September 17, 1996
Amcon Distributing Company
Attn: X. Xxxx Xxxxxx, Secretary
00000 "X" Xxxxxx
Xxxxx, Xxxxxxxx 00000-0000
Re: Sale of Certain Assets of Amcon Distributing Company, a Delaware
corporation ("Amcon"), to Western Distributing Company, a Colorado
corporation ("Western").
Dear Xx. Xxxxxx:
This confirms the terms of the agreement that has been reached between Amcon and
Western for Western's acquisition of certain assets of Amcon, as more
specifically described below (the "Assets").
1. THE ASSETS. The Assets are:
(a) All beverage products and inventory owned by Amcon (the "Inventory")
that meet the freshness requirements described in Paragraph 4(g) below and have
been manufactured or supplied by either of the following companies (together,
the "Suppliers"):
(i) Xxxxx Brewing Company (successor in interest to X. Xxxxxxxx
Brewing Company), and
(ii) Minnesota Brewing Company;
together with all of Amcon's rights, if any, in and to Amcon's distributorship
agreements (together, the "Distributorship Agreements") with the Suppliers.
(b) All of the equipment owned by Amcon, used in connection with its
business and listed on SCHEDULE 1 (the "FF&E"). The FF&E includes, only those
items set forth on the attached SCHEDULE 1, as modified and initialed by Amcon
and Western.
2. PURCHASE PRICE: HOLD BACK
(a) The total purchase price for the Assets (the "Purchase Price")
shall be an amount equal to the sum of: (i) the "laid in cost" of the
Inventory on the date of Closing, as determined by the Valuing Inventory (as
defined in Paragraph 8 below); plus (ii) the fair market value of the FF&E
(as set forth on EXHIBIT 1); plus (iii) an amount equal to the Accounts
Receivable as of the date of Closing; plus (iv) an amount allocable to the
Distributorship Agreements equal to $1,460,757.62.
(b) The Purchase Price, subject to any Closing Adjustments (as
described in Paragraph 9 below), shall be paid in full at the Closing.
(c) Western shall hold back from the Purchase Price payable a the
Closing the sum of Fifty Thousand Dollars ($50,000) (the "Hold Back"), which
shall be deducted from such portions of the Purchase Price payable at Closing as
Western may elect. To the extent available, the Hold Back may be used by
Western to offset any post-Closing adjustments and reacquisition costs as
provided for in Paragraphs 9 and 10 below; provided, however, that the amount of
the Hold Back is not intended in any way to limit the extent of such post-
Closing adjustments or reacquisition costs. To the extent that Hold Back
exceeds the post-Closing adjustments and reacquisition costs payable to Western,
Western shall promptly pay the amount of such excess to Amcon.
3. INVESTIGATION. Western shall have until the Closing to investigate the
Assets and all matters relevant to the acquisition, ownership, or operation of
the Assets. Such right of investigation shall include, without limitation, the
right to conduct any studies or inspections of the Assets that Western deems
necessary or appropriate. Western shall have the right to communicate directly
with the Suppliers and any other third parties contracting with Amcon concerning
present and future distributorship arrangements. Amcon agrees to cooperate
reasonably with any such investigations, inspections , or studies made by
Western or at Western's direction. If, on or before the Closing, Western is
reasonably dissatisfied in any material respect with all or any portions of the
Assets, Western may give Amcon written notice of such dissatisfaction, which
shall serve as Western's unequivocal election to terminate this letter
agreement. This letter agreement shall thereupon terminate and be of no further
force and effect.
4. AMCON'S's REPRESENTATIONS AND WARRANTIES. Amcon represents and warrants
to Western that:
(a) AUTHORIZATION. Amcon is a corporation duly organized and in good
standing under the laws of Colorado. Amcon has full right and authority to
enter into this letter agreement and consummate the transactions contemplated
hereby, subject to the approval of Amcon's Board of Directors. The execution
and delivery of this letter agreement by Amcon, and the consummation of the
transactions contemplated by it, do not, and will not, (i) violate any law,
rule, regulation, judgement, order, injunction or decree applicable to Amcon;
(ii) conflict with, result in a breach of, require the consent of any party to,
or constitute a default under, any indenture, mortgage, agreement, lease, or
other instrument to which Amcon is a party or by which it is bound; or (iii)
result in the creation or imposition of any claim, lien, charge, or other
encumbrance against any of the Assets.
(b) TITLE TO ASSETS. Amcon owns outright and is vested with good and
marketable title to all of the Assets, free and clear of any liens, mortgages,
security interests, claims, charges, restrictions, or other encumbrances, or any
other restrictions on sale or transfer, including any conditional sale or other
title retention agreement, except for: (i) liens for current taxes not yet
payable; and (ii) any other liens specifically disclosed on SCHEDULE 2 attached
hereto. There presently are no personal property taxes due and payable with
respect to the Assets.
(c) COMPLIANCE WITH LAWS. Amcon's use and operation of the Assets and
Amcon's conduct of its business do not violate or conflict with any applicable
law, rule, regulation, ordinance, judgement, decree, order, injunction, or
decision of any court or governmental authority , including, but not limited to,
any environmental, pollution, health, safety, or franchise law or regulation,
the enforcement of which would have a material adverse effect on the value of
the Assets or Amcon's business.
(d) LITIGATION. There are no claims, actions, suits, or proceedings
pending, or to Amcon's knowledge and belief threatened, in any court, or before
any governmental authority, or before any arbitrator, by or against Amcon or
affecting any of the Assets, which, if adversely determined, would materially
and adversely affect the value of the Assets or its business, or which would
prevent or restrict the consummation of the transactions contemplated by this
letter agreement, or declare such transactions unlawful, or cause their
rescission.
(e) EMPLOYMENT MATTERS. Amcon is not bound by any employment, union,
or service contracts.
(f) Not used.
(g) INVENTORY FRESHNESS. All of the Inventory to be acquired by
Purchaser complies with the following freshness requirements: (i) all canned and
bottled beer and other products have and shall have freshness expiration dates
no earlier than October 15, 1996; and (ii) all keg beer has and shall have
freshness expiration dates no earlier than October 15, 1996.
(h) CONTINUING ACCURACY. Each representation and warranty made by
Amcon in this letter agreement shall continue to be true and correct on the date
of Closing, as through such representation or warranty had been made again on
such date; and each representation and warranty shall survive the Closing.
5. WESTERN'S REPRESENTATIONS AND WARRANTIES. Western represents and
warrants to Amcon that:
(a) AUTHORIZATION. Western is a corporation duly organized and in good
standing under the laws of Colorado. Xxxxxxx has full right and authority to
enter into this letter agreement and consummate the transactions contemplated
hereby, subject to approval by Western's Board of Directors. The execution and
delivery of this letter agreement by Western, and the consummation of the
transactions contemplated by it, do not, and will not, (i) violate any law,
rule, regulation, judgement, order, injunction or decree applicable to Western;
or (ii) conflict with, result in a breach of, require the consent of any party
to, or constitute a default under, any indenture, mortgage, agreement, lease, or
other instrument to which Western is a party or by which it is bound.
(b) LITIGATION. There are no claims, actions, suits or proceedings
pending, or to Western's knowledge and belief threatened, in any court, or
before any governmental authority, or before any arbitrator, by or against
Western, which, if adversely determined, would prevent or restrict the
consummation of the transactions contemplated by this letter agreement, or
declare such transactions unlawful, or cause their rescission.
(c) CONTINUING ACCURACY. Each representation and warranty made by
Western in this letter agreement shall continue to be true and correct on the
date of Closing, as though such representation and warranty had been made again
on such date; and each representation and warranty shall survive the Closing.
6. WESTERN'S CONDITIONS PRECEDENT. The obligations of Western to perform
under this letter agreement are conditioned upon the satisfaction of the
following conditions or Western's waiver (in its sole discretion) of
satisfaction:
(a) Completion of the Valuing Inventory.
(b) Evidence that the holders of the liens set forth on SCHEDULE 2, if
any, will accept payment by Amcon and release those liens at Closing.
(c) The approval by Western's lenders and Western's Board of Directors
of the transaction contemplated by this letter agreement.
(d) Western's reasonable satisfaction with the condition of the Assets
as of the Closing.
(e) Western's receipt of the results of a UCC search from the Colorado
Secretary of State indicating the existence of no liens against the Assets
except those disclosed on SCHEDULE 2.
(f) Western's receipt of evidence, reasonably satisfactory to Western,
of Amcon's corporate authority to consummate the transactions contemplated
hereby.
(g) The continuing accuracy of Amcon's representations and warranties,
as if made on the date of the Closing.
(h) Not used.
(i) The approval by the Suppliers of the transfer to Western of the
Distributorship Agreements.
7. AMCON'S CONDITIONS PRECEDENT. The obligations of Amcon to perform under
this letter agreement are conditioned upon the satisfaction of the following
conditions or Amcon's waiver (in its sole discretion) of satisfaction:
(a) Completion of the Valuing Inventory.
(b) Amcon's receipt of evidence, reasonably satisfactory to Amcon, of
Western's corporate authority to consummate the transactions contemplated
hereby.
(c) The continuing accuracy of Western's representations and
warranties, as if made on the date of the Closing.
(d) The approval by Amcon's Board of Directors of the transaction
contemplated by this letter agreement.
8. POSSIBLE EXCLUSION OF FF&E: VALUING INVENTORY.
(a) Amcon and Western acknowledge that Western has heretofore inspected
all of the FF&E, all of which is located in SCHEDULE 1 and is agreed to have
fair market value of $16,744 (i.e., the same as the net book value thereof).
(b) Within 24 hours prior to the Closing, Western and Amcon will jointly
conduct an inventory (the "Valuing Inventory") of the Inventory and Accounts
Receivable. In the Valuing Inventory, all Inventory will be valued at actual
laid-in cost, and may at Western's option, be stored in Western's trucks at
Amcon's facility pending completion of the Closing. Western and Amcon will
together prepare a current list of Inventory (specifically excluding any product
that does not meet the freshness requirements described above) and a list of the
Accounts Receivable (specifically excluding any receivables that are more than
ninety (90) days old as of the date of the Closing).
9. CLOSING: CLOSING ADJUSTMENTS.
(a) The closing of this transaction (the "Closing") will take place at
2:00 p.m., October 4, 1996 at Western's offices, 0000 Xxx Xxxxxx, Xxxxxx,
Xxxxxxxx.
At the Closing: (i) Amcon will deliver or make available possession of the
Assets to Western (including, without limitation keys to any vehicles included
in the FF&E), and will deliver to Western an executed Bill of Sale to the
Assets, which shall include an assignment of Amcon's rights in and to the
assignable Distributorship Agreements, a certificate of title (bearing all
necessary endorsements thereto) to each of the vehicles that is included in the
FF&E, and all other instruments necessary or desirable in order to effect the
transaction contemplated by this letter agreement; and (ii) Western will
deliver to Amcon a check in the amount of the Purchase Price for the FF&E, and
the Accounts Receivable, subject to any Closing Adjustments.
(b) Appropriate adjustments ("Closing Adjustments") shall be made to the
Purchase Price at the time of Closing in order to prorate personal property
taxes relating to the Assets that are not yet payable, to reflect the Hold Back
described in Paragraph 2 above and to reflect the exclusion of any FF&E as
provided in Paragraph 8 above.
10. COLLECTION OF ACCOUNTS RECEIVABLE; REPURCHASE. From and after the date
of the Closing, Western will use reasonable efforts to collect the Accounts
Receivable purchased from Amcon. Any amounts collected from any obligor with
respect to any of the Accounts Receivable will, unless otherwise specified by
such obligor, be applied first to the Accounts Receivable before being applied
to any subsequent liability from such obligor to Western. Western's obligation
to attempt to collect the Accounts Receivable will NOT include any requirement
that it commence any type of litigation, engage any type of collection agent, or
incur any out-of-pocket costs related to such collection. Any Accounts
Receivable that have not been collected by Western within sixty (60) days after
the date of the Closing will promptly be repurchased by Amcon at face value.
11. PICK-UP OF STALE PRODUCT. Western and Amcon acknowledge that prior to
the Closing Amcon may have sold product supplied by the Suppliers which remains
on the shelves of retailers. As part of its arrangement with the Suppliers,
Western will be required to "pick up" from retailers any such product that
becomes "stale" prior to resale. For purposes hereof, any product will be
deemed "stale" if it has a freshness expiration date earlier than October 15,
1996. Western will be entitled to a post-Closing adjustment, as provided in
Paragraph 12 below, for any such "stale" product that it is required to pick up
after the date of the Closing. Western will also be entitled to dispose of all
such "stale" product, and Amcon shall have no claim to any such "stale"
product. Western shall notify Amcon approximately twenty-one (21) days after
the date of Closing of any "stale" product that Western is required to pick up
pursuant to this Paragraph 11; and Amcon shall have the period of one (1) week
after the date of such notification to investigate all such product and confirm
that it is in fact "stale."
12. FINAL RECONCILIATION: POST-CLOSING ADJUSTMENTS. On the first business
day that is sixty (60) days after the date of the Closing, Western and Amcon
shall reconvene at the offices of Western at 2:00 p.m., at which time the
parties shall do a final reconciliation of all amounts due and owing pursuant to
the terms of Paragraphs 10 and 11 above. At the time of such reconciliation, a
post-closing adjustment will be made to the Purchase Price as follows: (i)
Amcon shall pay to Western by check an amount equal to all Accounts Receivable
not theretofore collected by Western as provided in Paragraph 11 above, and
Western shall reassign the uncollected Accounts Receivable to Amcon without
recourse, representation or warranty; and (ii) Western shall receive a credit
against the Purchase Price for the Inventory in an amount equal to the laid-in
cost of all "stale" product previously picked up by Western in accordance with
the provisions of Paragraph 11 above. If any of the preceding post-closing
adjustments in favor of Western exceed the total amount of the Hold Back, Amcon
will promptly pay to Western an amount equal to such excess.
13. INDEMNITY OF WESTERN. Amcon will defend, indemnify, and hold Western
harmless from and against:
(a) Any and all liabilities, obligations, losses, and damages resulting
from, or attributable to: (i) any breach of any representation or warranty made
by Amcon in this letter agreement, or (ii) any breach or default in the
performance by Amcon of any of the agreements made by Amcon in this letter
agreement.
(b) Any and all liabilities and obligations of Amcon.
(c) Any and all costs and expenses, including reasonable legal fees,
relating to the foregoing.
14. INDEMNITY OF AMCON. Xxxxxxx will defend, indemnify, and hold Amcon
harmless from and against:
(a) Any and all liabilities, obligations, losses, and damages resulting
from, or attributable to: (i) any breach of any representation or warranty made
by Western in this letter agreement, or (ii) any breach or default in the
performance by Western of any of the agreements made by Western in this letter
agreement.
(b) Any and all liabilities and obligations relating to the Assets incurred
by Western from and after the date of the Closing.
(c) Any and all costs and expenses, including reasonable legal fees,
relating to the foregoing.
15. RISK OF LOSS. The risk of loss with respect to the Assets will remain
with Amcon until the Closing, and if any material loss, destruction or damage to
the Assets occurs before the Closing, Western will have the right either to
cancel this letter agreement without further obligation or to consummate the
transactions contemplated by this letter agreement and to be entitled to the
proceeds of insurance and other claims that Amcon has on account of the loss,
destruction or damage. Risk of loss with respect to all Assets will pass to
Western at the time of Closing, regardless of the date of actual pick-up of the
Inventory and FF&E.
16. AMCON EMPLOYEES. Amcon acknowledges that Western shall have no
obligation of any kind or nature to employ any employees of Amcon; provided,
however, that nothing herein shall preclude Western at its sole option from
hiring any such employees who meet Western's usual standards, tests, waiting
periods and procedures for employment for similar employees.
17. MISCELLANEOUS. Amcon and Western will take whatever steps are necessary
at no cost to either of them in order to ensure the effectuation of the goals
and purposes of this letter agreement. This letter agreement represents the
entire agreement of Amcon and Western and supersedes any prior written or oral
discussions or agreements between them, and may be modified only by a written
agreement signed by both of them. If Western or Amcon engages legal counsel to
pursue legal remedies on account of a breach of this letter agreement by the
other then the prevailing party will be entitled to the recovery of its
reasonable attorneys' fees and court costs. This letter agreement will inure to
the benefit of and be binding upon the successors and assigns of Western and
Amcon. The representations, warranties and indemnities contained herein will
survive the Closing. Amcon and Western will each bear their own costs,
including attorneys' fees, incurred in connection with the purchase ans sale of
the Assets, including costs in connection with the preparation of this letter
agreement and any other documents contemplated hereby. Each party hereto will
indemnify the other against any claims for any broker's or finder's fee or
other compensation made by any broker or finder engaged by, or claiming by
reason of any action of, the indemnifying party.
If the foregoing accurately sets forth the agreement of Amcon and Western
concerning the subject matter hereof, please execute the enclosed copy of this
letter and return it to the undersigned no later than the close of business on
October 2, 1996.
Very truly yours,
Western Distributing Company, a
Colorado corporation
By: Xxxxx Xxxxxx, President
------------------------------------------
Xxxxx Xxxxxx, President
FJL:pcs
AGREED TO AND ACCEPTED THIS
2nd DAY OF OCTOBER, 1996
Amcon Distributing Company,
a Delaware corporation
By: X. Xxxx Xxxxxx
-------------------------------------------
Name: X. Xxxx Xxxxxx
Title: Secretary
Schedule 2
to Letter Agreement dated September 17, 1996
between Amcon Distributing Company and
Western Distributing Company
Schedule of Liens
None.
AMCON Distributing Company
VEHICLE SCHEDULE - September 30, 1996
VIN# UNIT# Yr/Make/Model Cost Net Book
0XXXXXXX0XXX00000 1986 Intrl S series
Semi Tractor 13,500 9,450
0X00XXX0XXX000000 1986 Atlas Trailer 3,000 2,700
65512 1974 GD Trailer - 41 ft. 884 0
0XXXX0000XXX00000 D25 1980 Ford 12 Bay 8,105 1,204
DF257K6B15516 D17 1980 Intrl __ Bay 10,110 0
R700VJA8437 D24 1981 Ford 12 Bay 3,018 449
AA185BHA11509 D15 1981 Intrl 10 Bay 10,651 0
AA185BHA11520 D12 1981 Intrl 10 Bay 12,384 0
0XXX0X0X0XX000000 D20 1984 GMC12 Bay 7,000 2,100
1HTLTP9GHA19768 D28 1986 Intrl __ Bay 9,535 0
0XXXXXXX0XXX00000 D21 1986 Intrl 10 Bay 11,156 841
1HTLCHXP6GA18199 D22 1986 Intrl 8 Bay Xxxxxxx 3,758 0
0XXXXXXX0XX000000 D13 1989 Intrl 8 Bay Xxxxx 9,632 0
80FVR35034 017** 1973 Ford 10 Bay Xxxxx 3,158 0
325EGB24071 D05** 1975 Intrl __ Bay 2,310 0
N71FVY69126 003** 1977 Ford 10 Bay 3,211 0
A182JHB20200 019** 1979 Intrl 6 Bay Xxxxx 8,965 0
0XXX0X0X0XX000000 D19** 1981 GMC 6-1/2 Bay Xxxxxxx 1,050 0
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121,427 16,744
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