversely affect D&T's independence. It is currently the policy of the Audit
Committee to review and approve all services provided by D&T to the Company.
16
REVERSE STOCK SPLIT AND RELATED
AMENDMENT TO OUR CERTIFICATE OF INCORPORATION
GENERAL
Our Board of Directors has authorized, deems advisable and recommends a
reverse 1-for-6 stock split of our common stock, $0.01 par value
(collectively, the "Transaction"). In connection with the Transaction, our
Board of Directors has adopted a resolution approving, deeming advisable and
recommending to stockholders for approval, an amendment to our certificate of
incorporation to effect the proposed Transaction. The form of amendment is
attached hereto as Exhibit B.
If the stockholders approve the Transaction, we intend to file the amendment
to our certificate of incorporation with the Secretary of State of Delaware.
The Transaction will become effective on the date the amendment is filed with
the Secretary of State of Delaware, or such later date as is specified in the
filing (the "Effective Date"). We expect the amendment to become effective
as soon as practicable following the annual meeting. However, our Board of
Directors reserves the right to abandon the Transaction even if approved by
the stockholders. See " Reservation of Rights". Once our Board implements
the Transaction, we will publicly announce in a press release and post on our
website at http://www.amcon.com the Effective Date of the Transaction.
PURPOSE AND REASONS FOR TRANSACTION
Our Board of Directors decided to propose the Transaction in order to (a)
reduce administrative costs incurred by us in connection with the mailing of
reports to stockholders and maintenance of small stockholder accounts, and
(b) allow small stockholders to liquidate their shares easily.
COST SAVINGS TO COMPANY AND STREET NAME HOLDERS; ADMINISTRATIVE EXPENSES TO
MAINTAIN SMALL STOCKHOLDER ACCOUNTS. We have a large number of stockholders
that own relatively few shares. As of the record date, January 19, 2004,
approximately 630 stockholders of record owned fewer than six (6) shares of
our common stock each or approximately 1,280 shares of our common stock in
the aggregate. Although holders of fewer than six (6) shares constitute
approximately 66% of the stockholders of record, such stockholders own only
0.04% of the outstanding shares of our common stock. As of January 19, 2004,
we also estimate that approximately 1,800 persons beneficially owned shares
of our common stock in accounts at banks or brokerage firms in so-called
"street name" ("Street Name Holders") and many of these Street Name Holders
beneficially own fewer than six (6) shares of our common stock. We would
like to have these Street Name Holders also enjoy the benefit of this
Transaction. However, they will not participate in the Transaction unless
they either: (i) direct their broker or bank to change their ownership to
record title prior to the Effective Date of the Transaction, or (ii) instruct
their broker or bank owning record title to the shares to participate in the
Transaction by following the appropriate procedures of the Depository Trust
Company ("DTC"). Note, a fee may be associated with changing a Street Name
Holder's ownership from beneficial to record title. If you direct your bank
17
or broker to participate in the Transaction, we anticipate that the
administrative expense of such instruction will be lower than if you direct
your broker or bank to convert your ownership to record title. See "Structure
Of The Transaction-Effect On Street Name Holders."
LIQUIDITY FOR CERTAIN SMALL STOCKHOLDERS. We believe that holders of fewer
than six (6) shares of our common stock (the "Liquidated Stockholders") may
be deterred from selling their shares because of disproportionately high
brokerage costs. The Transaction gives stockholders of record, who own fewer
than six (6) shares of our common stock immediately prior to the Transaction,
the opportunity to receive cash for their shares without having to pay any
brokerage commissions. Stockholders of record who do not want to cash out
their holdings of our common stock, may avoid this result by purchasing
additional shares or consolidating accounts so that each record account
owning our common stock holds at least six (6) shares prior to 4:00 p.m.
(central standard time) on the Effective Date. See "Procedures To Cash-Out
Fractional Shares How to Avoid Cash-Out." Street Name Holders may also enjoy
the benefits of this Transaction, if they either: (i) direct their broker or
bank to change their ownership to record title prior to the Effective Date of
the Transaction, or (ii) instruct their broker or bank and instructions of
the broker or bank to participate in the Transaction by following the
appropriate procedures of DTC. If a Street Name Holder does not want
participate in the Transaction, no additional shares need to be purchased and
no additional action needs to be taken to avoid being cashed-out.
DETERMINATION OF CASH-OUT PRICE
The Board has set the Cash-Out Price per share of our common stock to equal
the average of the closing prices per share of our common stock on the
American Stock Exchange ("AMEX") for a period of ten consecutive AMEX trading
days ending on (and including) the Effective Date, without interest ("Cash-
Out Price").
Acquisitions of fractional shares by corporations in lieu of issuing
fractional shares to stockholders is governed by Section 155 of the Delaware
Corporation Law ("Section 155"). Section 155 requires a corporation
purchasing fractional shares to pay "fair value" for such shares. The
Delaware Supreme Court in Applebaum v. Avaya, Inc., 812 A.2d 880 (Del. Sup.
Ct. 2002) held that when a corporation is purchasing fractional shares
pursuant to a reverse stock split not resulting in going private, the
purchase price for the fractional shares will constitute "fair value" if it
is equal to the preceding ten-day average of the trading price of the
corporation's stock. The Court also found that a "going concern" analysis or
other analysis to determine the intrinsic value of the corporation is not
necessary.
STRUCTURE OF THE TRANSACTION
The Transaction consists of a one-for-six reverse stock split of our common
stock and a cash payment for fractional shares of less than one full share.
If the Transaction is approved by stockholders and implemented by the Board,
the reverse stock split is expected to occur at 8:00 p.m. on the Effective
Date.
18
EFFECT ON THE COMPANY. The Board of Directors has determined that Amcon has
no current plan or intention to take Amcon private. We have designed the
size of the reverse stock split to (a) maintain the public registration of
our common stock with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, by maintaining at least 300
stockholders of record, and (b) continue the listing of our common stock on
the AMEX, by maintaining at least 400 beneficial or record stockholders.
The number of authorized shares of our common stock will not change as a
result of the Transaction. On January 19, 2004, there were 3,169,154 shares
of our common stock issued and outstanding. As a result of the Transaction,
the total number of outstanding shares of our common stock will be reduced to
an amount equal to one-sixth of the amount of current outstanding shares and
the fractional shares cashed-out. The rights and preferences of the
outstanding shares of our common stock will remain the same after the
Transaction. Each share of our common stock issued pursuant to the
Transaction will be fully paid and non-assessable. The par value of our
common stock will remain at $0.01 per share after the Transaction.
We do not know what the average daily closing price per share of our common
stock as traded on the AMEX will be for the ten trading day period preceding
and including the Effective Date. We also do not know the number of shares
they will own to be cashed-out as a result of the Transaction, which will
vary from the respective numbers on January 19, 2004. We, therefore, cannot
determine the total amount to be paid by us in the Transaction.
However, by way of illustration only, the following examples demonstrate how
we will determine the amount of money to be paid to stockholders owning
fractional shares immediately after the reverse stock split (the "Cashed-Out
Stockholders"). Assuming that on the Effective Date immediately prior to the
Transaction:
- the total number of record holders has not changed since the record
date, there are 630 Liquidated Stockholders who own an aggregate of 1,284
shares, 400 remaining record holders holding 990 shares which will become
fractional shares following the Transaction, 120 remaining beneficial holders
who have instructed their broker or bank to participate in the Transaction
holding 360 shares which will become fractional shares following the
Transaction, and the cash-out price is $4.49 (based on the closing price on
January 9, 2004), the Company will be obligated to pay the Cashed-Out
Stockholders approximately $11,826.66 in the aggregate; or
- the total number of record holders has increased to 1,500, there are
1,030 Liquidated Stockholders who own an aggregate of 3090 shares,400
remaining record holders holding 990 shares which will become fractional
shares following the Transaction, 120 remaining beneficial holders who have
instructed their broker or bank to participate in the Transaction holding 360
shares which will become fractional shares following the Transaction, and the
cash-out price is $4.49 (based on the closing price on January 9, 2004), the
Company will be obligated to pay the Cashed-Out Stockholders $19,935.91 in
the aggregate.
19
- the total number of record holders has not changed since the record
date, 230 Street Name Holders owning less than six (6) shares of our common
stock prior to the Transaction instruct their bank or broker to participate
in the Transaction, resulting in 890 Liquidated Stockholders and Street Name
Holders who own an aggregate of 2,434 shares, and the cash-out price is $4.49
(based on the closing price on January 9, 2004), 400 remaining record holders
holding 990 shares which will become fractional shares following the
Transaction, 120 remaining beneficial holders who have instructed their
broker or bank to participate in the Transaction holding 360 shares which
will become fractional shares following the Transaction, the Company will be
obligated to pay the Cashed-Out Stockholders $16,990.16 in the aggregate.
EFFECT ON STOCKHOLDERS OF RECORD WITH FEWER THAN SIX (6) SHARES OF COMMON
STOCK. Upon consummation of the reverse stock split portion of the
Transaction, each stockholder of record on the Effective Date will own one
share of our common stock for each six (6) of shares of our common stock held
in his or her account immediately prior to the reverse stock split. Any
Liquidated Stockholder will receive a cash payment instead of a fractional
share. This cash payment will be determined and paid as described below
under "Determination Of Cash-out Price".
After the Transaction, if you are a Liquidated Stockholder, you will have no
further interest in the Company with respect to your cashed-out shares.
These shares will no longer entitle you to the right to vote as a
stockholder, to share in our assets, earnings, or profits, to receive any
dividends declared or paid after the Transaction or to any other rights as a
stockholder. In other words, you will be deemed to no longer hold or own
shares of our common stock you owned immediately prior to the Transaction,
you will have only the right to receive cash for these shares. In addition,
you will not be entitled to receive interest with respect to the period of
time between the Effective Date and the date you receive your payment for the
cashed-out shares.
Any stockholder of record currently owning fewer than six (6) shares of our
common stock who desires to retain an equity interest in the Company after
the Effective Date of the Transaction may do so by purchasing, prior to the
Effective Date, a sufficient number of shares of our common stock so that the
total number of shares held of record in the stockholder's name immediately
prior to the Transaction is equal to or greater than six, or, if applicable,
consolidating or transferring all accounts of record held by the stockholder
into one account with six or more shares of our common stock.
EFFECT ON REGISTERED STOCKHOLDERS WITH SIX (6) OR MORE SHARES OF COMMON
STOCK. Stockholders of record holding six (6) or more shares of our common
stock in his or her account immediately prior to the Transaction will remain
stockholders of the Company, but will receive the Cash-Out Price for any
fractional share resulting from the Transaction. After the Transaction,
continuing stockholders will hold approximately one-sixth of the number of
shares held prior to the Transaction, but the value of one post-Transaction
share will equal the value of six (6) pre-Transaction shares.
20
EFFECT ON STREET NAME HOLDERS. Street Name Holders will not participate in
the Transaction unless they either: (i) direct their broker or bank to change
their ownership to record title prior to the Effective Date of the
Transaction, or (ii) instruct their broker or bank owning record title to the
shares to participate in the Transaction by following the appropriate
procedures of DTC. The direction to change beneficial ownership to record
ownership must be given in a timely manner to permit the change in ownership
to record title to occur prior to 4:00 p.m. (central standard time) on the
effective date of the Transaction. The instruction to the broker or bank to
participate in the Transaction must be given in accordance with the
procedures of the broker or bank. If a Street Name Holder provides the (a)
timely direction to change beneficial ownership to record ownership or (b)
appropriate instruction to his or her broker or bank to participate in the
Transaction as provided in this proxy statement, the Street Name Holder will
receive cash for the fractional share resulting from the Transaction. If
immediately prior to the Transaction you are a Street Name Holder
beneficially owning less than six (6) shares of our common stock who follows
one of the above procedures to take advantage of the Transaction, your shares
will also be cashed out and you will no longer have any further interest in
the Company with respect to your fractional share. Note, if you are a Street
Name Holder who is considering participating in this Transaction, you should
check with your broker or bank to determine what, if any, fee would be
associated with converting your ownership to record title or instructing
your broker or bank to participate in the Transaction. If you direct your
bank or broker to participate in the Transaction by following the appropriate
procedures of DTC, we anticipate that the administrative expense of such
instruction will be lower than if you direct your broker or bank to convert
your ownership to record title. If a Street Name Holder does not want
participate in the Transaction, no additional shares need to be purchased and
no additional action needs to be taken to avoid being cashed-out.
EFFECT ON OPTIONS, WARRANTS AND OTHER SECURITIES. In addition, all
outstanding options, warrants and other securities entitling holders to
purchase shares of our common stock, if any, will be adjusted as a result of
the Transaction, as required by the terms of these securities. In
particular, the conversion ratio for each instrument would be reduced, and
the exercise price, if applicable, would be increased in accordance with the
terms of each instrument and based on the exchange ratio of the Transaction.
Also, the number of shares reserved for issuance under our existing stock
option and employee stock purchase plans would be reduced proportionally
based on the exchange ratio of the Transaction. None of the rights currently
accruing to holders of the common stock, options, warrants or other
securities convertible into common stock would be affected by the
Transaction.
Examples. In general, the effect of the Transaction can be illustrated by
the examples set forth on the following table. Note that for illustrative
purposes only, we have assumed a Cash-Out Price of $4.49 (based on an assumed
ten-day trading average that is equal to the on the closing price on January
9, 2004).
21
HYPOTHETICAL SCENARIOS
(1) Mr. Brown is a stockholder of record who holds five (5) shares of our
common stock in his account immediately prior to the Transaction.
RESULT
Instead of receiving a fractional share of our common stock immediately after
the Transaction, Mr. Brown's shares will be converted into the right to
receive cash. Mr. Brown would receive a check for $22.45 (5 x $4.49 =
$22.45). Note: If Mr. Brown wants to continue his investment in the Company,
immediately prior to the Effective Date, he can buy at least one (1) more
share. Mr. Brown would have to act far enough in advance of the transaction
so that the purchase is completed and the additional share is credited in his
account by the close of business (central standard time) on the Effective
Date.
(2) As of the Effective Date, Ms. Green has two separate record accounts.
She holds:
- 3 shares of our common stock in one account, and
- 2 shares of our common stock in the other.
All of her shares are registered in her name only.
RESULT
Ms. Green will receive cash payments equal to the Cash-Out Price of our
common stock in each record account instead of receiving fractional shares.
Ms. Green would receive two checks totaling $22.45 ((2 x $4.49 = $8.98) + (3
x $4.49 = $13.47)). Note: If Ms. Green wants to continue her investment in
the Company, she can consolidate or transfer her two record accounts
immediately prior to the Effective Date into one account and purchase one (1)
or more additional shares so her single account owns at least six (6) shares
of our common stock. Alternatively, she can buy three (3) or more shares for
the first account and four (4) or more shares for the second account, and
continue to hold them in separate accounts. She would have to act far enough
in advance of the transaction so that the consolidation or the purchase is
completed by the close of business (central standard time) on the Effective
Date.
(3) Mr. Blue holds 10 shares of our common stock as of the Effective Date.
RESULT
After the Transaction, Mr. Blue will continue to hold 1 share of our common
stock and will be entitled to a cash payment for the fractional share in
connection with the Transaction of $17.96 (4 x $4.49).
(4) Ms. Orange is a Street Name Holder holding 4 shares of our common stock
in her name in a brokerage account as of the Effective Date.
22
RESULT
Ms. Orange will hold 2/3rds of one share of our common stock in her name in
an account unless she either (i) directs her broker or bank to change her
ownership to record title prior to the Effective Date of the Transaction, or
(ii) instructs her broker or bank to participate in the Transaction by
following the appropriate procedures of DTC. If Ms. Orange becomes the
record owner, she will receive directly a check for $17.96 (4 shares x
$4.49). If Ms. Orange simply instructs her broker or bank to participate in
the Transaction, she will receive, through her broker or bank, a check for
$17.96 (4 shares x $4.49).
(5) Mr. Purple is a Street Name Holder holding 15 shares of our common stock
in his name in a brokerage account as of the Effective Date.
RESULT
If Mr. Purple follows either of the procedures described above to take
advantage of the Transaction, he will continue to hold 2 shares of our common
stock in street name and he will receive directly, or through his broker or
bank, as applicable, a check for $13.47 (3 shares x $4.49). If he does
nothing, he will beneficially own 2 and 1/2 shares of our common stock after
the Transaction.
PROCEDURES TO EXCHANGE CERTIFICATES AND CASH-OUT FRACTIONAL SHARES
EXCHANGING CERTIFICATES FOR REMAINING STOCKHOLDERS. Our transfer agent will
act as the exchange agent for purposes of implementing the exchange of stock
certificates. As soon as practicable after the effective date, stockholders
will be notified of the effectiveness of the Transaction. Stockholders of
record will receive a letter of transmittal requesting them to surrender
their stock certificates for new stock certificates reflecting the adjusted
number of shares as a result of the Transaction. Street Name Holders who do
not want to participate in the Transaction will not be required to take any
further actions. However, Street Name Holders who want to participate in the
Transaction may receive cash for their fractional share resulting from the
Transaction by either (i) directing their broker or bank to change their
ownership to record title prior to the Effective Date of the Transaction, or
(ii) instructing their broker or bank to participate in the Transaction by
following the appropriate procedures of DTC. See "Structure of the
Transaction-Effect On Street Name Holders."
PAYMENT FOR FRACTIONAL SHARES. As soon as practical after the Effective
Date, our transfer agent will mail to all stockholders:
- a notice of the filing of the amendment to our certificate of
incorporation,
- a letter of transmittal which contains instructions on how to surrender
your certificate(s) to our transfer agent to receive your cash payment, along
with
- other documents described below. See "How to Get Paid."
23
No certificates or scrip representing fractional shares of our common stock
adjusted for the Transaction will be issued in connection with the
Transaction. Instead, each Cashed-Out Stockholder who is not a Street Name
Holder, upon surrender of their stock certificates and delivery to our
transfer agent of the documents discussed below, will receive cash for the
fractional share resulting from the Transaction. Brokerage firms and banks
holding instructions to participate in the Transaction should follow DTC
procedures to receive cash for the fractional shares the Street Name Holders
will beneficially own as a result of the Transaction. Please do not send your
certificates until you receive your letter of transmittal.
The amount of the cash payment to record andparticipating beneficial
stockholders owning a fractional share will equal:
- the fractional share owned immediately after the Transaction, times six
(6) times
- the Cash-Out Price. See "Determination of Cash-Out Price."
At the same time we pay stockholders for the fractional share resulting from
the Transaction, we plan to send them any cash dividends for which they are
entitled, including dividends declared prior to the Effective Date. See "
Financial Information Dividends." As of the Effective Date of the
Transaction, Cashed-Out Stockholders will have no further right to the
payment of dividends declared after the Effective Date with respect to the
cashed-out shares.
HOW TO GET PAID. Each Cashed-Out Stockholder who is not a Street Name Holder
will be entitled to receive cash in the amount described above for the
fractional share resulting from the Transaction only after such holder
delivers to our transfer agent, Registrar and Transfer Company at 10 Commerce
Drive, Cranford, NJ 07016-3572:
- stock certificate(s) for shares of our common stock owned immediately
prior to the Transaction,
- the properly executed completed letter of transmittal,
- such evidence of ownership of such shares as our transfer agent may
require, and
- properly executed and completed tax documents, including a Form W-9, to
permit us to complete our filing obligations with the Internal Revenue
Service.
Street Name Holders will be entitled to receive cash in the amount described
above for the fractional share beneficially owned as a result of the
Transaction by instructing their broker or bank to follow the procedures of
the DTC necessary to participate in the Transaction.
All amounts owed to you will be subject to applicable federal income tax and
state abandoned property laws. You will not receive any interest on cash
payments owed to you as a result of the Transaction. See "Certain Federal
Income Tax Consequences."
24
FINANCIAL INFORMATION
INCORPORATION BY REFERENCE. We hereby incorporate by reference (a) the
financial statements and the notes thereto contained on pages F-2 through F-
33 of our Annual Report to Stockholders for the fiscal year ended September
26, 2003 ("Annual Report to Stockholders") included with this Proxy Statement
and attached as Exhibit 13.1 to our Annual Report on Form 10-K, (b) the
report of independent certified public accountants thereon contained on page
F-1 of the Annual Report to Stockholders, (c) supplemental financial
information contained on pages 2 through 3 of the Annual Report to
Stockholders, (d) Management's Discussion and Analysis or Plan of Operation
contained on pages 5 through 22 of the Annual Report to Stockholders and (e)
quantitative and qualitative disclosures about market risks contained on
pages 22 through 23 of the Annual Report to Stockholders.
DIVIDENDS. During fiscal years 2003 and 2002, the Board of Directors
declared cash dividends of $0.03 per share per quarter or $0.12 per share for
each year. The Board of Directors will evaluate payment of future dividends
at their regular meetings. Our revolving credit facility provides that we
may not pay dividends in excess of $0.12 per share on an annual basis. For
the last three years, we have maintained a policy of instructing our transfer
agent to hold any dividend checks payable in an amount less than $3.00. In
connection with paying the Cash-Out Price to each stockholder for a
fractional share, we plan to direct the transfer agent to pay with the Cash-
Out Price any dividends which have been held by the transfer agent for the
benefit of these stockholders.
VOTE REQUIRED
The Transaction must be approved by the holders of a majority of the
outstanding shares of our common stock entitled to vote thereon. Any
abstention or broker non-vote will have the effect of a vote against the
Transaction.
As of the record date, our executive officers and directors beneficially
owned a total of approximately 45% of the outstanding our common stock
entitled to vote at the Annual Meeting. Each of our executive officers and
directors has advised the Company that he or she intends to vote his or her
shares in favor of the Transaction.
APPRAISAL AND DISSENTERS' RIGHTS
No appraisal or dissenters' rights are available under Delaware law to
stockholders who dissent from the Transaction. We will not independently
provide our stockholders of record with any appraisal or dissenters' right.
RESERVATION OF RIGHTS
Even if the Transaction has been authorized by our stockholders at the Annual
Meeting, we reserve the right to abandon the Transaction without further
action by our stockholders at any time before the filing of the necessary
25
amendments to our certificate of incorporation with the Delaware Secretary of
State. By voting in favor of the Transaction you are also expressly
authorizing us to determine not to proceed with the Transaction if we should
so decide.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL. We have summarized below certain federal income tax consequences to
the Company and stockholders of record resulting from the Transaction. This
summary is based on U.S. federal income tax law existing as of the date of
this Proxy Statement, and such tax laws may change, even retroactively. This
summary does not discuss all aspects of federal income taxation which may be
important to you in light of your individual circumstances. Many
stockholders of record (such as financial institutions, insurance companies,
broker-dealers, regulated investment companies, personal holding companies,
tax-exempt organizations, foreign entities and foreign persons) may be
subject to special tax rules. Other stockholders of record may also be
subject to special tax rules, including but not limited to:
- stockholders who received our common stock as compensation for services
or pursuant to the exercise of an employee stock option, or
- stockholders who have held, or will hold, stock as part of a straddle,
hedging, or conversion transaction for federal income tax purposes.
In addition, this summary does not discuss any state, local, foreign, or
other tax considerations. This summary assumes that you are a U.S. citizen
and have held, and will hold, your shares as capital assets (i.e. generally
property held for investment) under the Code. You should consult your tax
advisor as to the particular federal, state, local, foreign, and other tax
consequences, in light of your specific circumstances.
We believe that the Company will be able to treat the Transaction as a tax-
free "recapitalization" for federal income tax purposes.
FEDERAL INCOME TAX CONSEQUENCES TO STOCKHOLDERS WHO ARE NOT CASHED OUT BY THE
TRANSACTION. If you (1) continue to hold our common stock immediately after
the Transaction, and (2) receive no cash as a result of the Transaction, you
will not recognize any gain or loss as a result of the Transaction and you
will have the same adjusted tax basis and holding period in our common stock
as you had in such stock immediately prior to the Transaction.
FEDERAL INCOME TAX CONSEQUENCES TO STOCKHOLDERS WHO RECEIVE CASH. In general,
Cashed-Out Stockholders will recognize a gain or loss as a result of the
Transaction equal to the difference between the total Cash-Out Price received
by them and their adjusted basis in the shares of common stock eliminated in
the Transaction. The characterization of this gain or loss as a long-term
capital gain or loss or short-term capital gain or loss will depend on the
period of time such shares were held by a stockholder prior to the
transaction.
26
THE FOREGOING IS A GENERAL DISCUSSION ONLY AND YOUR OWN TAX CONSEQUENCES
COULD BE DIFFERENT IN CERTAIN CASES. ACCORDINGLY, YOU SHOULD CONSULT YOUR
TAX ADVISOR AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER
TAX CONSEQUENCES OF THE TRANSACTION, IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS AND DEEMS ADVISABLE THAT
STOCKHOLDERS VOTE "FOR" THE TRANSACTION AND THE RELATED AMENDMENT TO OUR
CERTIFICATE OF INCORPORATION.
SUBMISSION OF STOCKHOLDER PROPOSALS
Under our Bylaws, any stockholder may submit a proposal for presentation
at the Annual Meeting by delivering the proposal to our corporate secretary
at our home office by no later than Thursday, February 5, 2004. Such
proposals 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 the Company's common
stock beneficially owned by such stockholder; and (iv) any material interest
of such stockholder in the business matter being proposed. Our Bylaws also
allow stockholders to submit nominations for directors by delivering the
nominations in writing to our corporate secretary at our home office by no
later than Thursday, February 5,2004. Only stockholders of record as of the
Record Date (January 19, 2004) are entitled to bring business before the
Annual Meeting or make nominations for directors.
Stockholders may also ask us to include proposals in the proxy materials
that we send out in connection with our annual meetings, subject to the proxy
rules adopted by the SEC. In order to be included in our Proxy Statement
relating to our 2005 Annual Meeting, a stockholder proposal must be submitted
to our corporate secretary at our home office by October 11, 2004.
OTHER MATTERS
We do not intend to bring any matters before the Annual Meeting other than
those disclosed in the Notice of Annual Meeting of Stockholders, and we do
not know of any business which persons, other than the management, intend to
present at the Annual Meeting. The enclosed proxy for the Annual Meeting
confers discretionary authority on the Board of Directors to vote on any
matter proposed by stockholders for consideration at the Annual Meeting.
We will bear the cost of soliciting proxies for use by our Board of
Directors at the Annual Meeting. To the extent necessary, proxies may be
solicited by our directors, officers and employees in person, by telephone or
through other forms of communication, but these persons will not receive any
additional compensation for this solicitation. We will reimburse brokerage
firms, banks and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy materials to the beneficial owners
of our common stock. We will supply banks, brokers, dealers and other
27
custodian nominees and fiduciaries with proxy materials to enable them to
send a copy of such materials by mail to each beneficial owner of shares of
our common stock which they hold of record and will, upon request, reimburse
them for their reasonable expenses in so doing.
Stockholders may communicate with any director, including the Chairman of
the Board and the chairman of any committee of the Board, by sending a letter
to the attention of the appropriate person (which may be marked as
confidential) addressed to our corporate secretary at our home office. All
communications received by the corporate secretary will be forwarded to the
appropriate directors. In addition, it is the policy of our Board of
Directors that directors attend, and be available to discuss stockholder
concerns, at the Annual Meeting. All directors attended last year's Annual
Meeting on March 13, 2003.
The Company's Annual Report, including the financial statements, is being
mailed, together with this Proxy Statement, to all stockholders entitled to
vote at the Annual Meeting. The Company has incorporated provisions of its
Annual Report into this Proxy Statement; however, such Annual Report is not
to be considered part of this proxy solicitation material. In addition, any
stockholder who wishes to receive a copy of the Form 10-K filed by the
Company with the Securities and Exchange Commission, or a copy of any
document incorporated by reference into the Proxy Statement, may obtain a
copy without charge by contacting the Company at 402-331-3727 or by writing
to the Company at 7405 Irvington Road, Omaha, Nebraska 68122. Requests
should be directed to Mr. Michael D. James at the Company's principal
executive office.
None of the information set forth in this Proxy Statement under the
headings "Report of the Compensation Committee on Executive Compensation,"
"Report of the Audit Committee" or "Company Performance" is deemed to be
"soliciting material" or to be "filed" with the SEC or subject to the SEC's
proxy rules or to the liabilities of Section 18 of the Securities Exchange
Act of 1934 (the "1934 Act"), and this information will not be deemed to be
incorporated by reference into any prior or subsequent filing by the Company
under the Securities Act of 1933 or the 1934 Act.
By Order of the Board of Directors
/s/ Michael D. James
---------------------------
Michael D. James, Secretary
Omaha, Nebraska
February , 2004
28
EXHIBIT A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF AMCON DISTRIBUTING COMPANY
I. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors (the "Board") of
AMCON Distributing Company (the "Company") to assist the Board in fulfilling
its oversight responsibilities. The Audit Committee's primary duties and
responsibilities are to:
- Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance;
- Oversee the accounting and financial reporting processes of the Company
and the audits of the Company's financial statements;
- Monitor the independence and performance of the Company's independent
auditors;
- Monitor the Company's compliance with legal and regulatory
requirements; and
- Provide an avenue for, and encourage open, dialogue and communication
among the independent auditors, management, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to
anyone in the Company. The independent auditors report directly to the Audit
Committee. The Audit Committee has the ability to retain, at the Company's
expense and without seeking the approval the Board or the Company,
independent legal, accounting, or other consultants or experts it deems
necessary or appropriate in the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
A. INDEPENDENCE
The Audit Committee shall be comprised of three or more directors as
determined by the Board. Except as set forth below, each member of the Audit
Committee must:
- qualify as an independent director (as defined in Section 121(A) of the
AMEX listing standards), who is not an officer or employee of the Company or
any of its subsidiaries and does not, in the view of the Board, have any
material relationship with the Company that would interfere with the exercise
of the director's independent judgment.
29
- qualify as independent under the requirements of Rule 10A-3 under the
Securities Exchange Act of 1934.
- not be an AMEX employee or Floor Member as provided under Section 802
of the AMEX listing standards.
The Board may appoint one member to the Audit Committee who is not
independent as defined under Section 121A of the AMEX listing standards as
long as such member satisfies the independence requirements of Rule 10A-3
under the Securities Exchange Act of 1934 and the Board has determined, under
exceptional and limited circumstances, in accordance with the requirements of
Section 121B(2)(b) of the AMEX listing standards, that membership on the
Audit Committee by such individual is required by the best interest of the
Company and its stockholders. In such case, the Board must disclose in the
annual meeting proxy statement subsequent to such determination, the nature
of the relationship that makes that individual not independent and the
reasons for the Board's determination. A member of the Audit Committee
appointed pursuant to this provision may not serve in excess of two
consecutive years and may not be the Audit Committee Chair of the Audit
Committee.
B. QUALIFICATIONS; FINANCIALLY SOPHISTICATED
All members of the Audit Committee must also be able to read and understand
fundamental financial statements, including the Company's balance sheets,
income statements and cash flow statements. At least one member of the Audit
Committee must at all times be financially sophisticated, in that he or she
has past employment experience in finance or accounting, requisite
professional certification in accounting, or any other comparable experience
or background which results in the individual's financial sophistication,
including but not limited to being or having been a chief executive officer,
chief financial officer, or other senior officer with financial oversight
responsibilities. A member of the Audit Committee who qualifies as an "Audit
Committee Financial Expert" under Item 401(h) of Regulation S-K is presumed
to qualify as financially sophisticated.
C. AUDIT COMMITTEE CHAIR
The Nominating Committee shall recommend to the Board, and the Board shall
designate, one member of the Audit Committee as Audit Committee Chair. The
Audit Committee Chair shall preside over meetings and proceedings of the
Audit Committee. If the Audit Committee Chair is not present, the members of
the Audit Committee may designate an Audit Committee Chair by majority vote
of the Audit Committee membership.
D. MEETINGS
The Audit Committee shall meet at least quarterly, prior to the filing of
each quarterly report on Form 10-Q or annual report on Form 10-K, as
applicable, or more frequently as circumstances dictate or the Audit
Committee Chair deems appropriate, or as required by law or applicable rules
and regulations. The Audit Committee Chair shall prepare and/or approve an
30
agenda in advance of each meeting. A majority of the members of the Audit
Committee shall constitute a quorum. The vote of a majority of the members
present at any meeting at which a quorum is present shall be the act of the
Audit Committee. The Audit Committee may meet in person or telephonically.
The Audit Committee shall establish its own rules of procedure which shall be
consistent with the Bylaws of the Company and this Charter. The Audit
Committee Chair or a majority of the members of the Audit Committee may call
a special meeting of the Audit Committee.
The Audit Committee should meet privately in executive session at least
annually with management and the independent auditors, and as an Audit
Committee to discuss any matters that the Audit Committee, management or the
independent auditors believe should be discussed. In addition, the Audit
Committee, or at least its Audit Committee Chair, should communicate with
management and the independent auditors quarterly to review the Company's
financial statements and significant findings based upon the auditors' review
procedures.
The Company's independent auditor will attend at least four of the Audit
Committee's meetings each year. The Audit Committee may request members of
management or others to attend meetings and provide such information as the
Audit Committee deems appropriate.
E. APPOINTMENT; REMOVAL; RESIGNATION
Members of the Audit Committee shall be appointed by the Board at its annual
meeting and shall generally serve until their failure to qualify,
resignation, or retirement, their removal by the Board or until their
successors shall be duly appointed and qualified.
No member of the Audit Committee shall be removed except by a majority vote
of the independent directors or upon failure of such member to meet the
independence or qualification requirements of this Charter. A member of the
Audit Committee shall be deemed to have resigned from the Audit Committee at
such time that the member shall have been removed from the Board pursuant to
the Bylaws of the Company or such member has resigned or otherwise terminated
his or her membership on the Board.
F. MINUTES; REPORTS TO BOARD OF DIRECTORS
The Audit Committee shall keep minutes of its proceedings and the names and
places of residence of its members. Following each of its meeting, the Audit
Committee shall deliver a report on the meeting to the Board, including a
description of all actions taken by the Audit Committee at the meeting. The
report will also include any significant issues arising with respect to (i)
the quality or integrity of the Company's financial statements, (ii) the
Company's compliance with legal or regulatory requirements, or (iii) the
performance and independence of the Company's independent auditors.
31
G. SUBCOMMITTEES
As permitted by law or the AMEX listing standards, the Audit Committee may
delegate its duties and authority to a subcommittee of fully independent
directors.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall perform
the following:
A. REVIEW PROCEDURES
1. Review and reassess the adequacy of this Charter at least annually.
Submit the Charter, which is approved by the Audit Committee, to the Board
for ratification and have the Charter published at least every three years in
accordance with SEC regulations.
2. Review and discuss with management and the independent auditor the
Company's annual audited financial statements prior to filing its Annual
Report on Form 10-K. Discuss significant issues regarding accounting
principles, practices and judgments, including the Company's disclosures
under "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
3. Review and discuss with management and the independent auditor, the
Company's quarterly financial results and/or the Company's quarterly
financial statements prior to the earlier of the release of earnings or the
filing of the Quarterly Report on Form 10-Q. Discuss the Company's
disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operations", any significant changes to the
Company's accounting principles and any items required to be communicated by
the independent auditor in accordance with SAS 61 (as may be modified or
amended). The Audit Committee Chair may represent the entire Audit Committee
for purposes of this review.
4. In consultation with management and the independent auditor, consider the
integrity of the Company's financial reporting processes and controls,
including (i) internal controls, (ii) internal control over financial
reporting and (iii) disclosure controls and procedures. Discuss significant
financial risk exposures and the steps management has taken to monitor,
control and report such exposures. Review the significant reports to
management prepared by the independent auditor, together with management's
responses, including the status of previous recommendations, and follow up on
these reports.
5. Discuss with management and the independent auditor the quality and
adequacy of the Company's internal controls and internal control over
financial reporting, including any significant deficiencies in the design or
operation of those controls which could adversely affect the Company's
32
ability to record, process, summarize and report financial data and any
fraud, whether or not material, that involves management or other employees
who have a significant role in the Company's internal controls, and discuss
with the independent auditor how the Company's financial systems and controls
compare with industry practices.
6. Report regularly to the Board with respect to any issues that arise with
respect to the quality or integrity of the Company's financial statements,
the Company's compliance with legal or regulatory requirements, and the
performance and independence of the Company's independent auditor.
7. Review the independent auditor's report required by Section 204 of
Sarbanes-Oxley Act of 2002, describing (i) all critical accounting policies
and practices to be used, (ii) all alternative treatments of financial
information within GAAP that have been discussed with management, (iii)
ramifications of the use of such alternative disclosures and treatments, and
the treatment preferred by the independent auditor, and (iv) other material
written communications between the auditor and management, such as any
management letter or schedule of unadjusted differences.
8. Review quarterly with the Company's CEO and CFO (i) any significant
deficiencies in the design or operation of internal controls which could
adversely affect the Company's ability to record, process, summarize and
report financial data, (ii) any material weakness in the Company's internal
controls, and (iii) any fraud, whether or not material, involving management
or other employees who have a significant role in the Company's internal
controls.
9. Review annually with management and the independent auditor (i) the
internal control report contained in the Company's annual report on Form 10-K
regarding management's assessment of the effectiveness of the internal
control structure and procedures of the Company for financial reporting, and
(ii) the attestation and report of the independent auditor regarding
management's assessment of internal controls.
10. Discuss earnings press releases, as well as financial information and
earnings guidance provided to analysts and rating agencies. This discussion
may be done generally (i.e., discussion of the types of information to be
disclosed and the type of presentation to be made). The Audit Committee need
not discuss in advance each earnings release or each instance in which the
Company may provide earnings guidance.
11.Discuss policies regarding risk assessment and risk management. While it
is the job of Company management to assess and manage the Company's exposure
to risk, the Audit Committee will discuss guidelines and policies that govern
the process. This discussion may include the Company's financial risk
exposures and the steps management has taken to monitor and control
exposures. The Audit Committee is not required to be the sole body
responsible for risk assessment and management.
33
12. While the fundamental responsibility for the Company's financial
statements and disclosures rests with management and the independent auditor,
the Audit Committee will review: (i) major issues regarding accounting
principles and financial statement presentations, including any significant
changes in the Company's selection or application of accounting principles,
and major issues as to the adequacy of the Company's internal control,
internal control over financial reporting and any special audit steps adopted
in light of material control deficiencies, (ii) analyses prepared by
management or the independent auditor setting forth significant financial
reporting issues and judgments made in connection with the preparation of the
financial statements, including analyses of the effects of alternative GAAP
methods on the financial statements and the treatment preferred by the
independent auditor, (iii) the effect of regulatory and accounting
initiatives, as well as off-balance sheet structures, on the financial
statements of the Company, and (iv) earnings press releases (paying
particular attention to any use of pro-forma information and non-GAAP
information), as well as financial information and earnings guidance provided
to analysts and rating agencies.
13. Conduct an annual performance self-evaluation of the Audit Committee.
B. INDEPENDENT AUDITOR
1. The independent auditor is ultimately accountable to and shall report
directly to the Audit Committee, as the representative of the Company's
stockholders. The Audit Committee has the sole authority and direct
responsibility to select, hire, evaluate and, where appropriate, replace the
independent auditor or to nominate the independent auditor to be proposed for
shareholder approval in any proxy statement. The Audit Committee shall
annually review the independence, qualifications and performance of the
independent auditors, including the review and evaluation of the lead partner
of the independent auditor, and shall oversee the work of the independent
auditor for the purpose of preparing or issuing an audit report on the
Company's financial statements or related work or performing other audit,
review or attest services for the Company. In making its evaluation, the
Audit Committee shall take into account the opinions of management.
2. The Audit Committee has the authority to, and shall, approve (A) the fees
and other compensation to be paid to the independent auditor, (B) the funding
for the independent auditors (including fees for the purpose of preparing or
issuing an audit report or performing other audit, approved non-audit, review
and attestation services for the Company, and (C) the funding of payment for
ordinary administrative expenses of the Audit Committee that are necessary or
appropriate in carrying out its duties.
3. The Audit Committee shall require the independent auditor to submit on a
periodic basis (but at least annually) to the Audit Committee a formal
written statement in accordance with Independence Standards Board ("ISB")
Statement No. 1 (as may be modified or amended) and such other requirements
as may be established by the Public Company Accounting Oversight Board
("PCAOB") delineating all relationships between them and the Company and to
34
actively engage in a dialogue with the independent auditor with respect to
any relationships or services disclosed in the statement that may impact the
independent auditor's objectivity and independence, and take appropriate
action in response to the statement of the independent auditor to satisfy
itself of the outside auditors' independence and objectivity and otherwise
oversee the independence of the independent auditor.
4. The Audit Committee shall confirm that neither the lead audit partner nor
the primary reviewing partner of the independent auditor has performed audit
services for the Company for each of the five previous fiscal years.
5. The Audit Committee shall consider results of the independent
accountant's last peer review, litigation status, and disciplinary actions,
if any.
6. At least annually, the Audit Committee shall consult with the independent
auditor, out of the presence of management, about the adequacy, quality and
integrity of the internal controls for financial reporting and the fair
presentation and accuracy of the Company's financial statements.
7. The Audit Committee shall resolve disagreements, if any, between
management and the independent auditor regarding financial reporting.
8. The Audit Committee shall review the independent auditor engagement
letter and audit plan and discuss the scope and general approach of the
audit, including staffing, locations and reliance upon management.
9. The Audit Committee shall approve in advance any audit services (which
may entail providing comfort letters in connection with securities
underwritings) and non-audit services (including the fees and terms thereof)
to be performed by the independent auditor to determine whether such
relationships and services are compatible with the auditor's independence;
provided, however, that the following services cannot be provided even with
Audit Committee approval, except to the extent permitted by the SEC rules or
unless the PCAOB approves an exemption on a case by case basis:
(A) bookkeeping or other services related to the accounting records or
financial statements of the Company; (B) financial information systems design
and implementation; (C) appraisal or valuation services, fairness opinions or
contribution-in-kind reports; (D) actuarial services; (E) internal audit
outsourcing services; (F) management functions or human resources;
(G) broker-dealer, investment adviser, or investment banking services;
(H) legal services and expert services unrelated to the audit; and (I) any
other service that the PCAOB determines, by regulation is not permissible.
10. The Audit Committee may pre-approve audit and non-audit services by
either (a) designating one or more members of the Audit Committee to pre-
approve any audit or non-audit services to be performed by the independent
auditor; provided that such members present such pre-approved activity to the
full Audit Committee at its next scheduled meeting or (b) establishing pre-
approval policies and procedures; provided the policies and procedures are
detailed as to the particular service, the Audit Committee is informed of
each service and such policies do not delegate the Audit Committee's
responsibilities to management.
35
11. The Audit Committee shall review and discuss certain matters required to
be communicated to the Audit Committee in accordance with AICPA SAS 61, as
amended by SAS 90, (as may be modified or amended).
12. The Audit Committee shall consider the independent auditor's judgments
about the quality and appropriateness of the Company's accounting principles
as applied in financial reporting by:
a. discussing with management and the independent auditor the quality of the
accounting principles and underlying estimates used in the preparation of the
Company's financial statements;
b. discussing with the independent auditor the clarity and fair presentation
of the financial disclosure practices used or proposed by the Company; and
c. inquiring as to the independent auditor's view about whether management's
choices of accounting principles appear reasonable from the perspective of
income, assets and liability recognition, and whether those principles are
common practices or are minority practices.
13. The Audit Committee shall periodically discuss with the independent
auditor whether all material correcting adjustments identified by the
independent auditor in accordance with GAAP and rules of the SEC are
reflected in the Company's financial statements.
14. The Audit Committee shall assure that the independent auditor change the
audit partners for the audit in accordance with the rules of the SEC and at
least annually consider whether, in order to assure continuing auditor
independence, the Company should change the independent auditor.
C. LEGAL AND REGULATORY COMPLIANCE
1. On at least an annual basis, review with the Company's outside legal
counsel (i) any legal matters that could have a significant impact on the
organization's financial statements or reporting, (ii) disclosure controls
and procedures and their interface with internal controls for financial
reporting, (iii) disclosure policy and practices, (iv) the Company's
compliance with applicable laws and regulations and internal controls
designed to ensure such compliance, (v) the Code of Business Conduct and
Ethics for Directors, Officers and Employees, and (vi) inquiries received
from regulatory or governmental agencies.
2. Consult with internal or external counsel if, in the opinion of the Audit
Committee, any matter under consideration by the Audit Committee has the
potential for any conflict between the interests of the Company and any of
its affiliates in order to ensure that appropriate procedures are established
for addressing any such potential conflict and for ensuring compliance with
all applicable laws.
36
D. OTHER AUDIT COMMITTEE RESPONSIBILITIES
1. Annually prepare a report to stockholders as required by the Securities
and Exchange Commission. The report is to be included in the Company's
annual proxy statement. The report is to state whether the Audit Committee
has:
a. reviewed and discussed the audited financial statements with management;
b. discussed with the independent auditor the matters required to be
discussed by SAS 61, as amended by SAS 90; and
c. received certain disclosures from the auditors regarding their
independence as required by the ISB No. 1 (as may be modified or amended) and
has discussed with the independent auditor the independent auditor's
independence.
2. If, based on the foregoing review and discussions, the Audit Committee
recommends to the Board that the audited financial statements be included in
the Annual Report filed with the SEC then a statement to that effect shall be
included in the Annual Report to Stockholders or in the Annual Report on Form
10-K.
3. Review, exercise oversight over and approve all related-party
transactions on an ongoing basis.
4. Adopt and implement a policy (A) to receive, handle and retain complaints
regarding (i) accounting and auditing matters, (ii) internal controls and
internal control over financial reporting and (iii) disclosure controls and
procedures and (B) to provide for the confidential, anonymous submissions by
employees making complaints regarding questionable accounting or auditing
matters or other matters referenced in clause (A).
5. Establish clear policies for hiring current employees or former employees
of the independent auditor, including policies to ensure that any such hiring
will not cause such independent auditor to no longer be considered
independent.
6. Perform any other activities consistent with this Charter, the Company's
Certificate of Incorporation and Bylaws, governing law, rules and
regulations, and AMEX listing standards as the Audit Committee or the Board
deems necessary or appropriate.
IV. LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the duties and responsibilities set forth in
this Charter, the Audit Committee is not responsible for auditing the
Company's financial statements or making determinations that the financial
statements (i) are complete and accurate, (ii) are prepared in accordance
with GAAP, or (iii) fairly present the Company's financial condition, results
of operations and cash flow. These duties are the responsibility of
management and the independent auditors. Further, management is responsible
for implementing adequate internal accounting and disclosure controls and
procedures and for preparing the Company's financial statements.
37
EXHIBIT B
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
AMCON Distributing Company, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: that at a meeting of the Board of Directors of AMCON Distributing
Company resolutions were duly adopted setting forth a proposed amendment of
the Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "Article IV" so that, as
amended, the following Section 7 shall be added to the end of said Article
and shall be and read as follows:
Section 7. At 8:00 p.m. (central standard time) on the effective date
of the certificate of amendment adding these paragraphs to Article IV,
Section 7 (the "Effective Date"), each share of the Corporation's common
stock, $.01 par value ("Common Stock"), held of record as of 8:00 p.m.
(central standard time) on the Effective Date shall be and hereby is
automatically reclassified and converted, without further action, into one-
sixth (1/6) of a share of the Common Stock ("Reclassification and
Conversion"). No fractions of shares shall be issued to any fractional
holder, and in lieu of receiving such fractions of shares shall be entitled
to receive, upon surrender of the certificate or certificates representing
shares of Common Stock held of record by such fractional holder, an amount
equal to the fair value of such fractions of share as determined by the Board
of Directors of the Corporation. From and after 8:00 p.m. (central standard
time) on the Effective Date, each fractional holder shall have no further
interest as a stockholder in respect of such fractional shares.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
an annual meeting of the stockholders of said corporation was duly called and
held upon notice in accordance with Section 222 of the General Corporation
Law of the State of Delaware at which meeting the necessary number of shares
as required by statute were voted in favor of said amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
38
FOURTH: That the authorized capital of said corporation shall not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, said Board of Directors has caused this certificate to be
signed by
, an Authorized Officer, this
--------------------------------- -------
day of March, 2004.
By:
-----------------------------------
Title:
--------------------------------
Name:
---------------------------------
39
REVOCABLE PROXY
AMCON DISTRIBUTING COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AMCON
DISTRIBUTING COMPANY FOR USE ONLY AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON THURSDAY, MARCH 11, 2004 AND AT ANY ADJOURNMENT THEREOF.
The undersigned hereby authorizes the Board of Directors of AMCON
Distributing Company (the "Company"), or any successors in their respective
positions, as proxy, with full powers of substitution, to represent the
undersigned at the Annual Meeting of Stockholders of the Company to be held
at LaSalle Bank, 135 South LaSalle Street, 43rd Floor, Chicago, IL 60603, on
Thursday, March 11, 2004, at 10:00 a.m., Central Standard Time, and at any
adjournment of said meeting, and thereat to act with respect to all votes
that the undersigned would be entitled to cast, if then personally present,
in accordance with the instructions below and on the reverse hereof.
1. ELECTION OF DIRECTORS.
/ / FOR the nominees listed below for the term to expire in 2007:
William F. Wright William R. Hoppner Stanley Mayer
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark "FOR" and cross out such nominee's name.)
/ / WITHHOLD AUTHORITY to vote for all nominees listed above.
2. AUDITORS. Ratification of the appointment by the Audit Committee of
Deloitte & Touche LLP as independent auditors for fiscal year 2004.
/ / FOR / / AGAINST / / ABSTAIN
3. AMENDMENT OF CERTIFICATE OF INCORPORATION. Amend the Certificate of
Incorporation of the Company to conduct a one-for-six reverse stock
split and to provide for the cash payment for fractional shares.
/ / FOR / / AGAINST / / ABSTAIN
4. To vote, in its discretion, upon any other business that may properly
come before the Annual Meeting or any adjournment thereof. Management is
not aware of any other matters which should come before the Annual
Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ELECTION OF THE BOARD OF DIRECTORS' NOMINEES FOR DIRECTORS,
FOR THE RATIFICATION OF THE APPOINTMENT OF AUDITORS AND FOR THE AMENDMENT OF
THE CERTIFICATE OF INCORPORATION.
(continued and to be signed on the reverse hereof)
This proxy is revocable and the undersigned may revoke it at any time prior
to the Annual Meeting by giving written notice of such revocation to the
Secretary of the Company. Should the undersigned be present and want to vote
in person at the Annual Meeting, or at any adjournment thereof, the
undersigned may revoke this proxy by giving written notice of such revocation
to the Secretary of the Company on a form provided at the Annual Meeting.
The undersigned hereby acknowledges receipt of a Notice of Annual Meeting of
Stockholders of the Company called for Thursday, March 11, 2004, the
Proxy Statement for the Annual Meeting and the Company's Annual Report for
fiscal year 2003 prior to the signing of this proxy.
Dated: , 2004.
--------------------------------
---------------------------------
(Signature)
---------------------------------
(Signature if held jointly)
Please sign exactly as name appears on
this proxy. When shares are held by
joint tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give your full title. If a
corporation, please sign in full
corporate name by authorized officer.
If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.