SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported) January 3, 2006
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AMCON DISTRIBUTING COMPANY
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(Exact name of registrant as specified in its charter)
DELAWARE 1-15589 47-0702918
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
7405 Irvington Road, Omaha, NE 68122
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(Address of principal executive offices) (Zip Code)
(402) 331-3727
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
A press release announcing an amendment to the loan agreement between AMCON
and its subsidiaries and their bank lenders is attached hereto as Exhibit
99.1 and incorporated herein by reference.
ITEM 2.04 TRIGGERING EVENTS THAT ACCELERATE OR INCREASE A DIRECT FINANCIAL
OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET
ARRANGEMENT.
On January 3, 2006, AMCON Distributing Company terminated the letter of
intent ("LOI") with a buying group led by William F. Wright, its Chairman of
the Board, Chief Executive Officer and largest stockholder, for the proposed
acquisition of 80% of the outstanding common stock of The Healthy Edge, Inc.
("THE") which is currently a direct wholly-owned subsidiary of AMCON. Even
though the LOI is terminated, if AMCON signs a letter of intent or an
agreement relating to the acquisition of, or a business combination with or
an investment in THE prior to February 28, 2006, then AMCON would be required
to pay a breakup fee of $550,000 at the closing of any such third-party
transaction. In addition, any third party acquisition of THE would require
the pay off of $2,750,000 of loans to Trinity Springs, Inc. ("TSI") from
certain affiliates of AMCON, including entities affiliated with William F.
Wright.
TSI has not made the originally scheduled installment payments of principal
and interest with respect to two acquisition notes issued by TSI as part of
the purchase price for the purported asset sale by Crystal Paradise Holdings,
Inc. which was the subject of the failed stockholder vote described in the
press release attached as Exhibit 99.1 hereto and incorporated herein by
reference. Crystal Paradise Holdings, Inc. may seek to declare a default on
those notes and may attempt to accelerate payment thereof as well as attempt
to call upon AMCON's guaranty of those notes. AMCON and TSI believe that
they have meritorious defenses thereto, including AMCON's and TSI's belief
that those notes were extinguished upon termination by them of the Asset
Purchase Agreement.
ITEM 8.01 OTHER EVENTS
A press release announcing the termination of the LOI and certain related
matters is attached hereto as Exhibit 99.1 and incorporated herein by
reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
EXHIBIT NO. DESCRIPTION
99.1 Press release, dated January 10, 2006
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMCON DISTRIBUTING COMPANY
(Registrant)
Date: January 10, 2006 By : Michael D. James
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Name: Michael D. James
Title: Vice President &
Chief Financial Officer
EXHIBIT INDEX
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Exhibit Description
99.1 Press release, dated January 10, 2006
3
Exhibit 99.1
NEWS RELEASE
AMCON ANNOUNCES TERMINATION OF LETTER OF INTENT FOR
SALE OF NON-DISTRIBUTION BUSINESSES, AND UPDATE ON
BANK LOAN AGREEMENT AND TRINITY SPRINGS LITIGATION
Omaha, NE, January 10, 2006 - AMCON Distributing Company (AMEX:DIT)
("AMCON"), an Omaha, NE based consumer products company, announced that it
has terminated a letter of intent ("LOI") with William F. Wright, its
Chairman of the Board, Chief Executive Officer and largest stockholder, for
the proposed acquisition of 80% of the outstanding common stock of The
Healthy Edge, Inc. ("THE") which is currently a direct wholly-owned
subsidiary of AMCON. The LOI had contemplated that THE would own, at the
time of closing of the proposed acquisition, 100% of the equity of Health
Food Associates, Inc. (d/b/a Akin's Natural Food Market), Chamberlin's
Natural Foods, Inc. (d/b/a Chamberlin's Market and Cafe), and Hawaiian
Natural Water Company, Inc. ("HNWC"), as well as 85% of the equity of Trinity
Springs, Inc. ("TSI"), each of which are currently direct or indirect
subsidiaries of AMCON. Even though the LOI is terminated, AMCON would be
required to pay a termination fee of $550,000 to the buyout group led by Mr.
Wright upon the closing of any acquisition of, business combination with, or
investment in, THE that is the subject of a letter of intent or agreement
with a third party regarding any of those alternatives that is signed prior
to February 28, 2006.
The termination of the LOI was due to, among other things, the complications
created by a ruling by the District Court of the Fifth Judicial District of
the State of Idaho announced by AMCON on December 21, 2005. That ruling
granted the plaintiff's motion for partial summary judgment declaring that
the stockholders of Trinity Springs, Ltd. (which subsequently changed its
name to Crystal Paradise Holdings, Inc.) did not validly approve the sale of
its business and assets because the vote of certain shares issued as a
dividend should not have been counted. The District Court has not yet ruled
on whether money damages or rescission of the sale transaction and related
matters will be ordered as the relief in this action.
In response to a motion filed by AMCON and TSI, the plaintiffs filed, on
January 6, 2006, a plan of rescission with the District Court which
contemplates: (i) the repayment to TSI of $1,000,000 in cash paid to Crystal
Paradise Holdings at the closing of the purported asset sale,
(ii) cancellation of the three promissory notes in the principal amount of
$500,000 issued at such closing and repayment of interest thereon of
approximately $32,000, (iii) cancellation of a ten-year promissory note
issued at such closing in the principal amount of $2,828,440 and repayment of
principal and interest thereon of $540,000, (iv) payment for the inventory
(including finished goods and raw materials) and current assets of TSI,
(v) payment of $67,630 for the portion paid by TSI subsequent to such closing
of the $156,275 of the liabilities of Crystal Paradise Holdings' assumed at
such closing, (vi) surrender for cancellation of the 15% of TSI common stock
held by Crystal Paradise Holdings, and (vii) relieving TSI of any further
obligation to pay water royalties but not reimbursing $275,704 in water
royalties paid by TSI. The plaintiffs' rescission plan would reduce the
foregoing repayments by the depreciation on the assets to be returned to
Crystal Paradise Holdings incurred since the closing of the purported asset
sale.
The plaintiffs also assert in their rescission plan that no repayment would
be made by Crystal Paradise Holdings of any loans or investments in TSI, or
other expenses incurred by AMCON for the benefit of TSI subsequent to the
closing of the purported asset sale. Plaintiffs' rescission plan would not
require TSI to repay any revenues generated from the operation of the TSI
business and provides that Crystal Paradise Holdings would collect the TSI
accounts receivable and pay them to TSI. However, the rescission plan is
inconsistent in that it would require the rescission payments to be reduced
by the fair market value (calculated at the time of closing of the purported
asset sale) of any assets sold, consumed in the ordinary course of business
or otherwise disposed of by AMCON or TSI.
The plaintiffs' rescission plan states that Mr. Robert Burns and Wallace
Williams LLC would be the source of the rescission payments as well as
working capital for Crystal Paradise Holdings, subject to satisfactory
completion of due diligence deemed by them to be necessary in their
discretion. No financial statements or other financial assurances were
provided by plaintiffs to demonstrate the capacity of Mr. Burns or Wallace
Williams LLC to make the restitution payments or provide working capital to
Crystal Paradise Holdings. Likewise, the rescission plan does not contain
any guarantee or assurances that it will be approved by the Crystal Paradise
Holdings Board, its shareholders or the Court.
AMCON and TSI believe that an appropriate plan of rescission would require
the plaintiffs to restore the parties fully to their position prior to the
purported asset sale transaction, including the return of the consideration
paid by TSI in the purported asset sale transaction as well as monies
subsequently invested in or loaned to TSI by AMCON and other affiliated
parties, the expenses paid by AMCON for the benefit of TSI, and any other
benefits received by TSI during the period of time since the closing of the
purported asset sale transaction. The District Court has not yet considered
the sufficiency of the plaintiffs' rescission plan, nor has the Court
considered the effect of the notice sent by AMCON and TSI on December 27,
2005 terminating the Asset Purchase Agreement for the purported asset sale
because approval by the requisite vote was not obtained within the time
period permitted under that agreement.
On January 6, 2006, the plaintiffs also filed a motion with the District
Court seeking leave to amend their complaint to: (i) add a claim for civil
conspiracy, intentional interference with economic advantage and punitive
damages against certain defendants which appears to include AMCON, and
(ii) confirm that plaintiffs seek the alternative remedy of rescissory
damages in the event that the District Court denies the remedy of rescission.
At the same time as the plaintiffs filed their motion to amend their
complaint, they also filed a motion to appoint a receiver and a motion to
compel mediation. AMCON and TSI are still in the process of reviewing
plaintiffs' motions and the merits of the arguments made therein and will
respond as appropriate upon the completion of that review.
AMCON's bank lenders will not allow additional funds to be invested in or
loaned to TSI by AMCON or its other subsidiaries. The uncertainty created by
the District Court's ruling make it unlikely that TSI will be able to raise
additional capital until either (i) the District Court issues the order
referenced above and plaintiffs clarify their ability to effect full
rescission and restitution, or (ii) a negotiated settlement is reached with
among TSI, AMCON, plaintiffs and Crystal Paradise Holdings, Inc. If these
events do not occur with sufficient lead time before TSI runs out of
operating cash, TSI's board of directors may determine to place TSI into
Chapter 11 bankruptcy.
TSI has not made the originally scheduled installment payments of principal
and interest with respect to the two notes issued by TSI referenced above as
part of the purchase price for the purported asset sale by Crystal Paradise
Holdings, Inc. which was the subject of the failed stockholder vote described
above. Crystal Paradise Holdings, Inc. may seek to declare a default on
those notes and may attempt to accelerate payment thereof as well as attempt
to call upon AMCON's guaranty of those notes. AMCON and TSI believe that
they have meritorious defenses thereto, including AMCON's and TSI's belief
that those obligations were extinguished upon termination by them of the
Asset Purchase Agreement described above.
On January 9, 2006, AMCON's bank lenders granted a waiver of any event of
default as a result of the failure to agree to the sale or liquidation of TSI
or HNWC. This waiver also encompasses any event of default that would occur
if any proceedings in bankruptcy by or against TSI or HNWC, or for the
liquidation or reorganization of TSI or HNWC, or alleging that TSI or HNWC is
insolvent or unable to pay its debts as they mature, or for the readjustment
or arrangement of TSI's or HNWC's debts.
The loan agreement with the bank lenders was also amended on January 9, 2006
to replace all prior financial covenants, which had previously been
suspended, with a covenant requiring that consolidated EBITDA (excluding TSI,
HNWC and The Beverage Group, Inc.) not be less than: (i) $100,000 as of the
last day of each month for the one-month period then ending, except for the
month ending February 28, 2006 which is permitted to be zero, (ii) $1,100,000
as of March 31, 2006 for the three-month period then ending, (iii) $3,200,000
as of June 30, 2006 for the six-month period then ending, and (iv) $5,500,000
as of September 30, 2006 for the ninth-month period then ending, and
(v) $6,500,000 as of December 31, 2006 for the twelve-month period then
ending. The amendment also requires AMCON and its subsidiaries to hire a
turn-around consultant acceptable to the agent for the bank lenders by
January 31, 2006 and to pay to the agent its customary fees and expenses in
exercising its rights under the loan agreement. In addition, the amendment
creates a new event of default if AMCON or its subsidiaries makes any payment
(in cash or other property) or a judgment is entered against AMCON or its
subsidiaries requiring a payment (in cash or other property) to be made under
or in connection with the guaranty by AMCON of the TSI acquisition notes or
the water royalty under the Asset Purchase Agreement for the purported sale
of TSI assets.
The Company is presently assessing the accounting and other implications of
the court's ruling in the TSI matter and the possible alternatives available
to it in order to develop a course of action to resolve the issues impacting
its beverage businesses. The Company's priority continues to be preserving
its primary businesses, wholesale distribution and retail health food, which
continue to be profitable and generate positive cash flows. However, because
of the uncertainties created by the TSI matter, there can be no assurances
that the Company will be able to resolve these matters in a timely manner
without incurring further costs and the beverage businesses incurring further
losses.
AMCON is a leading wholesale distributor of consumer products, including
beverages, candy, tobacco, groceries, food service, frozen and chilled foods,
and health and beauty care products with distribution centers in Illinois,
Missouri, Nebraska, North Dakota and South Dakota. Chamberlin's Natural
Foods, Inc. and Health Food Associates, Inc., both wholly-owned subsidiaries
of The Healthy Edge, Inc., operate health and natural product retail stores
in central Florida (6), Kansas, Missouri, Nebraska and Oklahoma (4). The
retail stores operate under the names Chamberlin's Market & Cafe and Akin's
Natural Foods Market. Hawaiian Natural Water Company, Inc. produces and
sells natural spring water under the Hawaiian Springs label in Hawaii and
other foreign markets and purified bottled water on the Island of Oahu in
Hawaii. The natural spring water is bottled at the source on the Big Island
of Hawaii. Trinity Springs, Inc. produces and sells geothermal bottled water
and a natural mineral supplement under the Trinity label and recently
introduced a vitamin enhanced beverage product under the Trinity Enhanced
label. The water and mineral supplement are both bottled at the base of the
Trinity Mountains in Paradise, Idaho, one of the world's deepest known
sources. Trinity Springs also distributes Hawaiian Springs on the U.S.
mainland.
This news release contains forward-looking statements that are subject to
risks and uncertainties and which reflect management's current beliefs and
estimates of future economic circumstances, industry conditions, Company
performance and financial results. A number of factors could affect the
future results of the Company and could cause those results to differ
materially from those expressed in the Company's forward-looking statements
including, without limitation, availability of sufficient cash resources to
conduct its business and meet its capital expenditures needs. Moreover, past
financial performance should not be considered a reliable indicator of future
performance. Accordingly, the Company claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995 with respect to all such forward-looking
statements.
Visit AMCON Distributing Company's web site at: www.amcon.com
FOR FURTHER INFORMATION CONTACT:
Michael D. James
Chief Financial Officer
AMCON Distributing Company
Tel 402-331-3727
Fax 402-331-4834
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