Amcon Distributing Co 10-Q for FY2022 Q3

About this 10-Q

Headline figures

Amcon Distributing Co (DIT)

10-Q 2022-07-18 For: 2022-06-30

Added on April 06, 2026

Amcon Distributing Co filed this 10-Q on July 18, 2022, covering the quarter ended June 30, 2022 (FY2022 Q3).

Acquisition-Date

Useful Life

Other Intangible Asset

Fair Value

(Years)

Customer list

Non-competition agreement

Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $550.58M; up 25.6% from $438.31M a year earlier
Net income: $5.98M; up 62.1% from net income of $3.69M a year earlier
Diluted EPS: $10.27; up 58.5% from $6.48 a year earlier

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Delaware		47-0702918
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

7405 Irvington Road, Omaha NE		68122
(Address of principal executive offices)		(Zip code)


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	DIT	NYSE American


June 30, 2022	PAGE

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements:

Condensed consolidated balance sheets at June 30, 2022 (unaudited) and September 30, 2021	3

Condensed consolidated unaudited statements of operations for the three and nine months ended June 30, 2022 and 2021	4

Condensed consolidated unaudited statements of shareholders’ equity for the three and nine months ended June 30, 2022 and 2021	5

Condensed consolidated unaudited statements of cash flows for the nine months ended June 30, 2022 and 2021	6

Notes to condensed consolidated unaudited financial statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3. Quantitative and Qualitative Disclosures About Market Risk	23

Item 4. Controls and Procedures	24

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	25

Item 1A. Risk Factors	25

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3. Defaults Upon Senior Securities	25

Item 4. Mine Safety Disclosures	25

Item 5. Other Information	25

Item 6. Exhibits	26


	June		September
	2022		2021
	(Unaudited)
ASSETS
Current assets:
Cash	$	600,936	$	519,591
Accounts receivable, less allowance for doubtful accounts of $2.6 million at June 2022 and $0.9 million September 2021		66,500,582		35,844,163
Inventories, net		142,093,610		95,212,085
Income taxes receivable		468,289		—
Prepaid expenses and other current assets		10,343,497		4,999,125
Total current assets		220,006,914		136,574,964

Property and equipment, net		48,452,634		16,012,524
Operating lease right-of-use assets, net		19,672,900		17,846,529
Note receivable, net of current portion		—		3,325,000
Goodwill		5,277,950		4,436,950
Other intangible assets, net		2,135,645		500,000
Equity method investment		—		9,380,343
Other assets		2,749,360		334,819
Total assets	$	298,295,403	$	188,411,129

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	40,975,820	$	24,235,042
Accrued expenses		13,339,837		11,468,955
Accrued wages, salaries and bonuses		7,346,300		4,489,852
Income taxes payable		—		867,160
Current operating lease liabilities		6,204,257		5,513,390
Current maturities of long-term debt		1,204,348		561,202
Total current liabilities		69,070,562		47,135,601

Credit facilities		101,228,521		43,650,865
Deferred income tax liability, net		2,938,240		1,531,228
Long-term operating lease liabilities		13,759,819		12,669,157
Long-term debt, less current maturities		12,159,895		5,054,265
Other long-term liabilities		66,694		757,387

Shareholders’ equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized		—		—
Common stock, $.01 par value, 3,000,000 shares authorized, 584,789 shares outstanding at June 2022 and 551,369 shares outstanding at September 2021		9,168		8,834
Additional paid-in capital		26,729,124		24,918,781
Retained earnings		92,210,760		83,552,298
Treasury stock at cost		(30,867,287)		(30,867,287)
Total parent shareholders’ equity		88,081,765		77,612,626
Non-controlling interest		10,989,907		—
Total shareholders’ equity		99,071,672		77,612,626
Total liabilities and shareholders’ equity	$	298,295,403	$	188,411,129


	For the three months ended June				For the nine months ended June
	2022		2021		2022		2021
Sales (including excise taxes of $129.2 million and $104.9 million, and $315.5 million and $297.4 million, respectively)	$	550,584,152	$	438,313,030	$	1,365,043,621	$	1,221,571,294
Cost of sales		516,907,540		412,771,324		1,277,757,425		1,149,594,823
Gross profit		33,676,612		25,541,706		87,286,196		71,976,471
Selling, general and administrative expenses		25,862,325		20,501,117		70,168,415		58,123,100
Depreciation and amortization		912,501		741,180		2,514,968		2,295,390
		26,774,826		21,242,297		72,683,383		60,418,490
Operating income		6,901,786		4,299,409		14,602,813		11,557,981

Other expense (income):
Interest expense		655,811		329,929		1,222,829		1,016,902
Other (income), net		(2,417,252)		(43,437)		(2,518,320)		(169,525)
		(1,761,441)		286,492		(1,295,491)		847,377
Income from operations before income taxes		8,663,227		4,012,917		15,898,304		10,710,604
Income tax expense		2,397,000		1,076,000		4,987,000		2,916,000
Equity method investment earnings, net of tax		307,973		754,293		1,670,133		1,403,124
Net income		6,574,200		3,691,210		12,581,437		9,197,728
Less: Net income attributable to non-controlling interest		(591,369)		—		(591,369)		—
Net income available to common shareholders	$	5,982,831	$	3,691,210	$	11,990,068	$	9,197,728

Basic earnings per share available to common shareholders	$	10.50	$	6.69	$	21.15	$	16.71
Diluted earnings per share available to common shareholders	$	10.27	$	6.48	$	20.62	$	16.37

Basic weighted average shares outstanding		569,689		551,369		567,026		550,276
Diluted weighted average shares outstanding		582,370		569,481		581,578		561,940

Dividends paid per common share	$	0.18	$	0.18	$	5.54	$	5.54


⌧	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2022


◻	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from ___________to _________

Large accelerated filer ◻	Accelerated filer ◻	Non-accelerated filer ⌧


							Additional
	Common Stock			Treasury Stock			Paid-in		Retained		Non-controlling
	Shares	Amount		Shares	Amount		Capital		Earnings		Interest		Total
THREE MONTHS ENDED JUNE 2021
Balance, April 1, 2021	883,589	$	8,834	(332,220)	$	(30,867,287)	$	24,917,765	$	73,724,722	$	—	$	67,784,034
Dividends on common stock, $0.18 per share	—		—	—		—		—		(105,586)		—		(105,586)
Compensation expense and settlement of equity-based awards	—		—	—		—		25,527		—		—		25,527
Net income	—		—	—		—		—		3,691,210		—		3,691,210
Balance, June 30, 2021	883,589	$	8,834	(332,220)	$	(30,867,287)	$	24,943,292	$	77,310,346	$	—	$	71,395,185

THREE MONTHS ENDED JUNE 2022
Balance, April 1, 2022	917,009	$	9,168	(332,220)	$	(30,867,287)	$	26,555,046	$	86,336,525	$	—	$	82,033,452
Dividends on common stock, $0.18 per share	—		—	—		—		—		(108,596)		—		(108,596)
Compensation expense and settlement of equity-based awards	—		—	—		—		174,078		—		—		174,078
Fair value measurement of non-controlling interest	—		—	—		—		—		—		10,419,138		10,419,138
Distributions	—		—	—		—		—		—		(20,600)		(20,600)
Net income	—		—	—		—		—		5,982,831		591,369		6,574,200
Balance, June 30, 2022	917,009	$	9,168	(332,220)	$	(30,867,287)	$	26,729,124	$	92,210,760	$	10,989,907	$	99,071,672


Acquisition-date fair value of non-controlling interest	$	10,419,138
Acquisition-date fair value of previously held interest		12,897,444
Fair value of Team Sledd at the Control Date	$	23,316,582

Preliminary amounts of identifiable assets and liabilities at fair value:

Cash	$	7,958
Accounts receivable		29,524,181
Inventories		42,896,135
Prepaid and other current assets		2,533,205
Property and equipment		21,002,604
Operating lease right-of use assets		1,501,996
Other intangible assets		1,664,000
Other assets		1,685,945
Liabilities assumed		(78,340,442)
Total identifiable net assets	$	22,475,582

Goodwill		841,000
	$	23,316,582


	June		September
Wholesale Segment	2022		2021
Beginning Balance	$	4,436,950	$	4,436,950
Acquisition of Team Sledd, LLC		841,000		—
Ending Balance	$	5,277,950	$	4,436,950


	June
	2022
Fiscal 2022 (1)	$	42,533
Fiscal 2023		170,130
Fiscal 2024		170,130
Fiscal 2025		139,303
Fiscal 2026 and thereafter		1,113,549
	$	1,635,645


	June 2022		September 2021
Real Estate Loan, interest payable at a fixed rate of 3.625% with monthly installments of principal and interest of $47,399 through February 2025 with remaining principal due March 2025, collateralized by three distribution facilities	$	4,190,214	$	4,498,213
Note payable, interest payable at a fixed rate of 4.50% with quarterly installments of principal and interest of $49,114 through June 2023 with remaining principal due September 2023		1,006,381		1,117,254
Note payable, interest payable at a fixed rate of 4.10% with monthly installments of principal and interest of $53,361 through June 2033 with remaining principal due July 2033, collateralized by Team Sledd’s principal office and warehouse		5,674,355		—
Note payable, interest payable at a fixed rate of 3.25% with monthly installments of principal and interest of $17,016 through August 2034 with remaining principal due September 2034, collateralized by Team Sledd’s principal office and warehouse		2,086,721		—
Note payable with monthly installments of principal and interest of $7,934 through February 2025 with remaining principal due March 2025, and an effective variable rate of 2.90% at June 2022, collateralized by certain of Team Sledd’s equipment		406,572		—
		13,364,243		5,615,467
Less current maturities		(1,204,348)		(561,202)
	$	12,159,895	$	5,054,265


Fiscal Year Ending
2022 (1)	$	302,592
2023		2,050,814
2024		1,120,121
2025		4,011,184
2026 and thereafter		5,879,532
	$	13,364,243


	June		June
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,581,437	$	9,197,728
Adjustments to reconcile net income to net cash flows from (used in) operating activities:
Depreciation		2,486,613		2,295,390
Amortization		28,355		—
Equity method investment earnings, net of tax		(1,670,133)		(1,403,124)
Gain on re-valuation of equity method investment to fair value		(2,387,411)		—
Gain on sales of property and equipment		(133,639)		(8,057)
Equity-based compensation		1,903,884		1,819,272
Deferred income taxes		1,407,012		(220,693)
Provision for losses on doubtful accounts		83,000		86,000
Inventory allowance		688,902		238,148
Changes in assets and liabilities net of effects of business acquisition:
Accounts receivable		(1,215,238)		(2,334,341)
Inventories		(4,674,292)		3,093,184
Prepaid and other current assets		(2,986,167)		(3,677,421)
Equity method investment distributions		1,095,467		828,466
Other assets		(728,596)		34,647
Accounts payable		1,313,711		2,680,540
Accrued expenses and accrued wages, salaries and bonuses		1,926,479		804,983
Other long-term liabilities		(690,693)		(169,854)
Income taxes payable and receivable		(1,890,449)		(537,548)
Net cash flows from (used in) operating activities		7,138,242		12,727,320

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(13,940,428)		(1,254,958)
Proceeds from sales of property and equipment		145,500		39,728
Principal payment received on note receivable		175,000		—
Cash acquired in business acquisition		7,958		—
Net cash flows from (used in) investing activities		(13,611,970)		(1,215,230)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities		1,393,048,057		1,217,375,073
Repayments under revolving credit facilities		(1,381,508,745)		(1,227,854,771)
Proceeds from borrowings on long-term debt		—		3,000,000
Principal payments on long-term debt		(524,874)		(373,216)
Proceeds from exercise of stock options		173,590		—


	Wholesale		Retail
	Segment		Segment		Other		Consolidated
THREE MONTHS ENDED JUNE 2022
External revenue:
Cigarettes	$	364,771,496	$	—	$	—	$	364,771,496
Tobacco		93,957,495		—		—		93,957,495
Confectionery		32,541,090		—		—		32,541,090
Health food		—		11,350,797		—		11,350,797
Foodservice & other		47,963,274		—		—		47,963,274
Total external revenue		539,233,355		11,350,797		—		550,584,152
Depreciation		602,770		281,376		—		884,146
Amortization		28,355		—		—		28,355
Operating income (loss)		9,432,660		241,225		(2,772,099)		6,901,786
Interest expense		320,103		—		335,708		655,811
Income (loss) from operations before taxes		9,094,511		256,392		(687,676)		8,663,227
Equity method investment earnings, net of tax		—		—		307,973		307,973
Total assets		278,824,259		18,656,853		814,291		298,295,403
Capital expenditures		12,074,922		985,835		—		13,060,757


	Wholesale		Retail
	Segment		Segment		Other		Consolidated
THREE MONTHS ENDED JUNE 2021
External revenue:
Cigarettes	$	294,690,427	$	—	$	—	$	294,690,427
Tobacco		68,525,147		—		—		68,525,147
Confectionery		25,703,325		—		—		25,703,325
Health food		—		11,745,769		—		11,745,769
Foodservice & other		37,648,362		—		—		37,648,362
Total external revenue		426,567,261		11,745,769		—		438,313,030
Depreciation		445,831		295,349		—		741,180
Operating income (loss)		6,349,783		621,421		(2,671,795)		4,299,409
Interest expense		56,924		—		273,005		329,929
Income (loss) from operations before taxes		6,304,328		624,447		(2,915,858)		4,012,917
Equity method investment earnings, net of tax		—		—		754,293		754,293
Total assets		159,766,283		17,140,050		11,874,597		188,780,930
Capital expenditures		384,429		133,732		—		518,161


	Wholesale		Retail
	Segment		Segment		Other		Consolidated
NINE MONTHS ENDED JUNE 2022
External revenue:
Cigarettes	$	900,677,466	$	—	$	—	$	900,677,466
Tobacco		229,765,009		—		—		229,765,009
Confectionery		79,691,881		—		—		79,691,881
Health food		—		35,695,298		—		35,695,298
Foodservice & other		119,213,967		—		—		119,213,967
Total external revenue		1,329,348,323		35,695,298		—		1,365,043,621
Depreciation		1,589,102		897,511		—		2,486,613
Amortization		28,355		—		—		28,355
Operating income (loss)		23,174,638		1,448,878		(10,020,703)		14,602,813
Interest expense		428,665		—		794,164		1,222,829
Income (loss) from operations before taxes		22,767,606		1,469,705		(8,339,007)		15,898,304
Equity method investment earnings, net of tax		—		—		1,670,133		1,670,133
Total assets		278,824,259		18,656,853		814,291		298,295,403
Capital expenditures		12,718,606		1,217,373		—		13,935,979


	For the three months ended June 2022		For the three months ended June 2021		For the nine months ended June 2022		For the nine months ended June 2021
Sales	$	64,123,105	$	179,676,748	$	393,606,372	$	502,704,216
Gross profit		3,721,966		9,711,966		21,759,753		25,279,274
Net income before income taxes		828,775		2,034,258		4,498,190		3,979,078
Net income attributable to AMCON, net of tax		307,973		754,293		1,670,133		1,403,124


Revenue	$	108,674,587
Net income available to common shareholders	$	1,340,811


	For the three months ended June 2022		For the three months ended June 2021		For the nine months ended June 2022		For the nine months ended June 2021
Revenue	$	614,707,257	$	617,672,972	$	1,758,649,994	$	1,724,275,510
Net income available to common shareholders	$	6,022,099	$	3,789,960	$	12,205,185	$	9,462,698


	2022			2021			Incr (Decr)		% Change
CONSOLIDATED:
Sales (1)	$	550,584,152		$	438,313,030		$	112,271,122	25.6
Cost of sales		516,907,540			412,771,324			104,136,216	25.2
Gross profit		33,676,612			25,541,706			8,134,906	31.8
Gross profit percentage		6.1	%		5.8	%

Operating expense	$	26,774,826		$	21,242,297		$	5,532,529	26.0
Operating income		6,901,786			4,299,409			2,602,377	60.5
Interest expense		655,811			329,929			325,882	98.8
Income tax expense		2,397,000			1,076,000			1,321,000	122.8
Equity method investment earnings, net of tax		307,973			754,293			(446,320)	(59.2)
Net income available to common shareholders		5,982,831			3,691,210			2,291,621	62.1

BUSINESS SEGMENTS:
Wholesale
Sales	$	539,233,355		$	426,567,261		$	112,666,094	26.4
Gross profit		29,442,578			21,157,711			8,284,867	39.2
Gross profit percentage		5.5	%		5.0	%
Retail
Sales	$	11,350,797		$	11,745,769		$	(394,972)	(3.4)
Gross profit		4,234,034			4,383,995			(149,961)	(3.4)
Gross profit percentage		37.3	%		37.3	%



	10.1	Seventh Amendment to Second Amended and Restated Loan and Security Agreement, dated June 30, 2022, between AMCON Distributing Company and Bank of America (incorporated by reference to Exhibit 10.1 of AMCON’s Form 8-K filed on July 6, 2022)

	10.2	LIBOR Transition Amendment, dated June 30, 2022

	10.3	Credit Agreement dated March 27, 2020 between Team Sledd, LLC and First National Bank of Pennsylvania, as agent

	10.4	First Amendment to Credit Agreement dated April 9, 2021 between Team Sledd, LLC and First National Bank of Pennsylvania

	10.5	Second Amendment to Credit Agreement dated October 4, 2021 between Team Sledd, LLC and First National Bank of Pennsylvania

	31.1	Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, pursuant to section 302 of the Sarbanes-Oxley Act

	31.2	Certification by Charles J. Schmaderer, Vice President, Chief Financial Officer and Secretary, pursuant to section 302 of the Sarbanes-Oxley Act

	32.1	Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 906 of the Sarbanes-Oxley Act

	32.2	Certification by Charles J. Schmaderer, Vice President, Chief Financial Officer and Secretary, furnished pursuant to section 906 of the Sarbanes-Oxley Act

	101	Interactive Data File (filed herewith electronically)

	104	Cover Page Interactive Data File – formatted in Inline XBRL and included as Exhibit 101

	AMCON DISTRIBUTING COMPANY
	(registrant)

Date: July 18, 2022	/s/ Christopher H. Atayan
	Christopher H. Atayan,
	Chief Executive Officer and Chairman

Date: July 18, 2022	/s/ Charles J. Schmaderer
	Charles J. Schmaderer,
	Vice President, Chief Financial Officer and Secretary
	(Principal Financial and Accounting Officer)

AGENT:	BANK OF AMERICA, N.A., as Agent and a Lender

	By:	/s/ Daniel Rubio
	Name:	Daniel Rubio
	Title:	Assistant Vice President

BORROWERS:	AMCON DISTRIBUTING COMPANY

	By:	/s/ Charles J. Schmaderer
	Title:	Vice President, Chief Financial Officer and Secretary

	CHAMBERLIN NATURAL FOODS, INC.

	By:	/s/ Andrew C. Plummer
	Title:	Secretary

	HEALTH FOOD ASSOCIATES, INC.

	By:	/s/ Charles J. Schmaderer
	Title:	Secretary

	AMCON ACQUISITION CORP.

	By:	/s/ Andrew C. Plummer
	Title:	President

	EOM ACQUISITION CORP.

	By:	/s/ Andrew C. Plummer
	Title:	Secretary

LENDER:	BMO HARRIS BANK N.A., as a Lender

	By:	/s/ Steve Teufel
	Title:	Vice President


Article I DEFINITIONS AND INTERPRETATIONS		1

Section 1.01	Defined Terms and Interpretations.	1
Section 1.02	Accounting Matters; Changes in GAAP.	1
Section 1.03	Conflict in Loan Documents.	2
Section 1.04	Legal Representation of Parties.	2

Article II THE CREDIT FACILITIES.		2

Section 2.01	Revolving Credit Loans.	2
Section 2.02	The Revolving Credit Note.	2
Section 2.03	Repayment of the Revolving Credit Loans; Nature of Lenders' Obligations with respect to Revolving Credit Loans.	2
Section 2.04	Voluntary Reduction of the Revolving Credit Commitment.	3
Section 2.05	Borrowing Procedures for Loans.	4
Section 2.06	Unused Revolving Credit Commitment Fee.	6
Section 2.07	Payments.	6
Section 2.08	Administrative Agent's Records.	7
Section 2.09	Letter of Credit Subfacility.	7
Section 2.10	Issuance, Amendment and Renewal of Letters of Credit.	9
Section 2.11	Drawings and Reimbursements.	10
Section 2.12	Role of the Issuing Lender.	12
Section 2.13	Obligations Absolute.	13
Section 2.14	Cash Collateral.	14
Section 2.15	Letter of Credit Fees; Indemnity.	15
Section 2.16	Defaulting Lenders.	15
Section 2.17	Pro Rata Treatment of Lenders.	17
Section 2.18	Sharing of Payments by Lenders.	17
Section 2.19	Presumptions by Administrative Agent.	18
Section 2.20	Additional Payments.	18

Article III INTEREST AND GENERAL LOAN PROVISIONS		18

Section 3.01	Interest.	18
Section 3.02	Continuation and Conversion of Loans.	20
Section 3.03	Prepayments.	21
Section 3.04	LIBOR Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available.	23
Section 3.05	Effect of Benchmark Transition Event.	25
Section 3.06	Increased Costs.	26
Section 3.07	Taxes.	27
Section 3.08	Indemnity.	31
Section 3.09	Survival.	31
Section 3.10	Security.	31

Article IV CONDITIONS OF LENDING		31


Section 4.01	Initial Conditions.	31
Section 4.02	Subsequent Conditions.	33

Article V REPRESENTATIONS AND WARRANTIES		34

Section 5.01	Organization, Subsidiaries and Authority.	34
Section 5.02	Consent.	35
Section 5.03	Litigation.	35
Section 5.04	Financial Statements and Solvency.	35
Section 5.05	Ownership and Management.	35
Section 5.06	Adverse Occurrences.	36
Section 5.07	Indebtedness.	36
Section 5.08	Information.	36
Section 5.09	Assets, Liens and Insurance.	36
Section 5.10	Contractual Obligations.	37
Section 5.11	Taxes.	37
Section 5.12	Margin Stock; Investment Company.	37
Section 5.13	Intellectual Property Rights.	37
Section 5.14	Environmental Laws.	38
Section 5.15	Collateral Documents.	38
Section 5.16	Bankruptcy; Insolvency.	39
Section 5.17	Compliance with Laws.	39
Section 5.18	Locations.	39
Section 5.19	ERISA Plans.	39
Section 5.20	Eligible Accounts.	40
Section 5.21	Eligible Inventory.	40
Section 5.22	Eligible Cigarette Inventory.	40
Section 5.23	Business Operations.	40
Section 5.24	Labor Relations.	41
Section 5.25	Contemporaneous Exchange.	41
Section 5.26	Disclosure.	41
Section 5.27	Anti-Terrorism Laws.	41
Section 5.28	Updates to Schedules.	41
Section 5.29	Certificate of Beneficial Ownership.	41

Article VI AFFIRMATIVE COVENANTS		42

Section 6.01	Use of Proceeds.	42
Section 6.02	Financial Information and Compliance Certificates.	42
Section 6.03	Books and Records; Visitation; Collateral Examinations and Monitoring Fee.	44
Section 6.04	Compliance with Laws.	45
Section 6.05	Notices.	45
Section 6.06	Insurance.	47
Section 6.07	Taxes.	48
Section 6.08	ERISA Compliance.	49
Section 6.09	Maintenance of Properties.	49
Section 6.10	Maintenance of Existence.	49


Section 6.11	Environmental Matters.	49
Section 6.12	Reimbursable Costs and Expenses.	50
Section 6.13	Cash Management System; Borrower's Account.	51
Section 6.14	Payment of Liabilities.	52
Section 6.15	True Disclosures.	52
Section 6.16	Security Interests.	52
Section 6.17	Further Assurances.	53
Section 6.18	Keepwell.	54
Section 6.19	Anti-Terrorism Laws; International Trade Compliance.	54
Section 6.20	Certificates of Beneficial Ownership; Other Additional Information.	54
Section 6.21	AMCON Transactions.	55

Article VII NEGATIVE COVENANTS		55

Section 7.01	Financial Covenants.	56
Section 7.02	Fundamental Changes.	56
Section 7.03	Restricted Payments.	56
Section 7.04	Indebtedness.	56
Section 7.05	Liquidations, Mergers, Consolidations.	57
Section 7.06	Investments, Acquisitions, Loans and Advances.	57
Section 7.07	Liens.	57
Section 7.08	Affiliated Transactions.	59
Section 7.09	Business and Accounting Changes.	59
Section 7.10	Documents.	59
Section 7.11	Hazardous Materials.	60
Section 7.12	Disposition of Assets.	60
Section 7.13	Guarantees.	60
Section 7.14	Rentals.	60
Section 7.15	ERISA Compliance.	61
Section 7.16	Changes in Organization Documents or JV Documents.	61
Section 7.17	Subsidiaries, Partnerships and Joint Ventures.	61
Section 7.18	Negative Pledge.	61

Article VIII EVENTS OF DEFAULT		61

Section 8.01	Failure to Make Payments.	61
Section 8.02	Representations and Warranties.	62
Section 8.03	Covenants and Agreements.	62
Section 8.04	Defaults on Other Obligations.	62
Section 8.05	Insolvency and Other Related Events.	63
Section 8.06	Final Judgments.	63
Section 8.07	Execution on Properties.	63
Section 8.08	ERISA Events.	63
Section 8.09	Suspension of Operations.	63
Section 8.10	The Collateral.	63
Section 8.11	Termination of Loan Documents.	64
Section 8.12	Criminal Activities.	64
Section 8.13	Change of Control.	64


Section 8.14	Anti-Terrorism Laws.	64
Section 8.15	Default on Other Indebtedness.	64
Section 8.16	Cure.	64

Article IX REMEDIES.		66

Section 9.01	Rights of the Administrative Agent and the Lenders Upon Default.	66
Section 9.02	Cumulative Remedies.	67
Section 9.03	Waiver of Right to Marshal.	67
Section 9.04	Application of Proceeds.	67

Article X ADMINISTRATIVE AGENT		68

Section 10.01	Appointment and Authority.	68
Section 10.02	Rights as a Lender.	69
Section 10.03	Exculpatory Provisions.	69
Section 10.04	Reliance by Administrative Agent.	70
Section 10.05	Delegation of Duties.	70
Section 10.06	Resignation of Administrative Agent.	70
Section 10.07	Non-Reliance on Administrative Agent and Other Lenders.	71
Section 10.08	Authorization to Release Collateral and Guarantors.	71
Section 10.09	No Reliance on Administrative Agent's Customer Identification Program	72
Section 10.10	National Flood Insurance Reform Act of 1994.	72

Article XI	MISCELLANEOUS	72

Section 11.01	Automatic Debits of Fees.	72
Section 11.02	Rights in Property held by the Administrative Agent.	72
Section 11.03	Collateral.	73
Section 11.04	No Third Party Rights.	73
Section 11.05	Construction.	73
Section 11.06	Waiver.	73
Section 11.07	Indemnification by the Loan Parties.	73
Section 11.08	Marshaling; Payments Set Aside.	74
Section 11.09	Waiver of Jury Trial.	75
Section 11.10	Consent to Jurisdiction.	75
Section 11.11	Survival.	75
Section 11.12	Disclosure of Information.	76
Section 11.13	Notices.	76
Section 11.14	Limitation of Liability.	77
Section 11.15	Sale and Participation.	77
Section 11.16	Applicable Law.	78
Section 11.17	Binding Effect and Assignment.	79
Section 11.18	Counterparts.	79
Section 11.19	Headings.	79
Section 11.20	Severability.	79
Section 11.21	Entire Agreement.	80
Section 11.22	Sealed Document.	80

Section 11.23	Modifications, Amendments or Waivers.	80
Section 11.24	Reimbursement by Lenders.	81
Section 11.25	Assignments by Lenders.	81
Section 11.26	Register.	83
Section 11.27	Payments.	83
Section 11.28	Holidays.	83
Section 11.29	USA Patriot Act Notice.	83
Section 11.30	Certain ERISA Matters.	84

Exhibit A	Notice of Borrowing
Exhibit B	Borrowing Base Certificate
Exhibit C	Notice of Continuation/Conversion
Exhibit D	Monthly Collateral Recap
Exhibit E	Accounts Receivable Reconciliation
Exhibit F	Applicable Margins
Exhibit G	Compliance Certificate
Exhibit H	Form of Assignment and Assumption Agreement
Exhibit I	Form of Collateral Assignment of Contracts
Exhibit J	Form of Guaranty Agreement (Individuals)
Exhibit K	Form of Indemnity Agreement
Exhibit L	Form of East Cove Property (68 and 100) Deed of Trust
Exhibit M	Form of Patent, Trademark and Copyright Security Agreement
Exhibit N	Form of Revolving Credit Note
Exhibit O	Form of Security Agreement
Exhibit P(1)	U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Exhibit P(2)	U.S. Tax Compliance Certificate (For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Exhibit P(3)	U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Exhibit P(4)	U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Exhibit Q	Form of East Cove Property (70) Deed of Trust

Schedule	One	Definitions
Schedule	Two	Conditions Precedent
Schedule	Three	Commitments of Lenders
Schedule	5.01	Organization, Subsidiaries and Authority
Schedule	5.03	Litigation
Schedule	5.05	Ownership
Schedule	5.09	Assets and Insurance
Schedule	5.13	Intellectual Property Rights
Schedule	5.14	Environmental Matters
Schedule	5.15	Filing Offices
Schedule	5.18	Locations
Schedule	5.19	ERISA Plans
Schedule	5.20	Eligible Accounts
Schedule	6.01	Use of Proceeds