<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended September 29, 1995
Commission File Number 2-60487
UNITED GROCERS, INC.
OREGON 93-0301970
6433 S.E. Lake Road (Milwaukie, Oregon)
Post Office Box 22187, Portland, Oregon 97222
Registrant's telephone number, including area code: (503) 833-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. __X__
State the aggregate market value of the voting stock held by non-affiliates of
the registrant.
$37,265,445 (computed on basis of 1995 offering price and number of shares
outstanding at December 22, 1995).
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
626,310 shares of common stock, $5 par value, as of December 22, 1995.
Documents incorporated by reference: None
<PAGE>
PART 1
Item 1. Business
The registrant, United Grocers, Inc. ("United" or "the Company"), a
wholesale grocery distributor, is an Oregon business corporation organized in
1915 which operates and is taxed as a cooperative.
The Company supplies groceries and related products to independent retail
grocers located in Oregon, western Washington and northern California.
United's goal is both to supply grocery products to retailers at prices which
enable them to compete effectively in the retail market, and to furnish them
other services, such as marketing assistance, engineering, accounting,
financing and insurance, which are important to the successful operation of a
retail grocery business.
United also sells groceries and related products at wholesale through 35
Cash and Carry depots, principally to nonmember grocers, restaurants and
institutional buyers.
Consolidated revenues by principal product lines and services appear in
the following table:
<TABLE>
<CAPTION>
For Fiscal Year Ended
September 29, 1995 September 30, 1994 October 1, 1993
================== ================== ===============
(dollars in thousands)
Percentage Percentage Percentage
of Total of Total of Total
Product or Revenue Revenue Revenue Revenue Revenue Revenue
Service
- ---------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Grocery<F1> 432,499 42.48 399,803 41.87 370,237 42.20
Dairy & Deli 105,263 10.34 105,336 11.04 97,425 11.11
Meat 83,227 8.17 86,893 9.11 86,115 9.82
Produce 49,108 4.82 47,709 5.00 46,462 5.30
Frozen Foods 53,992 5.30 53,803 5.64 49,078 5.60
Gen. Merchandise 45,165 4.44 45,285 4.75 42,494 4.85
Institutional<F2> 206,312 20.26 179,422 18.81 155,572 17.74
Retail Services 18,284 1.80 14,169 1.49 7,683 .88
Store Finance 3,117 .30 3,846 .41 2,374 .27
Distribution Segment 996,967 97.91 936,266 98.12 857,440 97.77
Insurance Segment 21,281 2.09 17,954 1.88 19,545 2.23
TOTAL $1,018,248 100.00 $954,220 100.00 $876,985 100.00
<FN>
<F1> Grocery revenues include sales from retail stores operated on a temporary
basis.
<F2> Institutional revenues include sales of all product lines.
</TABLE>
Financial data regarding the Company's industry segments is included in
the financial statements appearing in Item 8.
United and its wholly-owned subsidiaries Grocers Insurance Group, Inc.,
Grocers Insurance Agency, Inc., Grocers Insurance Company, UGIC, Ltd., United
Workplace Consultants, Inc., Western Passage Express, Inc., United Store
Development, Ltd., Northwest Process, Inc., Western Security Services, Ltd.,
Premier Consulting, Inc., United Resources, Inc., U.G. Resources, Inc., and
B.A.T. Enterprises, Inc. provide a variety of services to members.
Marketing and Distribution
Independent retail grocers within United's market area are eligible to
apply for membership. All applicants for membership are subject to approval
by United's board of directors on the basis of financial responsibility and
operational ability. On approval, applicants are required to purchase shares
of United's common stock. United has approximately 253 members operating a
total of approximately 368 retail grocery stores.
Members receive periodic order guides indicating the price and
availability of various merchandise. Members select the desired merchandise
and place their orders using United's computerized order system. The
merchandise is picked up by the member or delivered by truck to the member's
retail facility.
No member or other customer of United accounts for as much as 10 percent
of its sales. Management believes that the loss of any one or a few of its
members or other customers would not have a material effect on its business or
financial condition.
Members are eligible to join United's group advertising programs.
Members of advertising groups all do business under the group name, advertise
items jointly, are assessed fees for group marketing services, and take part
in group promotional programs. Each advertising group has its own coordinator
and acts independently in passing upon applications of membership within the
group and deciding on promotional and advertising programs.
United's Cash & Carry wholesale outlets provide a convenient, low-cost
method of purchasing groceries and institutional products for non-member
grocers, restaurants, and institutional buyers. Cash & Carry customers select
their merchandise at the outlet much in the same manner that a customer at a
retail grocery store would. Cash & Carry customers provide their own
transportation.
Supplies
United purchases goods from a wide variety of sources ranging from local
farmers to large multinational corporations. United attempts to obtain the
lowest possible price by pooling the buying power of its members. United is
not dependent on any single supplier and the loss of any single supplier would
not have a material effect on its business.
United is one of the five stockholders of Western Family Holding
Company, a corporation which pools the buying power of its stockholders in
order to obtain lower cost merchandise. Purchases from Western Family Holding
Company, which account for about 12% of United's total purchases, are
distributed under labels such as "Western Family" and "Cottage."
Retail Services
United provides a number of retail services to its members. Services
which do not carry a specific fee or charge include marketing information,
merchandising assistance, competitive retail price reporting and developmental
services such as store site selection, design and engineering.
United also offers its members, at a fee, complete bookkeeping,
accounting and tax services for their retail operations. A computerized
payroll service is also available. Other miscellaneous retail services which
generally carry a scheduled fee assessment include customized retail pricing,
retail shelf "unit pricing," and retail information service products.
United, where appropriate, leases retail space and subleases the space
to qualified members to enable them to obtain prime commercial space. At
September 29, 1995, United was obligated on 41 such leases. Each such
sublease requires that the sublessee pay all charges which may be incurred by
United. Lease insurance guaranteeing payment of rent in the event of default
covers a substantial amount of the lease payments. United's subsidiary UGIC,
Ltd. provides lease insurance for 19 such subleases. See "Notes to
Consolidated Financial Statements" for additional information on these
subleases.
<PAGE>
Finance Services
United's subsidiary, United Resources, Inc., makes loans and provides
other financial services to members. Loans to members are generally made at
one and three quarters to two and one quarter percentage points over the prime
interest rate. Such loans generally are for terms of one to ten years. Loan
funds are obtained under a note purchase agreement with National Consumer
Cooperative Bank at rates varying with market interest rates. At
September 29, 1995, the aggregate principal amount of member loans outstanding
due the subsidiary was $26,602,381. The subsidiary's interest income for the
year then ended was approximately $3,117,000. In the normal course of its
activities, United Resources, Inc., acquires retail stores through foreclosure
or purchase and operates them on a temporary basis. United Resources owned
four such stores at September 29, 1995. During 1995, United Resources
acquired two stores through foreclosure, purchased one store, and disposed of
three stores through sale or closure.
Insurance Services Overview
Grocers Insurance Group, Inc. was formed on October 25, 1990, and is a
holding company for United's insurance-related subsidiaries. Grocers
Insurance Group, Inc., assists in marketing insurance-related services offered
by those subsidiaries.
Grocers Insurance Agency, Inc., is an insurance agency offering
property, casualty, crime, workers' compensation, group life, group health and
other types of insurance. Sales of insurance, although primarily made to
members, are also made to nonmembers. Commissions earned totaled
approximately $451,000 for the year ended September 29, 1995.
Grocers Insurance Company (GIC), formerly United Employers Insurance
Co., underwrites insurance policies for property, casualty, and workers'
compensation. Net premiums earned during 1995 increased to $20.7 million,
from $18.0 million in 1994. GIC operates as a specialty insurer,
concentrating on grocery stores and food related businesses. Currently
licensed in 24 states located primarily in the western region of the United
States, GIC has applications pending in several additional states,
concentrated in the Midwest.
UGIC, Ltd. provides reinsurance services for property and casualty
insurance and workers' compensation.
United Workplace Consultants, Inc., offers rehabilitation services to
insurance companies, principally those owned by United. Service revenue for
the year ended September 29, 1995, was approximately $576,000.
Insurance Operations
The following analysis of insurance operations is limited to Grocers
Insurance Company, the significant underwriting subsidiary of the Company.
Premiums Written
An analysis of the GIC's premiums written during the last three years is
shown in the following table.
<TABLE>
<CAPTION>
$000
Direct Reinsurance Reinsurance Net
Year Written Assumed Ceded Written
- ---- ------- ------- ----- -------
<C> <C> <C> <C> <C>
1993 $24,431 $ 716 $6,597 $18,550
1994 23,992 861 6,652 18,201
1995 27,809 698 7,364 21,143
</TABLE>
The three states accounting for the largest amounts of direct premiums
written for the year ending September 29, 1995, were Oregon with 37%,
California with 23%, and Washington with 13%. No other state accounted for
more than 7% of such premiums. In 1995, there were no significant changes in
business, geographic mix or types of risks assumed.
Underwriting Results
A commonly used industry measurement of property and casualty insurance
underwriting results is the combined loss and expense ratio. This ratio is
the sum of the ratio of net incurred losses and related loss adjustment
expenses to net premiums earned (loss ratio) plus the ratio of underwriting
expenses to premiums written (expense ratio). Underwriting results are
generally considered profitable when the combined ratio is under 100%. The
industry computes this ratio on a calendar year statutory accounting basis for
comparison purposes. The loss ratio, expense ratio, and combined ratio for
GIC for the last three calendar years are as follows:
Loss Expense Combined
Year Ratio Ratio Ratio
- ---- ----- ------- --------
1992 79.1% 21.6% 100.7%
1993 89.6% 13.0% 102.6%
1994 79.0% 21.9% 100.9%
These ratios compare to industry composite combined ratios of 114.6% for 1992,
105.5% for 1993, and 109.5% for 1994.
There have been no unusually large gains or losses from underwriting or
investment operations during the year ending September 29, 1995. There are no
effects from currency fluctuations, since all of GIC's business is transacted
within the United States.
Claims Operations
GIC establishes estimates for reported claims on an individual case
basis. Fast track types of reserving methods are not used. The estimates are
based on GIC's experience within the grocery industry and specific knowledge
of facts regarding each individual claim. These estimates are reviewed on a
regular basis or as additional information becomes available.
Incurred But Not Reported ("IBNR") reserves are established for claims
which have occurred but are not yet reported to GIC as well as future
development on reported claims. IBNR estimates are principally derived from
analysis of historical patterns of development of both paid and incurred
losses by line of business and accident years. Independent professional
actuaries are engaged on an annual basis to analyze the overall reserving
accuracy of GIC. IBNR reserves account for approximately 39% of GIC's total
unpaid claims and claim adjustment expenses.
Net Unpaid Loss and Loss Adjustment Expenses (LAE) for the last three
fiscal years are:
$000
% Increase or
Year Losses LAE Total (Decrease)
- ---- ------ --- ----------------
1993 $23,747 $4,665 $28,412 13.9%
1994 22,968 4,671 27,639 (2.7)
1995 24,534 4,819 29,353 6.2
For additional historical information on loss reserve development and
reconciliation of claims reserves, please refer to Appendix 1 and Appendix 2
to this report.
During the year ending September 29, 1995, GIC adjusted reserves
recorded in prior years downward by approximately 10%, due to generally
favorable settlements on established case estimates for prior years claims and
an actuarially determined decrease in development factors previously used in
setting IBNR estimates.
There have been no other significant changes in reserving assumptions.
GIC does not typically use structured settlements of any materiality.
Reinsurance
In order to write policies above statutory limits, GIC reinsures limits
above $100,000 for all risks. Multiple layers of reinsurance treaties are
placed with upper limits of $20 million for workers' compensation and
liability exposures, and limits of up to $3 million for property risks.
Facultative reinsurance is purchased for property risks written with limits
above $3 million.
GIC utilizes a reinsurance intermediary for assistance in the design and
placement of reinsurance coverage. The structure of the reinsurance program
may vary slightly from year to year, but has remained essentially the same
since 1989. Treaties are primarily placed on an excess basis, with an
additional surplus share treaty used for property risks. Current reinsurers
on these main working layers are all rated A- or better by A.M. Best.
GIC has not entered into any portfolio loss transfers or other types of
financial transactions involving loss reserves.
Risk Based Capital
The National Association of Insurance Commissioners (NAIC) has adopted,
effective December 31, 1994, a risk based capital formula for property and
casualty companies which will be used by insurance regulators in assessing the
capital adequacy of insurance companies. The formula computes a required
level of capital based on the risks assumed by the insurer. Various
regulatory actions are then prescribed if a company's ratio falls below its
minimum level. The actions range from requiring the insurer to submit a
comprehensive action plan to the state of domicile to placing the insurer
under regulatory control.
The ratio for GIC as determined at December 31, 1994 was significantly
above the levels which would require regulatory action. Regulatory total
adjusted capital was $13.9 million: authorized control level risk based
capital is $1.5 million.
IRIS Ratios
The NAIC produces an annual evaluation, the Insurance Regulatory
Information System (IRIS), utilizing data from the statutory annual statements
filed as of each December 31 with the state insurance departments. The report
is intended to assist regulators in analysis of the financial conditions of
insurers and to aid in targeting troubled companies. IRIS identifies eleven
industry values and specifies "unusual values" for each ratio that falls
outside a pre-determined range. Regulators use the "unusual value"
designation as an indication of potential problems.
GIC had no ratios designated as an "Unusual value" in its IRIS Report
for the year ended December 31, 1994.
A.M. Best Ratings
A.M. Best Company, Inc., ratings are indications of the solvency of an
insurer and are derived from analysis of the financial conditions and
operations of a company relative to the insurance industry in general. The
1994 A.M. Best letter ratings range from A++ ("Superior") to F ("In
Liquidation"). GIC applied for an initial rating in 1991 and was rated a B+.
In 1994, GIC was upgraded to an A- rating, with a financial size category of
V.
GIC believes that the attainment of an "A-" rating has had a favorable
impact on the marketing of its policies.
Other Services
Western Passage Express, Inc., provides freight services to United and
others. Northwest Process, Inc., provides store displays, advertising
materials, and printing services. U. G. Resources, Inc., leases retail space
which is subleased to member store operators. Western Security Services,
Ltd., and Premier Consulting, Inc., provide various security and employment
management services.
Recent Acquisition Activity
In January, 1995, United acquired the assets of Rich and Rhine, Inc., a
Portland based distributor of tobacco and candy products, for $3.3 million.
The operations acquired from Rich and Rhine added approximately $29 million to
United's total revenue during the year ended September 29, 1995.
Also in January, 1995, United acquired the assets of Commissary Cash &
Carry, Inc., for approximately $1.8 million. The four stores owned by
Commissary were added to the Company's Cash & Carry division. These stores
accounted for approximately $9.0 million in sales during the year ended
September 29, 1995.
In December, 1995, United acquired the assets and related business of
the wholesale division of Bay Area Foods, Inc., doing business as Market
Wholesale Grocery ("Market Wholesale"). The acquired operations engage in
wholesale distribution of groceries and related merchandise to independent
grocers and restaurants located in California. United purchased approximately
$36 million in wholesale-related assets, consisting principally of
inventories, accounts receivable, customer loans, and equipment. United
assumed liabilities of approximately $16 million plus obligations under real
and personal property leases. The real estate leases cover three warehouse
locations in Santa Rosa, Tracy, and Modesto, California. Personal property
leases relate to tractors and trailer assets used in the business of Market
Wholesale.
Estimated annual revenues from the acquired operations are approximately
$300 million. As part of the acquisition, United entered into an agreement to
sell groceries and related merchandise to retail stores owned by the seller
for a period of five years. Historically, the seller's retail stores have
accounted for 20% of the total wholesale volume of Market Wholesale.
Competition
The grocery industry is characterized by intense competition. In order
to compete effectively, a wholesale grocer must have the ability to meet
competitive market prices which fluctuate rapidly, provide a wide range of
perishable and nonperishable products, make prompt and efficient delivery and
provide the peripheral services which are required by modern supermarket
operations.
United believes that it accounts for a larger volume of sales of
groceries than any other wholesaler in its grocery marketing area, which is
comprised of Oregon, the northernmost part of California and western
Washington. United's principal competitors are two national grocery
wholesalers (which because of their operations in other areas are larger than
United) and three regional grocery wholesalers.
The recent acquisition of the assets and business of Market Wholesale is
expected to shift a greater portion of the Company's wholesale volume to the
California market, and expand the Company's operations from Northern
California to additional regions of the state. With the expansion of
operations, an additional regional grocery wholesaler will become a competitor
of the Company.
Other competitors include a number of local grocery wholesalers, many of
whom are limited to special product lines, such as candy or produce, or sell
only to limited market segments, such as restaurants or institutions. United
also competes with a significant number of producers which market their
products directly to retailers and with several chain store organizations
which control both their wholesale and retail operations. United's
competitors range from small local businesses to businesses significantly
larger than United. Based on information available to it, United estimates
that its members, many of whom are in competition with one another, account
for approximately 16% of the retail grocery market within United's marketing
area. Although members are free to purchase from sources other than United,
members generally purchase goods (except goods which United does not supply,
such as beer and wine) principally from United. United does not account for a
significant percentage of the national wholesale grocery market.
Competition in the markets served by the Company's customers continues
to be intense. The Company continues to respond with new programs to be more
price competitive and has increased item selection and variety in several
product areas. Further, the Company's member volume allowance program has
been designed to share the savings associated with larger order efficiencies
from its member stores, thereby reducing the participating member's cost of
product.
Recent trends in the results of the Company's member stores have
continued. In general, members outside major metropolitan areas, and those
operating newer stores, price oriented or super store formats registered
various gains in volume. Members operating average-sized conventional stores
generally registered small volume losses overall.
Like the grocery industry, the insurance industry is highly competitive.
Grocers Insurance Group is well positioned to serve the retail food industry.
Due to its specialization in the retail food business, Grocers Insurance Group
generally operates on lower expense ratios than most of its competitors,
allowing it to offer competitive prices for its policies.
Employees
United employed approximately 1,700 persons at September 29, 1995.
Approximately 880 of its employees are members of Teamster or other unions.
Collective bargaining contracts with the unions are negotiated through an
employer association to which United and other major food distributors in its
marketing area belong.
United's collective bargaining agreements expire in April, 1996. The
Company considers its employee relations to be satisfactory.
The acquisition of the assets and business of Market Wholesale increased
the number of persons employed by United by approximately 300. Approximately
220 of these employees are covered by collective bargaining agreements.
Environment and Energy
United's operations are not of a type which ordinarily result in the
discharge of significant quantities of pollutants. United believes that its
operations substantially meet or exceed all applicable environmental
regulations.
United has, for a number of years, maintained a program of collecting
waste paper products from its members and from its own operations. This waste
paper is then sold to a paper company for recycling. Members participating in
this program receive weekly credits reflecting their participation in the
program.
United primarily uses electricity in the operation of its warehouses and
diesel fuel in the operation of its truck fleet. United believes that it has
adequate sources of supply to meet its anticipated energy needs. United's
energy suppliers have indicated that, because of the nature of United's
business, it would be entitled to priority in the event of any future energy
shortages.
Cost Savings
By pooling the buying power of its members, United is able to purchase
goods in large quantities at prices lower than the prices generally available
to independent retail grocers. The savings from the bulk purchases are passed
along to members in the form of rebates, allowances and patronage dividends.
Sales to members are invoiced to their accounts at prices contained in
United's order guide. A partnership incentive program results in the addition
or subtraction of a percentage of the member's weekly invoice cost based on
the member's average weekly purchases by department for the preceding four
weeks, excluding purchases of drop shipments. The partnership incentive
percentages are designed to reflect the economies of scale realized by United
in servicing various sized accounts.
Rebates and allowances are paid to members periodically based upon their
purchases of particular items or their promotional and advertising
performance. Generally, such rebates and allowances stem from United's
margins and the merchandising or promotional programs of United's suppliers.
United also pays its members annual patronage dividends based on the
overage, or excess of revenues over expenses, on sales to members for the
year. Each year United's board of directors determines the portion of the
overage which is to be distributed as patronage dividends. Decisions
concerning the portion of the overage to be retained are based upon various
factors including United's future capital needs and the amount of earnings
available from operations not qualifying for distribution as patronage
dividends. The patronage dividends are allocated among the members in
proportion to the contribution to United's gross profit (before rebates and
allowances) attributable to their purchases from United. The patronage
dividends are paid partly in cash and partly in Membership Stock.
Government Contract Business
The Company does not generate significant business based upon contracts
with local, state or federal government entities.
Income Taxes
United operates and is taxed as a cooperative. Accordingly, patronage
dividends are not included in United's taxable income but are instead taxed to
the individual members receiving the patronage dividends. The Internal
Revenue Code of 1986, as amended ("Code") requires that not less than 20
percent of each member's patronage dividend be paid in cash. United's
patronage dividend policy meets that requirement, providing for cash payments
of up to 100% of dividends based on ratios of the value of stock holdings by
member stores to their average weekly purchases, and total number of shares of
stock owned. Patronage dividends not paid in cash are paid in additional
Membership Stock. Members are required to agree to abide by all United's
bylaw provisions, including those applicable to federal income taxation of
patronage dividends. Accordingly, members must report as taxable income the
total amount of patronage dividends, whether paid in cash or Membership Stock,
in the year such patronage dividends are received, and such amounts are not
taxable to United.
United is taxed on income which does not qualify for distribution as
patronage dividends and on the portion of overage which is not distributed to
members. United's subsidiaries retain all profits (or losses) from their
operations and are part of the consolidated federal income tax return.
Item 2. Properties
United owns and operates two distribution centers. Its main
distribution center, located in Milwaukie, Oregon, contains over 815,000
square feet of warehouse space situated on a 62-acre site, owned by United.
Also at this location are 84,900 square feet of office space, a 20,000-square-
foot truck repair shop, and a 114,000-square-foot frozen food distribution
center.
United's southern Oregon division distribution center, located in
Medford, Oregon, contains approximately 200,000 square feet of warehouse
space, plus related office and maintenance areas.
United's distribution center warehouses are of modern, one-floor,
sprinklered, concrete construction. The warehouses are subject to various
mortgages, the terms of which are summarized in the Notes to the Consolidated
Financial Statements.
United leases a 9,600-square-foot facility in Milwaukie, Oregon, for the
purpose of conducting product damage reclamation activities. The lease
expires on September 30, 2000. Monthly rent for the facility is $2,836.
United's subsidiary, Western Passage Express, Inc., leases a 68,400
square foot crossdock/warehouse facility in Woodland, California. The lease
expires on October 1, 2005. Monthly rent for the facility is $24,640.
United's subsidiary, Rich and Rhine, Inc., leases 18,200 square feet of
warehouse space in Portland, Oregon. The lease expires on September 30, 1998,
and has a monthly rent of $5,000.
As part of United's acquisition of Market Wholesale, United assumed real
estate leases on the following warehouse facilities:
Area in Lease Monthly
Location Square Feet Expires Rent
- -------- ----------- ------- -------
Santa Rosa, CA 244,000 7/27/05 $80,520
Modesto, CA 275,000 7/27/05 $74,250
Tracy, CA 160,166 7/27/05 $84,888
United and its subsidiaries operate a truck fleet consisting of 168
tractor cabs and 362 dry freight and refrigerated semitrailers, including both
owned and leased units other than those acquired from Market Wholesale. In
connection with its acquisition of Market Wholesale, United assumed leases
covering an additional 20 tractors and 31 trailers.
United leases a mainframe computer, together with related peripheral
equipment, under various leases expiring in April, 1997. The leases call for
annual rental of approximately $797,000.
United leases the facilities described in the following table for Cash
and Carry outlets at an aggregate annual rent of approximately $3,000,000.
Most of the leases contain renewal options.
Area in Lease
Location Square Feet Expires
-------- ----------- -------
Aloha, Oregon 20,500 2-28-97
Bend, Oregon 18,460 4-21-07
Coos Bay, Oregon 14,250 8-31-97
Gresham, Oregon 18,220 12-31-96
Newport, Oregon 16,000 11-30-07
Portland, Oregon 17,508 7-01-01
Portland, Oregon 20,000 5-31-96
The Dalles, Oregon 16,400 6-02-02
Arcata, California 23,000 10-31-97
Redding, California 25,380 10-31-00
Olympia, Washington 17,780 9-2-99
Seattle, Washington 23,500 5-22-99
Seattle, Washington 23,764 7-24-99
Tacoma, Washington 20,400 9-01-99
Clackamas, Oregon 21,000 6-01-01
Bellingham, Washington 20,000 11-30-99
Portland, Oregon 20,600 3-31-01
Salem, Oregon 19,600 9-04-06
Warrenton, Oregon 14,700 4-21-07
Everett, Washington 18,750 10-31-00
Kent, Washington 18,896 3-31-06
Federal Way, Washington 21,453 9-12-08
Lynnwood, Washington 22,200 6-12-08
Bellevue, Washington 18,000 12-14-03
Sacramento, California 23,120 1-14-09
Medford, Oregon 22,150 6-06-10
Yuba City, California 26,871 6-15-10
Ballard, Washington 15,000 5-31-00
Bremerton, Washington 10,000 4-30-00
Tacoma, Washington 10,000 7-31-95
Tukwila, Washington 21,000 4-30-00
United plans to continue expansion of its Cash and Carry operations, with
three stores scheduled to be opened in the 1996 fiscal year.
Additionally, United owns Cash & Carry outlets as follows:
Area in
Location Square Feet
-------- -----------
Pendleton, Oregon 10,800
Kelso, Washington 21,400
Eugene, Oregon 23,520
Klamath Falls, Oregon 17,500
Boise, Idaho 21,094
United, as described under "Services," is also the prime lessee of
retail stores, which are subleased to members, totaling approximately
1,100,000 square feet. Further, United and its subsidiaries are the lessees
and operators of four retail stores acquired through foreclosure and purchase
totaling an additional 170,000 square feet. United owns an additional retail
store occupying approximately 38,000 square feet.
Item 3. Legal proceedings
The Company is regularly a party to routine legal proceedings not
expected to have a material effect on its business.
Item 4. Submission of Matters to a Vote of Security Holders None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
There is no market for United's Common Stock, which is non-transferable.
The approximate number of holders of United's Membership Stock as of December
22, 1995, was 253.
United's earnings are distributed only in the form of patronage
dividends. Accordingly, no earnings are available for the purpose of paying
dividends on Membership Stock.
Item 6. Selected Financial Data
The following balance sheet data at September 29, 1995 and September 30,
1994 and the income statement data for the years ended September 29, 1995,
September 30, 1994, and October 1, 1993 have been derived from audited
consolidated financial statements and notes thereto appearing elsewhere in
this Annual Report on Form 10-K. The balance sheet data at October 1, 1993,
October 2, 1992, and September 27, 1991 and income statement data for the
years ended October 2, 1992 and September 27, 1991 have been derived from
audited financial statements not required to be included in this report. The
data should be read in conjunction with the consolidated financial statements
and related notes included elsewhere herein.
Fiscal Years
Sept 29 Sept 30 Oct 1 Oct 2 Sept 27
1995 1994 1993 1992 1991
------- ------- ----- ----- -------
(Dollars in thousands, except per share amounts)
Income Statement:
Net sales and operations $1,018,248 $954,220 $876,985 $896,587 $882,878
Income before members'
patronage dividends,
income taxes
and accounting change 10,503 11,294 11,291 13,314 13,126
Patronage dividends 8,350 8,730 9,000 10,211 10,427
Net income 1,379 1,563 1,714 2,723 1,712
Balance Sheet:
Working capital 52,510 45,258 41,819 53,326 61,032
Total assets 322,456 306,836 285,342 261,289 249,205
Long-term liabilities 115,624 114,669 105,539 104,645 98,685
Members' equity 42,357 40,425 39,112 39,141 36,431
Adjusted book value per
share 62.14 59.50 57.00 53.94 48.99
Notes to Selected Financial Data
A. Data concerning net income per common share and cash dividends
per common share is omitted because United is a cooperative.
B. Adjusted book value per share is computed by subtracting from
total members' equity at year end, stock to be issued from patronage and
paid-in capital on such stock, unrealized gain on investments, and
undistributed equity from investments accounted for on the equity method
and dividing the resulting number by shares outstanding at year end.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
During fiscal year 1995, net sales and operations increased 6.7%
to $1,018.2 million. This compares to an 8.8% increase in 1994 to $954.2
million. Income before members' allowances, patronage dividends, and income
taxes decreased $0.7 million to $22.0 million (2.16% of sales). This compares
to $22.7 million (2.38% of sales) and $20.6 million (2.35% of sales) in 1994
and 1993 respectively.
During 1995, the increase in net sales and operations was
primarily attributable to the distribution segment which enjoyed increased
Cash & Carry unit volume and increased sales from the Company's acquisition of
Rich and Rhine, Inc. In addition, the insurance segment generated increased
sales primarily due to increased premium volume from growth in policies
issued. These gains in sales were offset by lower sales from company-owned
retail stores.
In 1995, the Company had increased profits within its distribution
segment from its Cash & Carry and other nonmember distribution segment
operations, and lower operating losses at company-owned retail stores. Within
the insurance segment, profits increased from agency operations and lease
insurance activities. These profit gains were offset by higher interest
expenses due to higher borrowing rates and average levels of debt, increased
operating expenses in the distribution segment, and increased property losses
in Grocers Insurance Company.
In December, 1995, United acquired the assets and related business
of the wholesale division of Bay Area Foods, Inc., doing business as Market
Wholesale Grocery. Estimated annual revenues from the acquired operations are
approximately $300 million.
In 1994, the increase in net sales and operations was primarily
attributed to increased Cash & Carry unit volume, and increased equipment
sales. These gains in sales were offset by lower premium income of the
insurance segment. 1994 profit improvements were primarily due to increased
profits from Cash & Carry and service income areas, and gains in insurance
segment profits caused by improved loss experience. These gains in profits
were offset by higher distribution segment operating expenses, increased
member allowances paid, and operating losses in retail store operations.
Net Sales and Operations
During 1995, sales of the Company's distribution segment increased
6.5% to $997.0 million. The sales gain was primarily due to increased Cash &
Carry and equipment sales unit volume, and sales from Rich and Rhine, Inc.
Price changes during 1995 impacted warehouse sales by 2.8%.
Cash & Carry sales increased 15.0% to $206.3 million compared to
$179.4 million in 1994. Sales at new units contributed 7.4% to the sales
increase.
Sales at company-owned retail stores, which are primarily acquired
as a result of store finance operations, decreased $3.7 million to $42.5
million. During the year, the company acquired three stores, and disposed of
three stores. As a result, the number of company-owned retail stores remained
at four stores.
In 1995, the insurance segment's net insurance premiums,
commissions, and fees increased $4.0 million to $22.8 million. The increase
was primarily attributed to increased policy volume, and earned lease
insurance premiums.
During 1994, distribution segment sales increased 5.9% to
$936.2 million. The sales gain was primarily attributed to increased unit
volume. The insurance segment's net premiums, commissions, and fees decreased
$1.7 million due to lower commissions earned by Grocers Insurance Agency.
Gross Operating Income
Gross operating income increased to $148.2 million (14.6% of
sales) in 1995 from $137.5 million (14.4% of sales) in 1994, and $127.5
million (14.5% of sales) in 1993. The increase in gross operating income was
due to higher unit sales, gross margin improvements in Cash & Carry operations
from centralized pricing controls, and higher insurance commissions, fees, and
lease insurance premiums. These improvements were offset by higher property
loss experience in Grocers Insurance Company, and lower retail store sales.
In 1995, loss and loss adjustment expenses were 74.7% of total
premium income, compared to 64.7% and 83.3% in 1994 and 1993, respectively.
Operating, Selling, and Administrative Expenses
In 1995, operating, selling, and administrative expenses increased
$8.3 million to $111.8 million (11.0% of sales). In 1994 and 1993, these
expenses were $103.5 million (10.9% of sales), and $97.5 million (11.1% of
sales), respectively. The components of these expenses are summarized below:
<PAGE>
Percent of Total Sales
1995 1994 1993
---- ---- ----
Salaries & Wages 6.1 6.0 6.3
Rents, Maintenance, and Repairs 1.7 1.7 1.6
Taxes, Other Than Income 0.8 0.9 0.9
Utilities, Supplies, & Services 1.1 1.6 1.5
Other Expenses 1.0 0.5 0.5
Provision for Doubtful Accounts 0.2 0.2 0.3
Total 11.0 10.9 11.1
During 1995, total operating, selling, and administrative expenses
increased primarily due to higher unit volume in both the distribution and
insurance segments, higher software expenses, and amortization of covenants
not to compete and goodwill relating to recent acquisitions.
Insurance segment operating expenses decreased to 32.3% of segment
net sales and operations. In 1994 and 1993, insurance segment operating
expenses were 36.3% and 26.4% of segment net sales and operations,
respectively.
Provision for doubtful accounts was $1.9 million (0.2% of sales)
in 1995. This compares to $2.0 million (0.3% of sales) and $2.2 million (0.3%
of sales) in 1994 and 1993, respectively.
Interest expense increased $3.6 million to $12.8 million (1.3% of
sales) in 1995. This increase was due to higher levels of average debt, as
well as higher average borrowing rates.
Member Allowances and Dividends
In 1995, total member allowances and dividends decreased 1.6% to
$19.9 million (2.0% of sales). In 1994, total member allowances and dividends
increased 9.9% to $20.2 million (2.1% of sales).
Total member allowances and dividends as a percent of member sales
decreased to 2.84% in 1995, compared to 2.90% in 1994, and 2.75% in 1993.
Net Income and Income Taxes
In 1995, income before taxes was $2.2 million (0.2% of sales)
compared to $2.6 million (0.3% of sales) and $2.3 million (0.3% of sales) in
1994 and 1993, respectively.
Net income after taxes was $1.4 million (0.1% of sales) in 1995, a
decrease of $0.2 million from $1.6 million (0.2% of sales) and $1.7 million
(0.2% of sales) in 1994 and 1993, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow From Operating Activities
In 1995, the Company used $14.9 million in cash in its operating
activities. Increases in accounts receivable and inventories as a result of
increased volume and acquisitions, and investments by the Company in its new
information services platform were the major factors contributing to the use
of cash in operations.
Cash Flow From Investing Activities
In 1995, the Company used $2.9 million in its investing activities, a
decrease of $13.4 million from the $16.3 million used in 1994. Cash
requirements of the Company's retail member finance activities were reduced in
1995 due to a $12.2 million increase in proceeds from the sale of member loans
under its Note Purchase Agreement during the year. Purchases of property and
equipment increased to $10.4 million from $5.3 million in 1994.
In fiscal year 1995, anticipated capital expenditures will approximate
$5.0 million, representing $1.0 million in replacement assets, $2.0 million
for new Cash & Carry units, and $2.0 million in continuing investments in
upgraded operations software.
Cash Flow From Financing Activities
In 1995, the Company provided $17.8 million from its financing
activities by increasing its levels of senior debt to fund its operations.
Capital Structure and Resources
The following table summarizes the Company's capital structure for the
last two years:
Year Ended
-------------------------------------------------
September 29, 1995 September 30, 1994
$000 % $000 %
------------------ ------------------
Average Short Term
Borrowings $42,632 20.6 $34,775 17.7
End of Year Amounts
Senior Term Debt $68,135 32.9 $67,597 34.4
Subordinated Debt $53,844 26.0 $53,848 27.4
Equity $42,357 20.5 $40,425 20.5
Total 206,968 100.0 $196,645 100.0
In 1995, the Company's capital structure shifted towards greater use of
short-term borrowings, due to increased funding needs. The present components
of the capital structure are within the Company's long-term targets for
funding sources.
In 1995, the Company's working capital increased $7.2 million to $52.5
million. The Company's main sources of funds include earnings, member capital
stock, capital investment notes, bank debt, private placement debt, and note
purchase programs. As of September 29, 1995, the Company had $24.5 million in
unused credit lines available. In addition, the Company had $8.4 million
available under its Note Purchase Agreement.
The Company purchased the net assets of the wholesale operations of Bay
Area Foods, Inc., on December 14, 1995, for approximately $21 million.
Funding for the acquisition was provided by increased bank credit. The
Company anticipates refinancing the additional bank credit with new senior
debt or the securitization of eligible trade accounts receivable.
Grocers Insurance Company investments are held to support the payment of
claims. These investments are not available to the Company to meet its
capital needs due to restrictions imposed by insurance regulators regarding
intercompany loans and advances.
In addition, state regulators require that Grocers Insurance Company
maintain minimum amounts of capital and surplus. As a result of these
regulatory requirements, $4.6 million of Grocers Insurance Company's equity
may not be paid as dividends to the Company.
Item 8. Financial Statements and Supplementary Data
The following financial statements are filed as part of this report.
Independent Auditor's Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Members' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor's Report on Financial Statement Schedules
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
AUDIT REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE FISCAL YEARS ENDED SEPTEMBER 29, 1995
TABLE OF CONTENTS
Independent auditor's report
Consolidated financial statements
Balance sheets
Statements of income
Statements of members' equity
Statements of cash flows
Notes to financial statements
Independent auditor's report on financial
statement schedules
Financial statement schedules included
Schedule I - Condensed financial information
of registrant
Schedule II - Valuation and qualifying accounts
Schedule V - Supplementary information concerning
property-casualty insurance
operations
Financial statement schedules not included Reason
- ------------------------------------------ ------
Schedule III - Real Estate and
Accumulated Depreciation Not applicable
Schedule IV - Mortgage Loans on Real
Estate Not applicable
<PAGE>
Board of Directors
United Grocers, Inc.
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheets of United
Grocers, Inc. and subsidiaries as of September 29, 1995 and September 30,
1994, and the related consolidated statements of income, members' equity and
cash flows for each of the three years in the period ended September 29, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United Grocers,
Inc. and subsidiaries as of September 29, 1995 and September 30, 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 29, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for investments in 1994-95. Also, as
discussed in Notes 4 and 11, the Company changed its method of accounting for
inventories in 1992-93 and for reinsurance in 1993-94.
Portland, Oregon
December 14, 1995
DeLap, White & Raish
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
ASSETS
1995 1994
-------- --------
Current assets:
Cash and cash equivalents $ 13,045,456 $ 12,984,028
Investments maintained for
insurance reserves (Note 1.d. & f.
& 2) 40,809,762 36,939,578
Accounts and notes receivable
(Note 3 & 11) 70,706,049 60,290,461
Inventories (Note 1.e. & 4) 81,477,754 74,307,422
Other current assets (Note 11 & 13) 3,870,703 5,367,295
Deferred income taxes (Note 9) 2,537,323 2,811,914
------------ ------------
Total current assets 212,447,047 192,700,698
------------ ------------
Non-current assets:
Notes receivable (Note 3) 21,950,478 33,155,543
Investment in and accounts with
affiliated companies (Note 1.c. & 16) 8,392,281 7,832,484
Other receivables and investments 6,869,895 6,899,133
Other non-current assets (Note 5) 11,668,590 7,730,575
------------ ------------
Total non-current assets 48,881,244 55,617,735
------------ ------------
Property, plant and equipment - (net
of accumulated depreciation) (Note 6) 61,127,772 58,517,120
------------ ------------
Total $322,456,063 $306,835,553
============ ============
The accompanying notes are an integral part of this financial statement.
<PAGE>
LIABILITIES AND MEMBERS' EQUITY
1995 1994
------------ ------------
Current liabilities:
Notes payable - bank (Note 7) $ 48,515,543 $ 31,020,667
Accounts payable 60,461,117 64,629,410
Insurance reserves supported by
investments (Note 1.f., 2 and 11) 29,958,678 32,038,408
Compensation and taxes payable 3,118,827 2,952,534
Other accrued expenses 3,662,495 3,159,900
Members' patronage payable (Note 10) 6,646,867 6,865,736
Current installments on long-term
liabilities (Note 8) 7,573,215 6,776,197
------------ ------------
Total current liabilities 159,936,742 147,442,852
Long-term liabilities (Note 8) 115,623,670 114,669,266
Deferred income taxes (Note 9) 3,651,247 3,744,109
Deferred income (Note 14) 886,917 554,469
------------ ------------
Total liabilities 280,098,576 266,410,696
------------ ------------
Commitments and contingencies (Note 18)
Members' equity:
Common stock (authorized, 10,000,000
shares at $5.00 par value; issued
and outstanding, 655,663 shares in
1995 and 619,881 shares in 1994)
(shares owned by a member in excess
of 4,000 are subject to repurchase
Note 1.l. & m.) 3,278,315 3,256,080
Additional paid-in capital 23,956,797 22,472,564
Retained earnings 14,923,491 14,696,213
Unrealized gain on investments (Note 2) 198,884 --
------------ ------------
Total members' equity 42,357,487 40,424,857
------------ ------------
Total $322,456,063 $306,835,553
============ ============
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 29, 1995, SEPTEMBER 30, 1994, AND OCTOBER 1, 1993
1995 1994 1993
-------------- ------------ ------------
Net sales and operations $1,018,248,456 $954,220,350 $876,985,353
-------------- ------------ ------------
Costs and expenses:
Cost of sales (Note 1.e.) 870,097,228 816,721,077 749,447,130
Operating expenses 101,029,068 93,991,529 88,046,293
Selling and administrative
expenses 10,872,432 9,533,741 9,441,916
Depreciation (Note 1.g. & 6) 5,952,576 5,609,779 4,737,401
Interest:
Interest expense 12,773,947 9,156,822 8,217,017
Interest income (4,494,053) (3,535,802) (3,552,107)
-------------- ------------ ------------
Interest expense, net 8,279,894 5,621,020 4,664,910
-------------- ------------ ------------
Total costs and expenses 996,231,198 931,477,146 856,337,650
-------------- ------------ ------------
Income before members' allowances
and patronage dividends, and
income taxes 22,017,258 22,743,204 20,647,703
Members' allowances (11,513,784) (11,449,305) (9,356,885)
Members' patronage dividends
(Note 10) (8,350,000) (8,730,168) (9,000,000)
-------------- ------------ ------------
Income before income taxes 2,153,474 2,563,731 2,290,818
Provision for income taxes
(Note 9) (774,469) (1,000,341) (576,435)
-------------- ------------ ------------
Net income $ 1,379,005 $ 1,563,390 $ 1,714,383
============== ============ ============
The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
YEARS ENDED SEPTEMBER 29, 1995, SEPTEMBER 30, 1994,
AND OCTOBER 1, 1993
Additional Unrealized
Common paid-in Retained gain on
stock capital earnings investments Total
------ ---------- -------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance, October 2, 1992 $ 3,464,735 $20,642,128 $15,034,453 $ -- $39,141,316
Stock:
Issued 78,755 759,972 -- -- 838,727
Repurchased (381,930) (1,687,165) (1,928,752) -- (3,997,847)
Patronage dividends 124,195 1,291,628 -- -- 1,415,823
Net income -- -- 1,714,383 -- 1,714,383
----------- ----------- ----------- ----------- -----------
Balance, October 1, 1993 3,285,755 21,006,563 14,820,084 -- 39,112,402
Stock:
Issued 148,090 1,515,656 -- -- 1,663,746
Repurchased (334,440) (1,757,412) (1,687,261) -- (3,779,113)
Patronage dividends 156,675 1,707,757 -- -- 1,864,432
Net income -- -- 1,563,390 -- 1,563,390
----------- ----------- ----------- ----------- -----------
Balance, September 30,
1994 3,256,080 22,472,564 14,696,213 -- 40,424,857
Stock:
Issued 115,780 1,260,324 -- -- 1,376,104
Repurchased (230,585) (1,342,184) (1,151,727) -- (2,724,496)
Patronage dividends 137,040 1,566,093 -- -- 1,703,133
Net income -- -- 1,379,005 -- 1,379,005
Unrealized gain on
investments -- -- -- 198,884 198,884
----------- ----------- ----------- ----------- -----------
Balance, September 29,
1995 $ 3,278,315 $23,956,797 $14,923,491 $ 198,884 $42,357,487
=========== =========== =========== =========== ===========
</TABLE>
Common stock share information:
Number
Description of shares
- ----------- ---------
Balance, October 2, 1992 651,250
Issued 57,448*
Repurchased (76,386)
--------
Balance, October 1, 1993 632,312
Issued 54,457*
Repurchased (66,888)
--------
Balance, September 30, 1994 619,881
Issued 81,899*
Repurchased (46,117)
--------
Balance, September 29, 1995 655,663
========
* Includes prior year patronage dividends to be issued.
The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 29, 1995, SEPTEMBER 30, 1994, AND OCTOBER 1, 1993
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,379,005 $ 1,563,390 $ 1,714,383
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 5,952,576 5,609,779 4,737,401
Provision for doubtful accounts
and notes 1,894,189 1,992,589 2,182,551
Patronage dividends payable
in common stock 1,703,133 1,864,432 1,415,823
Loss (gain) on sale of assets 402,634 174,927 (472,126)
Equity in loss (earnings) of
affiliates 46,989 191,760 (772)
Deferred income taxes 181,729 474,889 341,209
(Increase) decrease in non-cash
current assets:
Accounts and notes receivable (11,087,908) (15,343,787) 1,564,454
Inventories (7,170,332) (441,006) (3,358,014)
Other current assets 1,496,592 (642,531) 134,362
Increase (decrease) in non-cash
current liabilities:
Accounts payable and
insurance reserves (6,248,023) 5,018,583 9,768,705
Compensation and taxes payable 166,293 264,397 (1,107,883)
Other accrued expenses 502,595 (552,204) 239,803
Members' patronage payable (218,869) (349,191) (525,047)
(Increase) decrease in other
non-current assets (3,908,777) (2,598,160) 518,142
------------ ------------ -----------
Net cash provided by (used in)
operating activities (14,908,174) (2,772,133) 17,152,991
------------ ------------ -----------
Cash flows from investing activities:
Loans to members (18,578,568) (17,768,465) (18,766,639)
Collections on loans to members 7,758,425 6,325,619 6,155,085
Proceeds from sale of member loans 20,803,339 8,606,739 900,373
Sale of investments 3,607,299 843,718 --
Redemption of investments 4,630,686 4,747,745 3,857,384
Purchase of investments (11,909,285) (8,133,459) (8,039,512)
Investment in affiliated companies (606,786) (6,094,315) --
Sale of property, plant
and equipment 1,738,326 408,777 2,936,809
Purchase of property, plant
and equipment (10,371,740) (5,254,582) (11,990,981)
------------ ------------ -----------
Net cash used in investing
activities (2,928,304) (16,318,223) (24,947,481)
------------ ------------ -----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 29, 1995, SEPTEMBER 30, 1994, AND OCTOBER 1, 1993
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from financing activities:
Sale of common stock $ 1,376,104 $ 1,663,746 $ 838,727
Repurchase of common stock (2,724,496) (3,779,113) (3,997,847)
Proceeds of long-term liabilities:
Revolving bank lines of credit 689,100,000 807,500,000 510,100,000
Mortgages and notes 25,640,393 12,104,717 5,505,830
Redeemable notes and certificates 19,529,600 22,395,400 25,322,100
Repayment of long-term liabilities:
Revolving bank lines of credit (671,605,124) (801,209,733) (499,918,520)
Mortgages and notes (23,925,822) (2,789,206) (10,893,362)
Redeemable notes and certificates (19,492,749) (22,618,900) (18,745,800)
------------ ------------- -------------
Net cash provided by
financing activities 17,897,906 13,266,911 8,211,128
------------ ------------- -------------
Net increase (decrease) in cash
and cash equivalents 61,428 (5,823,445) 416,638
Cash and cash equivalents:
Beginning of year 12,984,028 18,807,473 18,390,835
------------ ------------- -------------
End of year $ 13,045,456 $12,984,028 $18,807,473
============ ============= =============
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
1. Summary of significant accounting policies
a. Reporting year
United Grocers, Inc. (the Parent) and subsidiaries (the Company) reports
on a fiscal year of 52 or 53 weeks which is the fiscal year of the
distribution segment. The Parent's fiscal closing date is the Friday
nearest September 30. The fiscal year of the subsidiaries included in
the insurance segment ends on September 30.
b. Organization
The Parent operates primarily as a wholesale grocery cooperative. The
Parent's stock is owned by its member customers. Sales to these members
account for approximately 80% of the wholesale grocery sales.
c. Principles of consolidation
The consolidated financial statements include the accounts of United
Grocers, Inc. and its wholly-owned subsidiaries as follows: Grocers
Insurance Group, Inc., Grocers Insurance Agency, Inc., UGIC, Ltd.,
Grocers Insurance Company, United Workplace Consultants, Inc., Western
Passage Express, Inc., Northwest Process, Inc., UG Resources, Inc.,
United Resources, Inc., Affiliated General Agency, Inc., Premier
Consulting, Inc., Western Security Services, Ltd., Rich and Rhine, Inc.
(new in 1995) and BAT Enterprises, Inc. All intercompany balances and
transactions have been eliminated upon consolidation. Investment in
affiliated companies is stated at cost plus the Company's share of
undistributed earnings since acquisition (see Note 16).
d. Investments
Beginning in 1994-95, the Company accounts for investments in accordance
with Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities, issued
May 1993. See Note 2 for details. Investments are primarily in non-
equity securities. The Company's intent is to hold most of these
securities until maturity. Sales and redemptions of investments are
primarily the result of maturities. Any realized gains or losses are
usually the result of immaterial differences between the called amount
and amortized cost. The market value of these investments at September
29, 1995 and September 30, 1994 is $41,610,228 and $36,487,841,
respectively.
e. Inventories and cost of sales
Inventories relate primarily to the distribution operation and are
valued at the lower of cost or market. The cost of these inventories is
determined under the first-in, first-out (FIFO) method. See Note 4 for
change in accounting for inventories.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
1. Summary of significant accounting policies (continued)
e. Inventories and cost of sales (continued)
Cost of sales includes primarily the cost of distribution and insurance
operations. The distribution operation costs include the purchases of
product net of allowances paid and received, less the net advertising
department margins, plus the handling allowances made to members based
upon the cost of servicing their accounts. The insurance operation
costs include losses reported, a provision for losses incurred but not
reported and premium refunds.
f. Restricted assets and net assets
Restricted assets and net assets that may not be transferred to the
parent company in the form of loans, advances, or cash dividends by the
insurance company subsidiary without the consent of various state
insurance agencies as of September 29, 1995 are as follows:
Cash and cash equivalents $ 350,238
Investments 17,284,345
-----------
Total $17,634,583
===========
In addition, although not formally restricted, the balance of the
investments of $23,326,533 represents assets that have been accumulated
for the possible payment of claims against the insurance reserves.
g. Property, plant and equipment
Property, plant and equipment is carried at cost and includes
expenditures for new facilities and those which substantially increase
the useful lives of the existing plant and equipment. The Company
capitalizes interest as a component of the cost of significant
construction projects. During the year ended October 1, 1993,
interest was capitalized in the amount of $64,929 out of a total
interest of $8,281,946 which resulted in an increase in the net income
of approximately $49,000. No interest was capitalized in 1995 or 1994.
Depreciation is computed using the straight-line method over the
estimated useful lives of the respective assets. Estimated useful lives
are generally as follows:
Buildings 40 - 75 years
Building improvements Balance of building life
Warehouse equipment 5 - 20 years
Truck equipment 3 - 8 years
Office equipment 5 - 10 years
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
1. Summary of significant accounting policies (continued)
h. Amortization
Long-term liability loan costs, software costs, goodwill, and non-
competition agreements are being amortized and charged to operating
expenses on a straight-line basis over five to twenty years.
i. Reinsurance
In the normal course of business, the Company seeks to reduce the loss
that may arise from catastrophes or other events that cause unfavorable
underwriting results by reinsuring certain levels of risk in various
areas of exposure with other insurance enterprises or reinsurers.
Amounts recoverable from reinsurers are estimated in a manner consistent
with the claim liability associated with the reinsured policy. Amounts
paid for prospective reinsurance are reported as prepaid reinsurance
premiums and amortized over the remaining contract period in proportion
to the amount of insurance protection provided.
j. Income taxes
The Company and its subsidiaries file a consolidated federal income tax
return. Income tax expense is allocated among those companies with
taxable income. The Company operates and is taxed as a cooperative.
Accordingly, amounts distributed as patronage dividends are not included
in its taxable income but are instead taxed to the individual members
receiving the patronage dividends. Deferred income taxes are recorded
to reflect the tax consequences on future years of differences between
the tax bases of assets and liabilities and their financial reporting
amounts at each year end based on enacted tax laws and statutory tax
rates applicable to the years in which the differences are expected to
affect taxable income. In 1995 a valuation allowance of $2,994,000 was
considered necessary for state NOL carryovers to reduce the deferred tax
asset to the amount expected to be realized. Income tax expense is the
tax payable for the year and the change during the year in net deferred
tax assets and liabilities. See Note 9 for details.
k. Earnings per common share
The Company's policy is to distribute earnings only in the form of
patronage dividends. No dividends have ever been declared on the common
stock of the Company, and all earnings not distributed as patronage
dividends have been retained. Earnings per common share are not shown
because no earnings are available for the purpose of paying dividends on
the common stock.
l. Treasury stock
The Company uses the par value method of accounting for treasury stock.
Under Oregon corporation law, treasury stock must be canceled upon
redemption.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
1. Summary of significant accounting policies (continued)
m. Common stock
The Company's board policy, subject to change without notice, requires
the Company to repurchase on request the number of shares a member owns
in excess of 4,000 shares. The excess shares are repurchased over a
five year period at the current adjusted book value each year, payable
in cash. At September 29, 1995 and September 30, 1994, there were
18,229 and 22,409 shares, respectively, subject to repurchase in the
amount of $1,084,626 and $1,277,313, respectively. At September 29,
1995 and September 30, 1994, there were 1,471 and 2,869 shares,
respectively, held for possible redemption in the amount of $87,525 and
$163,533, respectively.
n. Advertising costs
The Company expenses the production costs of advertising the first time
the advertising takes place. Advertising expense for 1995, 1994 and
1993 was $1,191,436, $1,027,214 and $981,399, respectively.
o. Statement of cash flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
p. Reclassifications
Certain reclassifications have been made to prior year balances to
conform to the current year classification.
2. Investments
Investments in accordance with SFAS No. 115 (see Note 1.d.) are classified
and accounted for as follows:
. Held-to-maturity securities are reported at amortized cost.
. Trading securities are reported at fair value, with unrealized gains
and losses included in earnings.
. Available-for-sale securities are reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a
separate component of members' equity.
SFAS No. 115 is not applied retroactively to prior years' financial
statements. The effect on retained earnings of initially applying this
statement is reported as a change in accounting principle. The cumulative
effect as of October 1, 1994 was an unrealized loss of approximately
$46,000.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
2. Investments (continued)
The amortized cost and estimated market values of investments in debt
securities and other investments at the balance sheet date are as follows:
Carrying
amount and
Number amortized Market
Name of issuer and of shares cost of value of
title of each issue or units each issue each issue
------------------- --------- ---------- ----------
1995:
United States Government
and its agencies 25,350,000 $25,769,781 $26,506,490
Any state of the United
States and its agencies 2,840,000 2,979,132 3,018,919
Political subdivision of
a state of the United
States and its agencies 5,995,000 6,201,500 6,319,852
Corporate bonds 5,610,000 5,658,984 5,756,735
----------- -----------
Subtotal - debt securities 40,609,397 41,601,996
Corporate stock 298 1,481 8,232
----------- -----------
Subtotal 40,610,878 41,610,228
Unrealized gain on available-
for-sale securities 198,884 --
----------- -----------
Total $40,809,762 $41,610,228
=========== ===========
1994:
United States Government
and its agencies 18,670,000 $19,303,713 $18,846,955
Any state of the United
States and its agencies 3,395,000 3,539,142 3,531,561
Political subdivision of
a state of the United
States and its agencies 8,275,000 8,604,835 8,615,517
Corporate bonds 5,410,000 5,490,407 5,487,134
----------- -----------
Subtotal - debt securities 36,938,097 36,481,167
Corporate stock 298 1,481 6,674
----------- -----------
Total $36,939,578 $36,487,841
=========== ===========
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
2. Investments (continued)
Investments of debt securities by classification under SFAS No. 115 at
September 29, 1995 are as follows:
Gross
unrealized Aggregate
Amortized gains and fair
cost (losses) value
--------- ---------- ---------
Held-to-maturity $35,827,706 $ 793,715 $36,621,421
Available-for-sale 4,781,691 198,884 4,980,575
----------- ----------- -----------
Total $40,609,397 $ 992,599 $41,601,996
=========== =========== ===========
For the year ended September 29, 1995 (initial year of application) the
gross proceeds from the sales of securities available-for-sale was
$3,607,299. The gross realized gains from these sales were $142,257.
There were no realized losses. The method used to determine cost when
calculating the realized gains was the amortized cost of the specific
security sold. There are no gains or losses included in earnings as a
result of transfers of securities between categories. There were no
securities classified as trading securities during this initial year.
During this initial year, because of changing market conditions, management
decided to transfer certain securities from held-to-maturity category to
the available-for-sale category. The amortized cost of these securities at
the time of transfer was $4,751,807 with a related net unrealized gain of
$386,834.
The amortized cost and estimated market value of debt securities at the
balance sheet date, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
1995 1994
----------------------- ----------------------
Amortized Market Amortized Market
cost value cost value
--------- ----- --------- ------
Due in one year or
less $ 5,210,406 $ 5,303,554 $ 4,136,043 $ 4,176,752
Due after one year
through five years 19,066,319 19,415,921 16,869,731 17,046,729
Due after five years
through ten years 15,783,193 16,324,879 15,882,892 15,207,218
Due after ten years 549,479 557,642 49,431 50,468
----------- ----------- ----------- -----------
Total $40,609,397 $41,601,996 $36,938,097 $36,481,167
=========== =========== =========== ===========
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
3. Accounts and notes receivable
These consist of amounts due principally from members at the balance sheet
date as follows:
1995 1994
----------- -----------
Accounts receivable $59,229,982 $46,640,928
Insurance premiums and related balances 8,509,160 10,898,715
Less allowance for doubtful accounts (1,176,767) (1,270,987)
----------- -----------
Net accounts receivable 66,562,375 56,268,656
----------- -----------
Notes receivable - current portion 4,224,381 4,057,961
Less allowance for doubtful notes (80,707) (36,156)
----------- -----------
Net current notes receivable 4,143,674 4,021,805
----------- -----------
Net current accounts and
notes receivable $70,706,049 $60,290,461
=========== ===========
Notes receivable - non-current portion $22,378,000 $33,454,161
Less allowance for doubtful notes (427,522) (298,618)
----------- -----------
Net non-current notes receivable $21,950,478 $33,155,543
=========== ===========
The notes receivable from members are generally for periods of two years
to ten years at interest rates of 3.00% to 12.00%. The annual maturities
for each of the next five fiscal years following September 29, 1995 are as
follows:
Year Amount
---- ------
1996 $ 4,224,381
1997 1,812,209
1998 1,894,931
1999 2,021,685
2000 1,877,851
The provision for doubtful accounts and notes charged to operating expenses
for the three years ended September 29, 1995 amounted to $1,894,189,
$1,992,589, and $2,182,551, respectively.
4. Change in accounting for inventories
The Company changed in 1992-93 its method of accounting for the cost of the
general wholesale grocery category of inventories from the last-in, first-
out (LIFO) method to the first-in, first-out (FIFO) method. The Company
believes that the use of the FIFO method better matches current costs with
current revenues and more appropriately reflects its financial condition.
This change has also been made for income tax purposes.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
4. Change in accounting for inventories (continued)
The change has been applied retroactively and the effect of this change on
beginning retained earnings at October 2, 1992 is as follows:
As previously reported in 1991-92 $14,924,706
-----------
LIFO inventory adjustment 178,034
Less tax effect (68,287)
-----------
Net adjustment 109,747
-----------
As restated $15,034,453
===========
5. Other non-current assets
Other non-current assets at the balance sheet date consist of the
following:
1995 1994
------------ ------------
Covenant not to compete - net
of accumulated amortization of
$1,232,869 in 1995 and $802,445
in 1994 $ 1,641,813 $ 765,953
Software - net of accumulated
amortization of $1,737,639 in
1995 and $1,295,466 in 1994 1,582,531 2,108,790
Loan fees - net of accumulated
amortization of $682,199 in
1995 and $584,847 in 1994 425,189 460,097
Software in progress 5,162,152 2,693,772
Other 2,856,905 1,701,963
----------- -----------
Total $11,668,590 $ 7,730,575
=========== ===========
6. Property, plant and equipment (at cost)
Property, plant and equipment as of the balance sheet date consists of the
following:
1995 1994
------------ ------------
Land $ 3,580,477 $ 3,421,277
Buildings and improvements 54,103,086 54,204,591
Warehouse and truck equipment 37,627,830 34,291,075
Office equipment 11,104,702 8,564,659
Construction in progress 1,323,492 640,035
----------- -----------
Total property, plant and
equipment 107,739,587 101,121,637
Less accumulated depreciation (46,611,815) (42,604,517)
----------- -----------
Net property, plant and
equipment $61,127,772 $58,517,120
=========== ===========
Depreciation expense for 1995, 1994 and 1993 was $5,952,576, $5,609,779 and
$4,737,401, respectively.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
7. Notes payable - bank
Notes payable - bank consists of borrowings on bank lines of credit at a
weighted average interest rate of 6.75% at September 29, 1995 and 5.72% at
September 30, 1994.
At September 29, 1995 and September 30, 1994, the Company had unused lines
of credit totaling $24,500,000 and $19,000,000, respectively; and unused
letters of credit totaling $350,000 at September 30, 1994, only.
In April of 1993, the Company entered into a three year reverse interest
swap agreement with a bank. Under the agreement, the Company receives a
fixed rate of 4.40% on $20 million (notional amount) and pays a floating
rate based on LIBOR, as determined in six month intervals. The transaction
effectively changes a portion of the Company's interest rate exposure from
a fixed rate to a floating rate basis, accordingly, all gains or losses
have been recognized as adjustments to interest expense. This swap
agreement has been entered into with a major financial institution which is
expected to fully perform under the terms of the agreement thereby further
mitigating the risk from the transaction.
8. Long-term liabilities
Long-term liabilities at the balance sheet date consist of the following:
1995 1994
----------- -----------
Notes payable - bank:
Credit agreement notes maturing
on April 30, 1997 with interest
rates of 6.70% per annum at
September 29, 1995 and 5.77% per
annum at September 30, 1994. The
interest rates ranged from 5.95%
to 7.00% in 1995 and from 3.84%
to 5.89% in 1994. $ 17,000,000 $ 35,000,000
Notes payable - insurance companies:
Senior notes payable to seven
(six in 1994) insurance companies
with interest rates of 8.42% and
9.15% per annum. Interest payable
monthly. Principal repayments
annually commencing October 1, 1992
in the amount of $3,336,000 and each
October 1 thereafter in the amount
of $3,333,000 until 2000; and
$4,000,000 due in 2004, maturing
in full 2005. 39,998,000 23,331,000
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
8. Long-term liabilities (continued)
1995 1994
------------ ------------
Notes payable - other:
Capital stock residual notes, payable
in twenty quarterly installments with
a variable interest rate based on the
current capital investment note rate. $ 4,239,958 $ 3,810,679
A discounted note payable in the
original amount of $1,741,265 without
interest, discounted at 9.90%, payable
in two installments of $641,265 in
1996 and $1,100,000 in 1997. 1,528,170 --
A covenant not-to-compete in the
original amount of $1,072,008 with
interest at 9.90%, payable in
monthly installments of $42,500
until 2004. 1,022,795 --
Four notes with interest at 7.50%
per annum payable in monthly
installments of $24,404 beginning
October 1995 (secured by equipment). 1,217,712 --
Two notes with interest at 9.25%
per annum payable in monthly
installments of $28,136 beginning
January 1988 (secured by equipment). -- 83,123
A real property contract for the
purchase of an office building,
payable in 180 monthly installments
of $2,346 including interest at
12.5% per annum until 1999 (secured
by real property). 85,386 101,734
Other note payable 2,292 27,500
Mortgage notes (secured by real property):
A note payable in monthly installments
of $41,449 including interest at 9%
until 1996. 442,243 878,279
A note payable in monthly installments
of $43,721 including interest at 10.30%
per annum until 1995. -- 457,059
A note payable in monthly installments
of $31,615 including interest at 7.25%
until 2013. 3,816,529 3,907,589
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
8. Long-term liabilities (continued)
1995 1994
----------- -----------
Redeemable notes and certificates:
Capital investment notes
(subordinated), interest ranging
from 5.75% to 8%. Maturity dates
range from 1995 to 2004 which is
ten years from dates of issue. $ 50,619,400 $ 50,319,700
Registered redeemable building
notes (subordinated), interest
at 8%. No fixed maturity date. 3,199,100 3,482,400
Redeemable transferable notes,
(subordinated), interest at
5.75%. No fixed maturity. 25,300 46,400
------------ ------------
Total 123,196,885 121,445,463
Less current installments (7,573,215) (6,776,197)
------------ ------------
Total long-term liabilities $115,623,670 $114,669,266
============ ============
Total maturities of long-term liabilities in each of the next five fiscal
years are as follows:
Year Amount
---- ------
1996 $ 7,573,215
1997 25,377,366
1998 5,904,803
1999 6,115,983
2000 6,346,450
The Company's loan agreements require the maintenance of certain financial
ratios and a minimum amount of capital and subordinated debt. The Company
was in compliance with these requirements as of September 29, 1995 and
September 30, 1994.
9. Income taxes
The provision for income taxes for the three years consists of the
following:
1995 1994 1993
---- ---- ----
Current payable:
Federal $ 542,585 $ 439,200 $ 162,758
State 50,156 86,252 72,468
Deferred 181,728 474,889 341,209
---------- ---------- ----------
Total $ 774,469 $1,000,341 $ 576,435
========== ========== ==========
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
9. Income taxes (continued)
The effective income tax rate for the three years ended September 29, 1995
does not correspond with the Federal tax rate. The reconciliation of this
rate to the effective income tax rate is as follows:
1995 1994 1993
---- ---- ----
Statutory income tax rate (34%) $ 732,181 $ 871,668 $ 778,878
State income taxes, net of
Federal income tax benefit 33,103 56,926 47,829
Tax exempt interest (133,622) (158,673) (133,080)
Refunds as a result of carrybacks (64,954) -- (184,980)
Prior year under accrual -- 179,235 --
Other 207,761 51,185 67,788
---------- ---------- ----------
Income tax expense $ 774,469 $1,000,341 $ 576,435
========== ========== ==========
Effective income tax rate 36.0% 39.0% 25.2%
==== ==== ====
The significant components of the deferred income taxes - current asset and
non-current liability as of the balance sheet date are as follows:
1995 1994
---------- ----------
Deferred income taxes -
current asset:
Insurance reserves $1,041,485 $1,041,678
Inventories 746,442 738,842
Unearned insurance premiums 508,089 541,417
Allowance for doubtful accounts 420,530 471,288
Other (179,223) 18,689
---------- ----------
Total $2,537,323 $2,811,914
========== ==========
Deferred income taxes -
non-current liability:
Accumulated depreciation $5,070,833 $4,589,568
Deferred income (345,898) (216,243)
Allowance for doubtful notes (233,679) (143,653)
Deferred compensation (174,550) (129,398)
Advance deposits (54,020) (52,004)
Alternative minimum tax
(AMT) credit (611,439) (304,161)
---------- ----------
Total $3,651,247 $3,744,109
========== ==========
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
9. Income taxes (continued)
The significant components of deferred income tax expense for the three
years are as follows:
1995 1994 1993
---- ---- ----
Decrease (increase) in deferred
income taxes - asset $ 274,590 $ 11,915 $ 157,747
(Decrease) increase in
deferred income taxes -
liability after applying
AMT credit (92,862) 62,974 183,462
---------- --------- ---------
Total $ 181,728 $ 474,889 $ 341,209
========== ========= =========
The Company has net operating loss carryovers of approximately $3,500,000
to apply against future years' State income taxes, expiring in years 2007
through 2010. These operating loss carryovers are the result of the
insurance company subsidiary being required to file a separate calendar
year State tax return and not giving the parent the benefit of this offset
on its State tax return. The Company also has unused State energy tax
credits of approximately $45,000, expiring in 1998.
10. Members' patronage dividends
The Company's income from sales to members, before income taxes and
patronage dividends, is available, at the discretion of the Board of
Directors, to be returned to the members in the form of patronage
dividends. As of year end, the Board of Directors voted to distribute the
following in patronage dividends:
1995 1994 1993
--------- ---------- ----------
Payable in cash and shown as
a current liability $ 6,646,867 $ 6,865,736 $ 7,584,177
Distributable in the form
of common stock 1,703,133 1,864,432 1,415,823
----------- ----------- -----------
Total $ 8,350,000 $ 8,730,168 $ 9,000,000
=========== =========== ===========
11. Reinsurance
The Company in 1994 adopted the Statement of Financial Accounting
Standards (SFAS) No. 113, Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts, issued in December, 1992.
The Statement requires that transactions relating to reinsurance
transactions be reported at gross amounts rather than net amounts. The
effect on the consolidated financial statements of the Company is to
gross up the insurance liabilities by reclassifying the ceded reinsurance
amounts for reinsurance recoverables and prepaid reinsurance premiums as
assets.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
11. Reinsurance (continued)
There is no effect or change to the consolidated income statement as the
income statement classifications did not change. Net premiums earned
continue to be reported as net sales and operations while net losses and
loss adjustment expenses continue to be reported as cost of sales.
Reinsurance contracts do not relieve the Company from its obligation to
policyholders. Failure of reinsurers to honor their obligations could
result in losses to the Company. The Company evaluates the financial
condition of its reinsurers and monitors concentrations of credit risk
arising from similar geographic regions, activities, or economic
characteristics of the reinsurers to minimize its exposure to significant
losses from reinsurer insolvencies.
Reinsurance amounts reflected in the financial statements are as follows:
1995 1994
----------- ------------
For the balance sheet:
Reinsurance recoverable for
ceded losses $ 5,081,542 $ 3,792,152
Prepaid reinsurance premiums 2,050,101 1,394,254
----------- -----------
Total $ 7,131,643 $ 5,186,406
=========== ===========
1995 1994 1993
---- ---- ----
For the income statement:
Premiums written:
Gross $27,808,928 $23,992,639 $24,430,854
Assumed 698,280 860,953 715,760
Ceded (7,364,002) (6,652,410) (6,597,150)
----------- ----------- -----------
Net premiums written $21,143,206 $18,201,182 $18,549,464
=========== =========== ===========
Percentage of amount
assumed to net 3.30% 4.73% 3.86%
==== ==== ====
Premiums earned:
Gross $27,375,036 $23,736,321 $24,185,628
Assumed 718,692 829,978 750,619
Ceded (7,364,002) (6,505,887) (6,493,811)
----------- ----------- -----------
Net premiums earned $20,729,726 $18,060,412 $18,442,436
=========== =========== ===========
Percentage of amount
assumed to net 3.47% 4.60% 4.07%
==== ==== ====
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
11. Reinsurance (continued)
1995 1994 1993
------------ ------------ ------------
Expenses:
Losses and loss adjustment
expenses $21,000,749 $15,079,858 $17,481,462
Reinsurance recoveries (5,511,850) (3,389,844) (2,121,602)
----------- ----------- -----------
Net losses and loss
adjustment expenses $15,488,899 $11,690,014 $15,359,860
=========== =========== ===========
12. Segment reporting
The Company has two operating segments which are located primarily in the
Pacific Northwest. The distribution segment includes all operations
relating to wholesale grocery and related product sales, retail grocery
sales, service department revenues, and financing income and fees. The
insurance segment includes all operations relating to insurance
underwriting, commissions, and reinsurance primarily to provide workers'
compensation and property-casualty coverage.
A summary of information about the Company's operations by segment before
intersegment eliminations for the three years is as follows:
1995 1994 1993
-------------- ------------ ------------
Net sales and operations:
Distribution $ 996,966,961 $936,266,067 $857,439,871
Insurance 22,794,952 18,788,523 20,525,392
Less intersegment insurance
sales and expenses (1,513,457) (834,240) (979,910)
-------------- ------------ ------------
Total $1,018,248,456 $954,220,350 $876,985,353
============== ============ ============
Income before allowances,
dividends, income taxes
and accounting change:
Distribution $ 18,889,425 $ 19,791,157 $ 18,162,132
Insurance 3,127,833 2,952,047 2,485,571
-------------- ------------ ------------
Total $ 22,017,258 $ 22,743,204 $ 20,647,703
============== ============ ============
Total assets:
Distribution $ 260,365,677 $243,267,148 $226,346,768
Insurance 63,698,155 64,923,598 64,591,472
-------------- ------------ ------------
Total $ 324,063,832 $308,190,746 $290,938,240
============== ============ ============
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
12. Segment reporting (continued)
1995 1994 1993
---- ---- ----
Depreciation expense:
Distribution $ 5,770,681 $ 5,408,896 $ 4,643,401
Insurance 181,895 200,883 94,000
------------ ------------ ------------
Total $ 5,952,576 $ 5,609,779 $ 4,737,401
============ ============ ============
Capital expenditures:
Distribution $ 10,096,516 $ 5,161,425 $ 11,310,048
Insurance 275,224 93,157 680,933
------------ ------------ ------------
Total $ 10,371,740 $ 5,254,582 $ 11,990,981
============ ============ ============
For net sales and operations, wholesale grocery sales (primarily to
members) during the three years ended September 29, 1995 accounted for
approximately 93%, 95% and 93%, respectively, of the distribution total.
Premium revenue (primarily from members) accounted for approximately 96%,
95% and 90%, respectively, of the insurance total.
The change in the method of accounting for inventories (Note 4) related
to and affected only the distribution segment.
13. Retirement plans
The Company has a Company-sponsored pension plan that covers substantially
all of its salaried employees. The Company also has separate Company-
sponsored 401(k) plans for salaried and union employees. The Company has
made annual contributions to the plans equal to the amount annually
accrued for pension expense. The Company's funding policy is to satisfy
the funding requirements of the Employees' Retirement Income Security Act.
The Company also participates in several multi-employer pension plans for
the benefit of its employees who are union members. The data available
from administrators of the multi-employer plans is not sufficient to
determine the accumulated benefit obligation, nor the net assets
attributable to the multi-employer plans in which the Company's union
employees participate.
The financial statements include pension expense for the company-sponsored
pension plan as determined using Statement of Financial Accounting
Standards (SFAS) No. 87, Employers' Accounting for Pensions. The effect
of SFAS 87 was a decrease of pension expense in the amount of $362,794 for
1995, $546,894 for 1994, and $484,020 for 1993. The Company's
unrecognized net asset resulting from the initial application of SFAS 87
is being amortized over eighteen years.
In determining the actuarial present value of the projected benefit
obligation, a discount rate of 8% and a future maximum compensation
increase rate of 4% were used. The expected long-term rate of return on
assets was 8%.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
13. Retirement plans (continued)
Pension costs for all plans for the three years consist of the following:
1995 1994 1993
---- ---- ----
Company-sponsored:
Service costs of benefits
earned $ 945,413 $ 918,423 $ 910,214
Interest cost on the projected
benefit obligation 1,557,954 1,448,447 1,339,393
Expected return on plan assets (1,713,673) (1,688,595) (1,443,513)
Net amortization of unrecognized
net asset (168,168) (168,168) (168,168)
Unrecognized net gain -- (4,414) --
Unrecognized prior service cost 61,478 73,760 73,760
----------- ----------- -----------
Net salaried pension cost 683,004 579,453 711,686
Multi-employer plan costs 2,590,269 2,395,300 2,180,280
Matching costs of 401(k) plans 384,282 391,605 437,413
----------- ----------- -----------
Total pension expense $ 3,657,555 $ 3,366,358 $ 3,329,379
=========== =========== ===========
The following table sets forth the Company-sponsored plan's funded status
as of year end:
Actuarial present value of
benefit obligations:
Vested $14,997,208 $13,337,570 $12,397,747
Non-vested 927,101 823,015 819,479
----------- ----------- -----------
Accumulated benefit obligation 15,924,309 14,160,585 13,217,226
Effect of projected future
compensation levels 4,767,286 4,881,117 4,501,814
----------- ----------- -----------
Projected benefit obligation 20,691,595 19,041,702 17,719,040
Plan assets at fair value,
primarily listed stocks, fixed
income, and bond and equity
funds 24,482,376 22,030,725 21,056,267
----------- ----------- -----------
Excess of plan assets over
projected benefit obligation 3,790,781 2,989,023 3,337,227
Unrecognized prior service cost 716,993 778,471 1,031,162
Unrecognized net gain (2,745,049) (1,422,307) (2,273,777)
Unrecognized net asset, net of
amortization (1,729,335) (1,897,503) (2,065,671)
----------- ----------- -----------
Prepaid pension cost $ 33,390 $ 447,684 $ 28,941
=========== =========== ===========
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
13. Retirement plans (continued)
In addition to pension benefits, the Company provides health benefits for
certain retired salaried employees. The Financial Accounting Standards
Board has issued Statement of Financial Accounting Standards No. 106,
Employer's Accounting for Post Retirement Benefits Other Than Pensions.
This statement will require accrual of such benefits during the years an
employee provides services. The costs of these benefits are currently
expensed on a pay-as-you-go basis. The cost of this retiree health care
is funded out of current operations and was approximately $349,000 in
1995, $356,000 in 1994 and $282,000 in 1993. The impact of this new
standard has not been fully determined, but the change likely will result
in a greater liability and expense being recognized for these benefits.
The Company has until 1995-96 to adopt this Statement because fewer than
500 employees will be affected.
14. Leases
The Company is obligated under one hundred and thirteen significant
leases in 1995. Forty-one of these leases are for twenty to
twenty-five years with renewal options and involve supermarket properties
which are subleased to members. Six of these leases are subleased to
affiliated companies. The remaining leases represent property and
equipment used by the Company. The leases expire at various dates, the
last expiring in 2018. Rental expense for the three years consists of
the following:
1995 1994 1993
------------ ----------- -----------
Minimum rentals $15,252,948 $13,690,702 $14,082,104
Less sublease income 6,549,338 (5,971,461) (6,554,855)
------------ ----------- -----------
Net rental expense $ 8,703,610 $ 7,719,241 $ 7,527,249
============ =========== ===========
The following is a schedule by years showing future minimum rental
payments required under operating leases that have initial or remaining
non-cancelable lease terms in excess of one year as of September 30,
1995:
Fiscal Minimum Minimum Net
year payments (A) receipts (B) minimum
--------- ------------ ------------ -----------
1995-1996 $ 15,340,062 $ 6,616,852 $ 8,723,010
1996-1997 12,632,668 6,272,417 6,360,251
1997-1998 11,177,507 5,659,728 5,517,779
1998-1999 11,052,452 5,657,941 5,394,511
1999-2000 10,568,835 5,731,107 4,837,728
Later years 84,945,834 51,838,150 33,837,728
------------ ------------ -----------
Total $145,717,358 $81,776,195 $63,941,163
============ ============ ===========
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
14. Leases (continued)
Minimum Minimum Net
payments (A) receipts (B) minimum
------------ ----------- -----------
Summary:
Building leases $141,084,573 $81,582,941 $59,501,532
Equipment leases 4,632,785 193,054 4,439,531
------------ ----------- -----------
Total $145,717,358 $81,776,195 $63,941,163
============ =========== ===========
(A) Minimum payments are those required by the Company over the terms of
the significant leases.
(B) Minimum receipts are those to be received by the Company from
sublease agreements.
Nineteen of the subleases as of September 29, 1995, are insured by
the Company's foreign subsidiary, UGIC, Ltd. The annual rental for
these leases is approximately $1,900,000. The total remaining
minimum payments over the lease term for these same leases is
approximately $26,900,000.
The Company has sale-leaseback transactions for four cash and carry
outlets. The sales resulted in deferred gains of approximately
$1,200,000 which are being amortized over the leaseback period of fifteen
years. The total remaining lease commitments are approximately
$4,250,000 over fifteen years with an annual rental of approximately
$310,000.
15. Supplemental cash flow information
1995 1994 1993
----------- ----------- -----------
Supplemental disclosures:
Cash paid during the
year for:
Interest $11,753,143 $ 8,898,144 $ 8,292,247
Income taxes - net
of refunds 341,836 336,810 647,836
Supplemental schedule of
noncash investing and
financing activities:
Patronage dividends payable
in common stock 1,703,103 1,864,432 1,415,823
16. Affiliated companies
The Company owns interests in three separate affiliates which are
accounted for on the equity method. All of these affiliates are in the
grocery distribution business. One affiliate is a vendor that provides
private label brand merchandise. The other affiliates operate retail
grocery stores and are also members of the Company.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
16. Affiliated companies (continued)
An approximate summary of aggregate transactions with these affiliates is
as follows:
1995 1994
----------- -----------
As of year end:
Equity interest $ 8,392,000 $ 7,832,000
Accounts receivable 4,820,000 1,860,000
Notes receivable 6,440,000 4,355,000
Accounts payable (4,930,000) (6,006,000)
Undistributed earnings 1,416,000 1,463,000
1995 1994 1993
----------- ----------- ----------
During the year ended:
Increase in equity
interest $ 607,000 $ 6,094,000 $ --
Sales 91,447,000 22,945,000 --
Purchases 97,541,000 89,179,000 70,334,000
Volume incentive rebate (1,707,000) (1,561,000) (1,231,000)
Refunds, rebates and
allowances 3,013,000 701,000 --
Equity interest
income (loss) (47,000) (192,000) --
These affiliates and the Company's percentage of ownership are as follows:
Western Family Holding Company 22%
C & K Market, Inc. 22%
R.A.F. Limited Liability Company 50%
All of these affiliates are privately held companies for which no ready
market values are available. In management's opinion the equity interest
as stated is equal to or less than the fair value of their interest in
these affiliates.
17. Concentrations of credit risk
The Company holds its cash and cash equivalents in several banks located
in the Pacific Northwest and a zero balance bank account located in the
Midwest. Each bank is covered by FDIC insurance; balances in excess of
coverage are not insured.
As a cooperative, the majority of the Company's accounts receivable
represent sales to its members who are located throughout the Pacific
Northwest. These accounts are not generally secured by collateral but
each member has stock holdings in the Company as well as patronage rebates
which the Company could apply against account balances.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
17. Concentrations of credit risk (continued)
The Company makes store financing loans to members from time to time
mainly to finance the acquisition of grocery store properties and
equipment. These loans are represented by notes receivable which are
secured by collateral consisting of personal property, securities and
guarantees. See Note 18a. for sale of notes subject to limited recourse
provisions.
The insurance subsidiaries have investments primarily in federal
securities and state municipal bonds which are backed by the full faith
and credit of the respective governmental agency. See Note 2 for
investment details.
18. Commitments and contingencies
a. The Company has entered into various agreements under which it sells
certain of its notes receivable from members subject to limited
recourse provisions. These notes are secured by collateral which
usually consists of personal property, securities and guarantees.
The Company in turn receives a monthly service fee. In 1995, 1994
and 1993, the Company sold notes totaling approximately $20,800,000,
$8,625,000 and $900,000, respectively. The balances of transferred
notes that were outstanding and subject to recourse provisions were
$28,537,400, $13,652,000 and $13,441,000 at September 29, 1995,
September 30, 1994 and October 1, 1993, respectively.
b. In connection with its loan activities to members, the Company has
approved loan applications totaling approximately $12,700,000 for
which funds have been committed, but not disbursed, as of September
29, 1995.
c. The Company is guarantor of a covenant by a member as of September
29, 1995 totaling $300,000 with annual principal payments of
approximately $50,000.
d. The Company is a party to various litigation and claims arising in
the ordinary course of business. While the ultimate effect of such
actions cannot be predicted with certainty, the Company expects that
the outcome of these matters will not result in a material adverse
effect on the Company's consolidated financial position or results
of operations.
19. Subsequent event
In December 1995 the Company entered into a transaction to acquire
certain assets and assume certain liabilities and property leases of a
wholesale grocery operation in California. The approximate net book
value purchase amount was $19,200,000. The approximate annual sales
volume for this new operation is $300,000,000.
<PAGE>
Board of Directors
United Grocers, Inc.
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULES
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements included in United Grocers, Inc.'s annual
report to stockholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated December 14, 1995. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. Schedules
I, II and V listed in the index under Section 210.12-04 are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
Portland, Oregon
December 14, 1995 DeLap, White & Raish
<PAGE>
SCHEDULE I
UNITED GROCERS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
BALANCE SHEETS:
ASSETS
1995 1994
------------ ------------
Current assets:
Cash and cash equivalents $ 1,215,643 $ 1,251,143
Accounts receivable - (net of allowance) 55,014,559 44,452,568
Inventories 73,880,989 70,376,577
Other current assets 2,875,918 2,592,863
Deferred income taxes 884,350 1,183,576
------------ ------------
Total current assets 133,871,459 119,856,727
------------ ------------
Non-current assets:
Investments in affiliated companies
and intercompany accounts 74,593,758 75,419,673
Other non-current assets 15,410,908 12,599,343
------------ ------------
Total non-current assets 90,004,666 88,019,016
------------ ------------
Property, plant and equipment - (net
of accumulated depreciation) 55,669,749 53,214,508
------------ ------------
Total $279,545,874 $261,090,251
============ ============
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Notes payable - bank $ 48,515,543 $ 31,020,667
Accounts payable 49,765,896 53,702,058
Other expenses and taxes 4,678,846 3,461,517
Members' patronage payable 6,646,867 6,865,735
Current installments on long-term
liabilities 7,573,215 6,693,074
------------ ------------
Total current liabilities 117,180,367 101,743,051
Long-term liabilities 115,623,670 114,669,263
Deferred income taxes 3,696,317 3,698,611
Deferred income 886,917 554,469
------------ ------------
Total liabilities 237,387,271 220,665,394
------------ ------------
Members' equity:
Common stock 3,278,315 3,256,080
Additional paid-in capital 23,956,797 22,472,564
Retained earnings 14,923,491 14,696,213
------------ ------------
Total members' equity 42,158,603 40,424,857
------------ ------------
Total $279,545,874 $261,090,251
============ ============
The independent auditor's report should be read with this supplemental
schedule.
<PAGE>
SCHEDULE I
UNITED GROCERS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
YEARS ENDED SEPTEMBER 29, 1995, SEPTEMBER 30, 1994, AND OCTOBER 1, 1993
STATEMENTS OF INCOME:
1995 1994 1993
------------ ------------ ------------
Net sales and operations $937,134,185 $898,754,635 $831,264,000
Costs and expenses:
Cost of sales 812,077,258 782,437,215 722,308,820
Operating expenses 76,575,960 71,084,769 68,177,924
Selling and administrative
expenses 10,872,432 9,533,741 9,441,916
Depreciation 4,878,412 4,444,310 3,739,787
Interest expense, net 11,450,122 8,343,701 7,132,748
------------ ------------ ------------
Total costs and expenses 915,854,184 875,843,736 810,801,195
------------ ------------ ------------
Income before members' allowances
and patronage dividends, income
taxes and income (loss) of
subsidiaries 21,280,001 22,910,899 20,462,805
Members' allowances (11,513,784) (11,449,305) (9,356,885)
Members' patronage dividends (8,350,000) (8,730,168) (9,000,000)
------------ ------------ ------------
Income before income taxes and
income (loss) of subsidiaries 1,416,217 2,731,426 2,105,920
Provision for income taxes (457,895) (876,343) (490,419)
Income (loss) of subsidiaries 420,683 (291,693) 98,882
------------ ------------ ------------
Net income $ 1,379,005 $ 1,563,390 $ 1,714,383
============ ============ ============
STATEMENTS OF MEMBERS' EQUITY:
Additional
Common paid-in Retained
stock capital earnings Total
----------- ----------- ----------- -----------
Balance, October 2,
1992 $ 3,464,735 $20,642,128 $15,034,453 $39,141,316
Stock:
Issued 78,755 759,972 -- 838,727
Repurchased (381,930) (1,687,165) (1,928,752) (3,997,847)
Patronage dividends 124,195 1,291,628 -- 1,415,823
Net income -- -- 1,714,383 1,714,383
----------- ----------- ----------- -----------
Balance, October 1,
1993 3,285,755 21,006,563 14,820,084 39,112,402
Stock:
Issued 148,090 1,515,656 -- 1,663,746
Repurchased (334,440) (1,757,412) (1,687,261) (3,779,113)
Patronage dividends 156,675 1,707,757 -- 1,864,432
Net income -- -- 1,563,390 1,563,390
----------- ----------- ----------- -----------
Balance, Sept 30,
1994 3,256,080 22,472,564 14,696,213 40,424,857
<PAGE>
Stock:
Issued 115,780 1,260,324 -- 1,376,104
Repurchased (230,585) (1,342,184) (1,151,727) (2,724,496)
Patronage dividends 137,040 1,566,093 -- 1,703,133
Net income -- -- 1,379,005 1,379,005
----------- ----------- ----------- -----------
Balance, Sept 29, 1995
$ 3,278,315 $23,956,797 $14,923,491 $42,158,603
=========== =========== =========== ===========
The independent auditor's report should be read with this supplemental
schedule.
<PAGE>
SCHEDULE I
UNITED GROCERS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
YEARS ENDED SEPTEMBER 29, 1995, SEPTEMBER 30, 1994, AND OCTOBER 1, 1993
STATEMENTS OF CASH FLOWS:
1995 1994 1993
----------- ----------- -----------
Cash flows from operating activities:
Net income $ 1,379,005 $ 1,563,390 $ 1,714,383
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 4,878,412 4,444,310 3,739,787
Provision for doubtful accounts
and notes 622,000 722,000 1,241,838
Patronage dividends payable
in common stock 1,703,133 1,864,432 1,415,823
Loss (gain) on sale of assets 213,478 22,593 (423,351)
Equity in loss (earnings) of
affiliated companies (373,694) 483,453 (99,654)
Deferred income taxes 296,932 719,262 482,278
(Increase) decrease in non-cash
current assets:
Accounts receivable (11,183,991) (16,408,543) (240,591)
Inventories (3,504,412) (1,560,061) (1,037,472)
Other current assets (283,055) (592,812) (110,560)
Increase (decrease) in non-cash
current liabilities:
Accounts payable (3,936,162) 6,419,950 5,770,284
Other expenses and taxes 1,217,329 134,923 (1,347,149)
Members' patronage payable (218,868) (718,442) 466,645
(Increase) decrease in other
non-current assets (2,811,565) (1,529,897) 693,037
----------- ----------- -----------
Net cash provided by (used in)
operating activities (12,001,458) (4,435,442) 12,265,298
----------- ----------- -----------
Cash flows from investing activities:
(Increase) decrease in investment
in affiliated companies 1,199,609 (13,363,124) (11,290,921)
Sale of property, plant
and equipment 824,916 46,238 1,386,150
Purchase of property, plant
and equipment (8,039,599) (3,923,351) (8,769,116)
----------- ----------- -----------
Net cash used in investing
activities (6,015,074) (17,240,237) (18,673,887)
----------- ----------- -----------
The independent auditor's report should be read with this supplemental
schedule.
<PAGE>
SCHEDULE I
UNITED GROCERS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
YEARS ENDED SEPTEMBER 29, 1995, SEPTEMBER 30, 1994, AND OCTOBER 1, 1993
STATEMENTS OF CASH FLOWS (CONTINUED):
1995 1994 1993
----------- ----------- -----------
Cash flows from financing activities:
Sale of common stock $ 1,376,104 $ 1,663,746 $ 838,727
Repurchase of common stock (2,724,496) (3,779,113) (3,997,847)
Proceeds of long-term liabilities:
Revolving bank lines of credit 689,100,000 807,500,000 510,100,000
Mortgages and notes 25,640,393 12,104,717 5,505,830
Redeemable notes and certificates 19,529,600 22,395,400 25,322,100
Repayment of long-term liabilities:
Revolving bank lines of credit (671,605,124) (801,209,733) (499,918,520)
Mortgages and notes (23,842,696) (2,157,310) (10,377,773)
Redeemable notes and certificates (19,492,749) (22,618,900) (18,745,800)
----------- ----------- -----------
Net cash provided by
financing activities 17,981,032 13,898,807 8,726,717
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents (35,500) (7,776,872) 2,318,128
Cash and cash equivalents:
Beginning of year 1,251,143 9,028,015 6,709,887
----------- ----------- -----------
End of year $ 1,215,643 $ 1,251,143 $ 9,028,015
============ ============ ============
Supplemental disclosures:
Cash paid during the year for:
Interest $ 11,740,047 $ 8,889,088 $ 8,134,981
Income taxes - net of refunds 341,836 208,010 570,336
Supplemental schedule of noncash
investing and financing activities:
Patronage dividends payable in
common stock 1,703,133 1,864,432 1,415,823
CONTINGENCIES AND GUARANTEES:
The Company is party to various litigation and claims arising in the
ordinary course of business. While the ultimate effect of such actions
cannot be predicted with certainty, the Company expects that the outcome of
these matters will not result in a material adverse effect on the Company's
financial position or results of operations.
The Company is guarantor of a covenant by a member as of September 29, 1995
totaling $300,000 with annual principal payments of approximately $50,000.
The independent auditor's report should be read with this supplemental
schedule.
<PAGE>
SCHEDULE I
UNITED GROCERS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
LONG-TERM LIABILITIES:
Long-term liabilities at the balance sheet date consist of the following:
1995 1994
----------- -----------
Notes payable - bank:
Credit agreement notes maturing
on April 30, 1997 with interest
rates of 6.70% per annum at
September 29, 1995 and 5.77% per
annum at September 30, 1994. The
interest rates ranged from 5.95%
to 7.00% in 1995 and from 3.84%
to 5.89% in 1994. $ 17,000,000 $ 35,000,000
Notes payable - insurance companies:
Senior notes payable to seven
(six in 1994) insurance companies
with an interest rates of 8.42% and
9.15% per annum. Interest payable
monthly. Principal repayments
annually commencing October 1, 1992
in the amount of $3,336,000 until
2000; and $4,000,000 due in 2004,
maturing in full in 2005. 39,998,000 23,331,000
Notes payable - other:
Capital stock residual notes, payable
in twenty quarterly installments with
a variable interest rate based on the
current capital investment note rate. 4,239,958 3,810,679
A discounted note payable in the
original amount of $1,741,265 without
interest, discounted at 9.90%, payable
in two installments of $641,265 in
1996 and $1,100,000 in 1997. 1,528,170 --
A covenant not-to-compete in the
original amount of $1,072,008 with
interest at 9.90%, payable in
monthly installments of $42,500
until 2004. 1,022,795 --
Four notes with interest at 7.50%
per annum payable in monthly
installments of $24,404 beginning
October 1995 (secured by equipment). 1,217,712 --
Other notes payable 87,678 129,234
The independent auditor's report should be read with this supplemental
schedule.
<PAGE>
SCHEDULE I
UNITED GROCERS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
LONG-TERM LIABILITIES (CONTINUED):
1995 1994
----------- -----------
Mortgage notes (secured by real property):
A note payable in monthly installments
of $41,449 including interest at 9%
until 1996. $ 442,243 $ 878,279
A note payable in monthly installments
of $43,721 including interest at 10.30%
per annum until 1995. -- 457,056
A note payable in monthly installments
of $31,615 including interest at 7.25%
until 2013. 3,816,529 3,907,589
Redeemable notes and certificates:
Capital investment notes
(subordinated), interest ranging
from 5.75% to 8%. Maturity dates
range from 1996 to 2004 which is
ten years from dates of issue. 50,619,400 50,319,700
Registered redeemable building
notes (subordinated), interest
at 8%. No fixed maturity date. 3,199,100 3,482,400
Redeemable transferable notes,
(subordinated), interest at
5.75%. No fixed maturity. 25,300 46,400
------------ ------------
Total 123,196,885 121,362,337
Less current installments (7,573,215) (6,693,074)
------------ ------------
Total long-term liabilities $115,623,670 $114,669,263
============ ============
Total maturities of long-term liabilities in each of the next five fiscal
years are as follows:
Year Amount
---- -------------
1996 $ 7,573,215
1997 25,377,366
1998 5,904,803
1999 6,115,983
2000 6,346,450
Mandatory dividend or redemption requirements of redeemable stocks:
See Note 1.m. to the consolidated financial statements.
Cash dividends paid to the registrant for each of the last three fiscal years
by subsidiaries:
None.
The independent auditor's report should be read with this supplemental
schedule.
<PAGE>
SCHEDULE II
UNITED GROCERS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
Column A Column B Column C Column D Column E
- ---------- ---------- ----------- ----------- -----------
Additions
Balance at charged to Deductions Balance at
beginning costs and from end of
Description of period expenses reserve period
- ----------- ---------- ----------- ----------- -----------
1995:
Reserves deducted in
balance sheet from asset
to which it applies -
Allowance for doubtful
accounts for:
Accounts receivable $ 1,270,987 $ 794,189 $ 888,409 $ 1,176,767
Notes receivable 334,774 1,100,000 926,545 508,229
----------- ----------- ----------- -----------
Total $ 1,605,761 $ 1,894,189 $ 1,814,954 $ 1,684,996
=========== =========== =========== ===========
Reserves which support
the balance sheet caption:
Insurance reserves for
losses and expenses:
Workers' compensation $15,205,999 $ 9,837,535 $ 8,862,477 $16,181,057
Property and casualty 16,832,409 5,652,133 8,706,921 13,777,621
----------- ----------- ----------- -----------
Total $32,038,408 $15,489,668 $17,569,398 $29,958,678
=========== =========== =========== ===========
1994:
Reserves deducted in
balance sheet from asset
to which it applies -
Allowance for doubtful
accounts for:
Accounts receivable $ 1,283,681 $ 1,092,589 $ 1,105,283 $ 1,270,987
Notes receivable 376,108 900,000 941,334 334,774
----------- ----------- ----------- -----------
Total $ 1,659,789 $ 1,992,589 $ 2,046,617 $ 1,605,761
=========== =========== =========== ===========
Reserves which support
the balance sheet caption:
Insurance reserves for
losses and expenses:
Workers' compensation $15,230,686 $ 6,355,601 $ 6,380,288 $15,205,999
Property and casualty 17,284,711 5,635,565 6,087,867 16,832,409
----------- ----------- ----------- -----------
Total $32,515,397 $11,991,166 $12,468,155 $32,038,408
=========== =========== =========== ===========
The independent auditor's report should be read with this supplemental
schedule.
<PAGE>
SCHEDULE II
UNITED GROCERS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS (CONTINUED)
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1994
Column A Column B Column C Column D Column E
- ---------- ---------- ----------- ----------- -----------
Additions
Balance at charged to Deductions Balance at
beginning costs and from end of
Description of period expenses reserve period
- ----------- ---------- ----------- ----------- -----------
1993:
Reserves deducted in
balance sheet from asset
to which it applies -
Allowance for doubtful
accounts for:
Accounts receivable $ 1,434,097 $ 1,393,049 $ 1,543,465 $ 1,283,681
Notes receivable 420,169 789,502 833,563 376,108
----------- ----------- ----------- -----------
Total $ 1,854,266 $ 2,182,551 $ 2,377,028 $ 1,659,789
=========== =========== =========== ===========
Reserves which support
the balance sheet caption:
Insurance reserves for
losses and expenses:
Workers' compensation $13,514,617 $ 8,610,206 $ 6,894,137 $15,230,686
Property and casualty 15,084,358 7,360,333 5,159,980 17,284,711
----------- ----------- ----------- -----------
Total $28,598,975 $15,970,539 $12,054,117 $32,515,397
=========== =========== =========== ===========
As to columns omitted, the answer is "none".
The independent auditor's report should be read with this supplemental
schedule.
<PAGE>
SCHEDULE V
UNITED GROCERS, INC. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS
FOR THE THREE YEARS ENDED SEPTEMBER 29, 1995
Column A Column B Column C Column D Column F
- ---------- ----------- ------------ ---------- -----------
Future policy
Deferred benefits,
policy losses, claims
acquisition and loss Unearned Premium
Segment costs expenses premiums revenue
- ---------- ----------- ------------ ---------- -----------
Insurance segment:
1995 $ 471,064 $35,040,219 $ 9,459,315 $20,729,726
1994 432,192 32,038,408 8,518,168 18,060,412
1993 823,236 32,515,397 7,956,051 18,442,436
Column G Column H Column I Column J Column K
---------- ---------- ------------ ---------- --------
Benefits, Amortization
claims, of deferred
Net losses and policy Other
investment settlement acquisition operating Premium
income expenses costs expenses written
---------- ---------- ------------ ---------- --------
Insurance segment:
1995 $ 2,981,013 $15,489,668 $ 1,765,422 $ 2,295,895 $21,143,200
1994 2,666,023 11,991,166 1,479,422 4,136,101 18,201,182
1993 2,576,212 15,970,539 1,656,419 1,042,727 18,549,464
As to columns omitted, the answer is "none".
The independent auditor's report should be read with this supplemental
schedule.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
A. Identification of Directors:
Name Age Principal Occupation
---- --- --------------------
Directors whose terms began in 1993 and expire in 1996:
Craig Danielson 47 President, Dan, Inc. Oregon
Dennis Blasingame 47 Owner, Da Boys #2
James C. Vickers 62 President, J. C. Markets, Inc.
Directors whose terms began in 1994 and expire in 1997:
Raymond Nidiffer 66 President, C & K Markets, Inc.
David D. Neal 45 President, SMN Company
Peter J. O'Neal 51 President, Quality Food Investments, Inc
Directors whose terms began in 1995 and expire in 1998:
Dick Leonard 56 President, L&L Market, Inc.
Deano Ryan 37 President, Topps Industries, Inc.
Gordon Smith 50 President, Market Place Foods, Inc
Nominees for Director (three to be elected in 1996 for terms expiring in
1999):
Kenneth W. Findley 56 Vice President, Bales Thriftway, Inc.
Robert A. Lamb 55 Partner, Lamb Lasko Partnership
Ron Mansacola 59 President, Al Mansacola Grocery Market,
Inc.
H. Larry Montgomery 51 President, Larry's Market, Inc.
Michael Werness 48 President, Food Club of California, Inc.
Richard L. Wright, Jr. 33 Vice President, Operations, Wright's
Foodliner,Inc.
B. Identification of Executive Officers:
Name Age Offices Held Officer Since
---- --- ------------ -------------
Alan C. Jones 53 President, Secretary, Treas. 1981
John W. White 42 Vice President 1988
George P. Fleming 55 Assistant Secretary 1980
C. Identification of Certain Significant Employees:
None.<PAGE>
D. Family Relationships
None.
E. Business Experience
All executive officers have been employed by United in various
management and executive capacities for more than the past five years.
All directors and nominees have been principally engaged in the retail
grocery business for more than the past five years with the firms shown
opposite their names. Except as described in Item 13 below, none of such firms
is a parent, subsidiary or other affiliate of United.
No director or nominee is a director in another company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 or subject to the requirements of Section 15(d) of such Act or any company
registered as an investment company under the Investment Company Act of 1940.
F. Involvement in Certain Legal Proceedings
None
Item 11. Executive Compensation
A. Remuneration
The following table shows the compensation, during each of the years in
the three year period ended September 29, 1995, earned by each of the Company's
executive officers whose total annual salary and bonus for fiscal 1995 exceeded
$100,000. The Company does not provide long term compensation to its executive
officers other than retirement benefits, as discussed below.
<TABLE>
<CAPTION>
Name of
Individual Annual Compensation All
and Other
Principal Compen-
Position Year Salary Bonus sation <F1>
- ---------- ---- ------ ----- -----------
<S> <C> <C> <C> <C>
Alan C. Jones 1995 $251,713 $ 28,781 $34,048
President, 1994 252,398 54,000 54,111
Chief Executive 1993 222,826 149,620 40,040
Officer
John W. White 1995 112,195 38,000 2,767
Vice President, 1994 108,959 35,000 4,823
Chief Financial 1993 97,861 30,000 4,171
Officer
<FN>
<F1> Amounts shown for fiscal 1995 and 1994 include the dollar amount of
insurance premiums paid by the Company with respect to term life insurance for
the benefit of Mr. Jones, in the amount of $27,000 for 1995 and $27,000 for
1994. Such amounts also include matching contributions by the Company under
the United Grocers Special 401(k) Savings Plan as follows: Mr. Jones, $7,048
and $5,197; Mr. White, $2,767 and $3,184. The Company provides Mr. Jones with
a company car and a social membership at a local golf club.
</TABLE>
<PAGE>
B. Employment Agreement
Mr. Jones has an employment agreement with the Company pursuant to which he
is entitled to an annual base salary (subject to cost of living adjustment)
plus bonuses subject to performance targets set at the discretion of the board
of directors. The agreement further provides for Mr. Jones to receive certain
payments if the agreement is terminated without "cause" (as defined) or in the
event of a change in control of United.
In the event Mr. Jones is terminated without cause during the term of the
agreement, he will be entitled to receive payments for the remaining term of
the agreement equal to 50% of his then-current base salary plus the annual
premium for his life insurance policy. Further, Mr. Jones would be entitled to
be covered under the Company's medical and dental plans for the remaining term
of the agreement. As of September 29, 1995, the employment agreement had a
remaining term of 24 months.
In the event of a change of control of United (as defined), Mr. Jones will
have the right to terminate the employment agreement and receive a severance
payment equal to three times an amount which is 150% of his then-current base
salary.
C. Retirement Plan
The Company's retirement plan is an actuarially funded defined benefit
plan. The following table shows the estimated annual benefits payable upon
retirement (assuming normal retirement at age 65) for employees at specified
annual salary levels (based upon the highest average of five consecutive years)
with various years of service.
<TABLE>
<CAPTION>
Annual Pension Plan Table
Remuneration Years of Service <F1>
- ------------ ---------------------
10 15 20 25 30 35
<S> <C> <C> <C> <C> <C> <C>
$50,000 $ 6,500 $ 9,750 $13,000 $16,250 $ 19,500 $22,750
$75,000 $10,813 $16,219 $21,625 $27,032 $ 32,438 $37,844
$100,000 $15,438 $23,156 $30,875 $38,594 $ 46,313 $54,032
$125,000 $20,063 $30,094 $40,125 $50,157 $ 60,188 $70,219
$150,000 $24,688 $37,031 $49,375 $61,719 $ 74,063 $86,407
<F1> Under the present terms of the Company's retirement plan, the maximum
salary level and number of years of service considered for the purposes of
determining benefits are $150,000 and 35 years, respectively.
</TABLE>
The number of years of service under the plan for the officers listed in
the table on the preceding page is as follows:
Years of
Person Service
------ --------
Alan C. Jones 25
John W. White 8
<PAGE>
The amount of compensation used in calculation of pension benefits for
Mr. Jones and Mr. White is the dollar amount shown under "salary" and "bonus,"
subject to plan limitations, in the table for Item 11, Section A. above.
[Amounts payable under the plan are not subject to deduction for social
security or other offset amounts.]
D. Remuneration of directors
Directors, except the Chairman of the Board, received $10, plus expenses, for
each board meeting attended. The Chairman received $25, plus expenses, for
each board meeting attended and for each additional day spent on the conduct of
United's business.
Item 12. Security Ownership of Certain Beneficial Owners and Management
A. Security Ownership of Certain Beneficial Owners
The following table sets forth information as of December 22, 1995,
regarding each person known to United to be the beneficial owner of more than
5 percent of United's Common Stock.
Title of Class Name and address Amount and nature of Percent of
of beneficial owner beneficial ownership class
- -------------- ------------------- -------------------- ----------
United Grocers, Raymond L. Nidiffer 58,651 shares<F1> 9.4% of class
Inc., Common P. O. Box 730
Stock Brookings, OR 97415
[FN]
<F1> Includes 3,881 shares issuable as patronage dividends within 60
days. Mr. Nidiffer has sole voting and investment power with respect to
the shares indicated in the table.
B. Security Ownership of Management.
As of December 22, 1995, the directors and nominees for
election as directors of United owned the indicated amounts of United's
Common Stock, United's only class of voting security.
<PAGE>
Amount of
Beneficial Stock to Percent
Beneficial Owner Ownership <F1><F2> be issued <F9> of class
---------------- ------------------ -------------- --------
Directors:
Craig Danielson 21,796 shares 1,543 shares 3.7<F5>
Dennis Blasingame 1,683 shares 42 shares .3<F3>
James C. Vickers 10,100 shares -0- shares 1.6<F6>
Ray Nidiffer 54,770 shares 3,881 shares 9.4<F7>
Dave Neal 5,703 shares -0- shares .9<F3>
Peter J. O'Neal 4,102 shares 95 shares .7
Deano Ryan 4,263 shares -0- shares .7<F3>
Gordon Smith 4,910 shares -0- shares .8<F8>
Dick Leonard 4,133 shares -0- shares .7
Directors and
officers as
a group 111,460 shares 5,561 shares 18.7
Nominees:
Kenneth W. Findley 11,499 shares -0- shares 1.8<F10>
Robert A. Lamb 13,210 shares 199 shares 2.1<F4>
Ron Mansacola 5,833 shares 700 shares 1.0<F3>
H. Larry Montgomery 2,834 shares 59 shares .5<F3>
Michael Werness 4,688 shares 378 shares .8<F3>
Richard L. Wright, Jr. 22,595 shares 340 shares 3.7<F11>
[FN]
<F1> According to the bylaws, each stockholder of record is
entitled to one vote and one vote only, irrespective of
number of shares owned. All of the above-named individuals
have only one vote, except for Messrs. Smith, Danielson,
Lamb and Vickers, who may be deemed to have more than one
vote because they have interests in various entities that own
shares.
<F2> Except as indicated below, all of the above-named individuals
have sole voting and investment power with respect to the
shares indicated in the table.
<F3> These shares are owned jointly by the person named and his
spouse or by a corporation whose stock is owned jointly by
the person named and his spouse.
<F4> These shares are owned by a corporation and a partnership in which
Mr. Lamb has an equity or voting interest.
<F5> These shares are owned by two corporations in which Mr.
Danielson has an equity interest.
<F6> These shares are owned by two corporations in which Mr.
Vickers has a controlling interest.
<F7> These shares are owned by a corporation in which Mr. Nidiffer
has a controlling interest.
<F8> These shares are owned by two corporations in which Mr. Smith
has an equity interest.
<F9> These shares are issuable as patronage dividends within 60 days
and are included in the total shown under "Amount of
Beneficial Ownership."
<F10> These shares are owned by a corporation in which Mr. Findley has a
voting interest.
<F11> These shares are owned by a corporation in which Mr. Wright has a
voting interest.
C. Changes in Control. None
Item 13. Certain Relationships and Related Transactions.
A. Transactions with Management and Others
All directors and nominees (or their firms), as members of United,
purchase groceries and related products from United in the ordinary course of
business at prices available to members generally.
In the ordinary course of business, United enters into prime leases and
subleases property to qualified members. United presently is a party to
subleases with entities affiliated with Ray Nidiffer and Craig Danielson, and
Ron Mancasola, Michael Werness, Robert Lamb and Richard Wright, director
nominees of United. At September 29, 1995, monthly payments due pursuant to
the subleases were as follows:
Danielson $47,946
Nidiffer $46,795
Mancasola $16,054
Werness $32,807
Lamb $45,076
Wright $44,813
United guarantees members' indebtedness under certain conditions and
loans money to members through its financing department. The Company has
guaranteed certain loan obligations of C&K Market, Inc., a corporation owned
and controlled by Ray Nidiffer, a director.
B. Certain Business Relationships
During fiscal year 1995, C&K Market, Inc., a corporation controlled by
Ray Nidiffer, a director, purchased groceries and other products in the
ordinary course of business from United in the amount of $87,243,756. United
owns a 22% equity interest in C&K Market, Inc.
C. Indebtedness of Management
The following directors, officers, nominees or related persons or entities were
indebted to United during the fiscal year ended September 29, 1995, or
thereafter and prior to the date of this report:
<PAGE>
<TABLE>
<CAPTION>
Largest
aggregate
amount of debt
outstanding # of
during Balance at Notes
year ended November 30, & Rate of
Name of Debtor September 29, 1995 Interest
1995
- -------------- --------------- ------------ ---------
<S> <C> <C> <C>
Quality Food Investments,
Inc. 250,000 233,174 1 @ 7.99%
Peter J O'Neal - Director
SMN Company 813,314 737,938 1 @ 9.50%
David Neal - Director Various @
Variable
C & K Market, Inc. 7,588,920 7,152,475 3 @ 11.00%
Ray Nidiffer - Director 1 @ 10.00%
1 @ variable%
JC Market, Inc. 322,473 253,081 1 @ variable%
JC Market of Toledo, Inc 1 @ 7.99%
James C. Vickers - Director 1 @ 10.50%
Larry's Market Inc. 153,701 99,190 2 @ variable%
Lawrence Montgomery - Nominee 1 @ 8.5%
IFOR, Inc. 175,006 - 0 - 1 @ variable%
Dennis Blasingame - Director
Wright's Foodliner, Inc.
Rick Wright-Nominee 2,169,451 1,280,871 1 @ 7.99%
1 @ 9.50%
1 @ 10.75%
3 @ Variable
Food Club of California, Inc. 789,903 700,672 2 @ 10.75%
Michael Werness - Nominee 1 @ 11.00%
Robert Lamb/Gale Lasko,
Partnership
Robert Lamb, Proprietor
Robert Lamb, Nominee 2,213,107 1,200,764 1 @ 11.25%
1 @ 10.75
1 @ Variable%
Al Mancasola's Grocery Markets,
Inc
Ron Mancasola, Nominee 529,108 470,047 1 @ 10.75%
</TABLE>
All of the above loans were for purchase of inventory and equipment
and are secured by inventory and equipment. Variable rate loans bear
interest at prime plus 1.75 percent to 2.25 percent.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of the report
1. The following financial statements are filed as part of this report:
Independent Auditor's Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Members' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor's Report on Financial Statement Schedules
2. The following financial statement schedules are filed as part of this
report:
Schedule I - Condensed financial information of registrant
Schedule II - Valuation and qualifying accounts
promoters and employees (other than related parties)
Schedule V - Supplementary information concerning property - casualty
insurance operations
3. Exhibits. The exhibits listed on the accompanying index to exhibits
are filed as part of this report.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
UNITED GROCERS, INC.
(Registrant)
Dated: December 28, 1995 By: /s/ Alan C. Jones
Alan C. Jones
President
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Alan C. Jones President, Secretary and 12-28-95
Alan C. Jones Treasurer (Principal
executive officer)
/s/ John W. White Vice President 12-28-95
John W. White (Principal Financial Officer)
Director 12-28-95
Dennis Blasingame
/s/ Craig Danielson Director 12-28-95
Craig Danielson
Director 12-28-95
Peter J. O'Neal
/s/ Dave Neal Director 12-28-95
Dave Neal
/s/ Dick Leonard Director 12-28-95
Dick Leonard
Director 12-28-95
Gordon Smith
/s/ Deano Ryan Director 12-28-95
Deano Ryan
/s/ James C. Vickers Director 12-28-95
James C. Vickers
Director 12-28-95
Ray Nidiffer
<PAGE>
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered
Securities Pursuant to Section 12 of the Act.
No annual report covering the company's last fiscal year has been sent
to security holders. An annual report will be furnished to security
holders subsequent to the filing of the annual report on Form 10-K and
copies of the annual report shall be sent to the Commission when sent to
security holders.
Enclosed with this report is a copy of proxy soliciting material, including
the form of proxy, sent to United's shareholders for the January 13, 1996
annual meeting.
The enclosed proxy soliciting material and, when provided, the annual
report for the last fiscal year are, or will be, furnished to the
Commission for its information and shall not be deemed filed with the
Commission or otherwise subject to the liabilities of Section 18 of the
Securities Exchange Act of 1934, except to the extent that the company
specifically incorporates them in its annual report on this form by
reference.<PAGE>
<TABLE>
<CAPTION>
APPENDIX 1
Analysis of Loss Reserve Development
($ in thousands)
(9 Mos) (9 Mos)
Year Ended 12/84 12/85 12/86 12/87 12/88 12/89 12/90 12/91 12/92 12/93 12/94 9/94 9/95
---------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Liability for
Unpaid Claims and
Claim Adjustment
Expenses 4,169 6,498 8,985 11,251 13,123 15,951 17,610 22,357 25,252 27,784 28,351 27,639 29,353
Paid (Cumulative)
as of:
One Year Later 1,808 2,558 4,568 4,534 4,580 6,219 5,311 5,620 7,466 8,708
Two Years Later 2,798 4,414 6,788 6,903 7,383 8,238 8,057 10,016 12,815
Three Years Later 3,666 4,844 8,233 8,399 8,084 9,390 10,349 12,063
Four Years Later 3,748 5,302 9,074 8,881 8,427 10,113 11,100
Five Years Later 3,782 5,424 9,296 8,972 8,644 10,336
Six Years Later 3,876 5,413 9,287 9,118 8,669
Seven Years Later 3,897 5,257 9,387 9,120
Eight Years Later 3,872 5,250 9,351
Nine Years Later 3,865 5,240
Ten Years Later 3,838
Reserves Reesti-
mated
Year Ended 12/84 12/85 12/86 12/87 12/88 12/89 12/90 12/91 12/92 12/93
One Year Later 4,632 6,765 10,902 12,419 14,410 17,226 17,696 19,574 22,726 24,623
Two Years Later 4,577 6,898 11,188 12,875 13,927 14,673 15,024 18,058 22,203
Three Years Later 4,792 6,350 11,951 12,817 11,386 12,807 14,315 17,692
Four Years Later 4,457 6,831 11,903 11,026 10,337 12,298 14,826
Five Years Later 4,573 6,801 10,643 10,353 10,096 12,777
Six Years Later 4,603 6,140 10,142 10,215 10,576
Seven Years Later 4,284 5,720 10,132 10,645
Eight Years Later 4,128 5,533 10,486
Nine Years Later 3,999 5,733
Ten Years Later 4,050
Cumulative
Redundancy
or (Deficiency) 119 765 (1,501) 606 2,547 3,174 2,784 4,665 3,049 3,161
</TABLE>
<PAGE>
APPENDIX 2
<TABLE>
<CAPTION>
Reconciliation of claim reserves:
($ in thousands)
@ 9 mos @ 9 mos
1995 1994 1994 1993 1992
======= ======= ====== ====== ======
<S> <C> <C> <C> <C> <C>
a Net liabilities, beginning 28,351 27,784 27,784 25,252 22,357
of year
b Incurred claims & claim
adjustment expense
i Provision for current
accident year claims 12,928 11,837 17,864 18,426 16,933
ii Increase/(decrease) in
prior year claims 120 (1,425) (3,162) (1,778) (2,156)
Total incurred claims and
claim adjustment expense 13,048 10,412 14,702 16,648 14,777
c Payments
i Provision for current 3,852 2,136 5,426 5,903 5,634
accident year claims
ii Attributable to prior
year claims 8,037 6,894 8,708 8,212 6,122
Total Payments 11,888 9,030 14,134 14,115 11,756
d Other None None None None None
e Net liabilities, end of year 29,603 27,639 28,351 27,784 25,252
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS, INC. AND SUBSIDIARIES SCHEDULE II
Amounts receivable from related parties and underwriters, promoters, and
employees other than related parties
For the three years ended September 30, 1994 Balance at end
Balance at Deductions of period
beginning amounts Not
Name of debtor Year of period Additions collected Current current
- -------------- ---- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Gordon Smith 1993 98,598 -0- 70,876 27,722 -0-
(Note A)
1994 27,722 -0- 27,722 -0- -0-
1995 -0- -0- -0- -0- -0-
Dave Neal 1993 279,368 -0- 61,989 217,379 -0-
(Note B)
1994 217,379 -0- 61,293 156,086 -0-
1995 156,086 716,400 109,337 763,149 -0-
Dick Leonard 1993 51,426 -0- 34,496 16,930 -0-
(Note C)
1994 16,930 -0- 16,930 -0- -0-
1995 -0- -0- -0- -0- -0-
Peter O'Neal 1993 -0- -0- -0- -0- -0-
(Note D)
1994 -0- -0- -0- -0- -0-
1995 -0- 250,000 24,178 225,822 -0-
Dennis
Blasingame 1993 113,081 130,000 38,452 204,629 -0-
(Note E)
1994 204,629 -0- 29,452 175,006 -0-
1995 175,006 -0- 175,006 --0- -0-
Larry
Montgomery 1993 322,371 -0- 112,000 210,371 -0-
(Note F)
1994 210,371 -0- 56,670 153,701 -0-
1995 153,701 -0- 48,360 105,341 -0-
Raymond 1993 5,912,504 2,488,179 6,292,683 2,108,000 -0-
(Note G)
Nidiffer 1994 2,108,000 7,300,000 4,060,748 5,347,251 -0-
1995 5,347,251 2,500,000 567,982 7,279,269 -0-
James C. 1993 316,823 -0- 80,219 236,604 -0-
(Note H)
Vickers 1994 236,604 -0- 68,704 167,900 -0-
1995 167,900 179,441 78,317 269,024 -0-
Rick Wright 1993 2,842,794 283,122 632,239 2,496,677 -0-
(Note I)
1994 2,496,677 313,878 641,104 2,169,451 -0-
1995 2,169,451 -0- 750,823 1,418,628 -0-
Michael Werness 1993 -0- -0- -0- -0- -0-
(Note J)
1994 -0- 620,000 11,217 608,783 -0-
1995 608,783 200,000 90,954 717,829 -0-
Bob Lamb 1993 1,372,911 365,855 223,845 1,514,921 -0-
(Note K)
1994 1,514,921 1,021,715 478,661 2,057,972 -0-
1995 2,057,972 591,815 1,406,292 1,243,495 -0-
Ron Mancasola 1993 232,677 -0- 64,008 168,669 -0-
(Note L)
1994 168,669 429,814 69,375 529,108 -0-
1995 529,108 -0- 45,198 483,910 -0-
</TABLE>
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES SCHEDULE II
Notes to Schedule II
Note A Smith: Two notes bearing interest at a fixed rate of 7.99% and
paid in full on March 1, 1994.
Note B Neal: Three notes bearing interest at fixed rates of 10.50%,
10.75%, and 10.50% per annum, payable in equal monthly installments
maturing March 1, 1998, December 1, 1999, and May 1, 2002.
(Loan 497/497A/880)
Note C Leonard: One note bearing interest at a variable rate and paid in
full on July 1, 1994.
Note D O'Neal: One note bearing interest at a fixed interest rate of
10.50% per annum, payable in equal monthly installment maturing
February 1, 2001. Secured by inventory and fixtures at two
locations. (Loan #888)
Note E Blasingame: One note bearing interest at a variable rateand paid
in full on February 24, 1995
Note F Montgomery: One note bearing interest at a variable rate, 10.50%
as of September 29, 1995, payable in equal monthly installments
maturing August 1, 1997. One note bearing interest at a fixed rate
of 10.75% per annum, payable in equal monthly installments maturing
December 1, 1998. Secured by inventory and fixtures at two
locations. (Loans 754/802)
Note G Nidiffer: Five notes bearing interest at fixed interest rates
of 10.00%, 11.00%, 11.00%, 11.00%, and 10.75% per annum, payable in
equal monthly installments maturing 12/31/2002, 1/1/1999.
12/1/2000, 1/1/2000, and 9/29/1999, respectively. One note bearing
interest at a variable rate, 10.75% as of September 29, 1995,
payable in equal monthly installments maturing 12/23/1995. Secured
by inventory and fixtures at four locations, inventory at two
locations, and a deed of trust. (Loans 773/836/845/846/826/891).
Note H Vickers: One note bearing interest at a fixed rate of 7.99% per
annum, payable in equal monthly installments maturing November 1,
1996, November 1, 1998, and July 1, 2000. Three notes bearing
variable rates (10.75%, 10.75%. and 10.50% on September 29, 1995),
Payable in equal monthly installments maturing April 1, 1997.
Secured by inventory and fixtures at two locations. (Loans
126/779)
Note I Wright: Three notes bearing interest at fixed interest rates of
7.99%, 9.50%, and 10.75% per annum, payable in equal monthly
installments maturing November 1, 1996, November 1, 1998, and
July 1, 2000. Three notes bearing variable rates (10.75%, 10.75%,
and 10.50 per annum, payable in equal monthly installments maturing
April 1, 1999 and May 1, 1997. Secured by inventory and fixtures at
seven locations. (Loans 134/767/826/667/666/705)
Note J Werness: Three notes bearing interest at fixed rates of 10.75%,
11.00%, and 10.75% per annum, payable in equal monthly installments
maturing July 1, 2001, January 1, 2000, and September 1, 1999.
Secured by inventory and fixtures at one location and one mortgage.
(loans 826/829A/830).
Note K Lamb: One note bearing interest at a variable rate (10.75% on
September 29, 1995), and two notes bearing interest at fixed
interest rates of 11,25% and 10.75% per annum, payable in equal
monthly installments maturing December 1, 2000, September 1, 1998,
and April 1, 2000. Secured by inventory and fixtures at three
locations. (Loans 844/567/899)
<PAGE>
Note L Mancasola: One note bearing interest at a fixed rate of 10.75%,
payable in equal monthly installments maturing October 1, 2001.
Secured by inventory at two locations, and fixtures at one
location. (Loan 726)
<PAGE>
EXHIBIT INDEX
2.A Copy of agreement for sale and purchase of business assets dated
December 7, 1994, between Commissary Cash & Carry, Inc., and the
registrant (incorporated by reference to Exhibit 10.1 to the
registrant's quarterly report on Form 10-Q for the period ended
March 31, 1995).
2.B Copy of agreement for sale and purchase of business assets dated
December 22, 1994, between Rich and Rhine, Inc., and the
registrant (incorporated by reference to Exhibit 10.2 to the
registrant's quarterly report on Form 10-Q for the period ended
March 31, 1995).
2.C Copy of asset purchase agreement dated as of November 10, 1995,
between Bay Area Foods, Inc., and the registrant (incorporated by
reference to Exhibit 2 to the registrant's current report on Form
8-K dated December 13, 1995).
3.A Copy of the registrant's restated articles of incorporation, as
amended (incorporated by reference to Exhibit 4-E to the
registrant's registration statement on Form S-2, No. 33-26631).
3.B Copy of the registrant's bylaws, as amended (incorporated by
reference to Exhibit 4-F to the registrant's registration
statement on Form S-2, No. 33-26631).
4.A Copy of indenture dated as of February 1, 1978, between the
registrant and United States National Bank of Oregon, as trustee,
relating to the registrant's Capital Investment Notes
(incorporated by reference to Exhibit 4-I to the registrant's
registration statement on Form S-1, No. 2-60488).
4.B1 Copy of supplemental indenture dated as of December 15, 1984,
between the registrant and United States National Bank of Oregon,
as trustee, relating to the registrant's Series D 5% Subordinated
Redeemable Capital Investment Notes (incorporated by reference to
Exhibit 4-F to the registrant's registration statement on Form
S-2, No. 33-95213).
4.B2 Copy of supplemental indenture dated as of December 15, 1986,
between the registrant and United States National Bank of Oregon,
as trustee, relating to the registrant's Series E 5% Subordinated
Redeemable Capital Investment Notes (incorporated by reference to
Exhibit 4-G to the registrant's registration statement on Form
S-2, No. 33-11212).
4.B3 Copy of supplemental indenture dated as of January 27, 1989,
between the registrant and United States National Bank of Oregon,
as trustee, relating to the registrant's Series F 5% Subordinated
Redeemable Capital Investment Notes (incorporated by reference to
Exhibit 4-G to the registrant's Form 10-K for the fiscal year
ended September 30, 1989).
4.B4 Copy of supplemental indenture dated as of January 22, 1991,
between the registrant and United States National Bank of Oregon,
as trustee, relating to the registrant's Series G 5% Subordinated
Redeemable Capital Investment Notes (incorporated by reference to
Exhibit 4-D to the registrant's registration statement on Form
S-2, No. 33-38617).
4.B5 Copy of supplemental indenture dated as of July 6, 1992, between
the registrant and United States National Bank of Oregon, as
trustee, relating to the registrant's Series H 5% Subordinated
Redeemable Capital Investment Notes (incorporated by reference to
Exhibit 4-C to the registrant's registration statement on Form
S-2, No. 33-49450).
4.B6 Copy of supplemental indenture dated as of January 9, 1995,
between the registrant and First Bank National Association, as
trustee, relating to the registrant's Series J 5% Subordinated
Redeemable Capital Investment Notes (incorporated by reference to
Exhibit 4-C to the registrant's registration statement on Form
S-2, No. 33-57199).
4.C Copy of amended and restated credit agreement of May 31, 1995,
among the registrant, United States National Bank of Oregon, and
Seattle-First National Bank.
4.D Copy of note agreement dated as of September 20, 1991, and senior
notes dated September 24, 1991 among the registrant and various
purchasers (incorporated by reference to Exhibit 4-I to the
registrant's Form 10-K for the fiscal year ended September 27,
1991).
4.E Copy of Promissory Note, Assignment of Rents and Leases, Deed of
Trust, Financing Agreement and Security Agreement, and
Environmental Indemnity Agreement dated as of September 30, 1993,
between the registrant and United of Omaha Life Insurance Company,
relating to the registrant's construction of a new office building
(incorporated by reference to Exhibit 4.E to the registrant's Form
10-K for the fiscal year ended October 1, 1993).
4.F1 Copy of Loan Purchase and Servicing Agreement dated as of May 13,
1994, among United Resources, Inc., as Seller and Servicer, the
registrant, as Guarantor, and National Consumer Cooperative Bank,
as Buyer, relating to the selling of loans originated by the
registrant's subsidiary, United Resources, Inc., (incorporated by
reference to Exhibit 4.F1 to the registrant's Form 10-K for the
fiscal year ended September 30, 1994).
4.F2 Copy of First Amendment to Loan Purchase and Servicing Agreement
of May 13, 1994, dated as of July 15, 1994, among United
Resources, Inc., the registrant, and National Consumer Cooperative
Bank (incorporated by reference to Exhibit 4.F2 to the
registrant's Form 10-K for the fiscal year ended September 30,
1994).
4.F3 Copy of Second Amendment to Loan Purchase and Servicing Agreement
of May 13, 1994, dated as of September 28, 1995, among United
Resources, Inc., the registrant, and National Consumer Cooperative
Bank.
4.F4 Copy of Loan Purchase and Servicing Agreement (Holdback Program)
dated as of September 28, 1995, between United Resources, Inc., as
Seller and Servicer, and National Consumer Cooperative Bank, as
Buyer, and related guaranty agreement between the registrant and
National Consumer Cooperation Bank.
4.G Copy of Note Agreement dated October 10, 1994, between the
registrant and Phoenix Home Life Mutual Insurance Company
(incorporated by reference to Exhibit 4.G to the registrant's Form
10-K for the fiscal year ended September 30, 1994).
Pursuant to Item 601 (b)(4)(iii) of Regulation S-K, the registrant is not
filing certain instruments with respect to its long-term debt because the
amount authorized under any such instrument does not exceed 10 percent of the
total consolidated assets of the registrant at September 30, 1995. The
registrant agrees to furnish a copy of any such instrument to the Securities
and Exchange Commission upon request.
10.A1 Copy of United Grocers, Inc., pension plan and trust agreement
dated as of October 1, 1985 (incorporated by reference to Exhibit
10-A to the registrant's registration statement on Form S-2, No.
33-11212).
10.A2 Copy of first amendment to United Grocers, Inc., pension plan and
trust agreement dated as of October 1, 1987 (incorporated by
reference to Exhibit 10-B to post effective amendment No. 1 to
the registrant's registration statement on Form S-2, No.
33-11212).
10.A3 Copy of policy summary and related documents pertaining to a life
insurance policy for Alan C. Jones, President of the registrant,
purchased pursuant to the registrant's supplemental executive
retirement plan (incorporated by reference to Exhibit 10-E to the
registrant's Form 10-K for the fiscal year ended September 28,
1990).
10.A4 Copy of registrant's executive deferred compensation plan
(incorporated by reference to Exhibit 10-U to the registrant's
Form 10-K for the fiscal year ended September 27, 1991).
10.B Copy of executive compensation agreement dated March 1, 1991
(incorporated by reference to Exhibit 10-T to the registrant's
Form 10-K for the fiscal year ended September 27, 1991).
10.C Copy of binder of insurance with respect to indemnification of
officers and directors (incorporated by reference to Exhibit 10.C
to the registrant's Form 10-K for the fiscal year ended October 1,
1993).
10.D1 Typical forms executed in connection with loans to members,
including directors:
10.D1a Installment note (Stevens-Ness form 217), with optional interest
rate riders (incorporated by reference to Exhibit 10-D1a to the
registrant's Form 10-K for the fiscal year ended October 2, 1992).
10.D1b Promissory note (Stevens-Ness form 216), with optional interest
rate riders (incorporated by reference to Exhibit 10-D1b to the
registrant's Form 10-K for the fiscal year ended October 2, 1992).
10.D1c Installment note.
10.D1d Renewal note for fixed rate loan.
10.D1e Subsequent note (three forms) (incorporated by reference to
Exhibit 10-D1c to the registrant's Form 10-K for the fiscal year
ended October 2, 1992).
10.D1f Loan agreement (two forms) (incorporated by reference to Exhibit
10-D1d to the registrant's Form 10-K for the fiscal year ended
October 2, 1992).
10.D1g Loan agreement for subsequent notes (incorporated by reference to
Exhibit 10-D1e to the registrant's Form 10-K for the fiscal year
ended October 2, 1992).
10.D1h Amendment to loan and security agreements, including optional
clauses (incorporated by reference to Exhibit 10-D1f to the
registrant's Form 10-K for the fiscal year ended October 2, 1992).
10.D1i Amendment to installment note and security agreements.
10.D1j Security agreement (Stevens-Ness form 1201) (incorporated by
reference to Exhibit 10-D1g to the registrant's Form 10-K for the
fiscal year ended October 2, 1992).
10.D1k Purchase money security agreement (Stevens-Ness form 1202)
(incorporated by reference to Exhibit 10-D1h to the registrant's
Form 10-K for the fiscal year ended October 2, 1992).
10.D1l Security agreement for equipment (Stevens-Ness form 1203)
(incorporated by reference to Exhibit 10-D1i to the registrant's
Form 10-K for the fiscal year ended October 2, 1992).
10.D1m Inventory loan and security agreement (Stevens-Ness form 1206)
(incorporated by reference to Exhibit 10-D1j to the registrant's
Form 10-K for the fiscal year ended October 2, 1992).
10.D1n Security agreement (equipment and inventory) (incorporated by
reference to Exhibit 10-D1k to the registrant's Form 10-K for the
fiscal year ended October 2, 1992).
10.D1o Security agreement for subsequent notes (incorporated by reference
to Exhibit 10-D1l to the registrant's Form 10-K for the fiscal
year ended October 2, 1992).
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the registrant has
filed the forms listed above in lieu of filing each copy executed in
connection with loans to directors. A schedule showing the principal amount
and interest rate of each director loan at November 30, 1995, appears in Item
13.C of this Form 10-K. The registrant agrees to furnish a copy of any
omitted loan document to the Securities and Exchange Commission upon request.
10.D2 Typical form of residual stock redemption note executed in
connection with redemption of common stock from members
(incorporated by reference to Exhibit 10-D2 to the registrant's
Form 10-K for the fiscal year ended October 2, 1992).
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the registrant has
filed the form listed above in lieu of filing each copy executed in
transactions with directors. The registrant agrees to furnish a copy of any
omitted document to the Securities and Exchange Commission upon request.
10.E1 Copy of sublease agreement for Aloha store dated January 3, 1994,
between the registrant and CTD, L.L.C., a limited liability
company controlled by Craig T. Danielson, a director of the
registrant (incorporated by reference to Exhibit 10.E to the
registrant's Form 10-Q for the quarterly period ended April 1,
1994).
10.E2 Copy of sublease agreement for Tigard store dated January 3, 1994,
between the registrant and CTD, L.L.C., a limited liability
company controlled by Craig T. Danielson, a director of the
registrant (incorporated by reference to Exhibit 10.D to the
registrant's Form 10-Q for the quarterly period ended April 1,
1994).
10.E3 Copy of sublease agreement for Sandy store dated May 4, 1994,
between the registrant and Dan Inc Oregon, a corporation
controlled by Craig T. Danielson, a director of the registrant
(incorporated by reference to Exhibit 10.G3 to the registrant's
Form 10-K for the fiscal year ended September 30, 1994).
10.E4 Copy of Asset Purchase and Sale Agreement dated May 4, 1994, for
Sandy store between the registrant and Dan Inc Oregon, a
corporation controlled by Craig T. Danielson, a director of the
registrant (incorporated by reference to Exhibit 10.G4 to the
registrant's Form 10-K for the fiscal year ended September 30,
1994).
10.E5 Copy of Asset Purchase and Sale Agreement dated January 3, 1994,
for Aloha and Tigard stores between the registrant and CTD,
L.L.C., a limited liability company controlled by Craig T.
Danielson, a director of the registrant (incorporated by reference
to Exhibit 10.C to the registrant's Form 10-Q for the quarterly
period ended April 1, 1994).
10.F1 Copy of sublease agreement for Troutdale store dated December 15,
1993, between the registrant and a partnership in which Robert A.
Lamb, a nominee for director of the registrant, is a partner.
10.F2 Copy of sublease agreement for Wilsonville store dated June 25,
1991, between the registrant and a partnership in which Robert A.
Lamb, a nominee for director of the registrant, is a partner.
10.G Copy of sublease agreement for Magalia store dated March 15, 1994,
between the registrant and Al Mancasola Grocery Markets, Inc., a
corporation controlled by Ronald L. Mancasola, a nominee for
director of the registrant.
10.H1 Copy of sublease agreement for Silverton store effective as of
December 14, 1994, between the registrant and a partnership in
which David D. Neal, a director of the registrant, is a partner.
10.H2 Copy of assignment of real property sale contract dated February
20, 1985, by David D. Neal to the registrant.
10.I1 Copy of sublease agreement for Coos Bay store dated February 28,
1991, between the registrant and Raymond Nidiffer, a director of
the registrant (incorporated by reference to Exhibit 10-I19 to the
registrant's Form 10-K for the fiscal year ended September 27,
1991).
10.I2 Copy of sublease agreement for Arcata store dated August 11, 1977,
between the registrant and Raymond L. Nidiffer, a director of the
registrant (incorporated by reference to Exhibit 10-Q2 of the
registrant's registration statement on Form S-2, No. 33-26631).
10.I3 Copy of sublease agreement for Gold Beach store dated July 6,
1979, between the registrant and Raymond L. Nidiffer, a director
of the registrant (incorporated by reference to Exhibit 10-Q3 of
the registrant's registration statement on Form S-2, No. 33-
26631).
10.I4 Copy of assignment of lease and related documents for Mt. Shasta
store between the registrant and C & K Market, Inc., an affiliate
of Raymond L. Nidiffer, a director of the registrant (incorporated
by reference to Exhibit 10-Q4 of the registrant's registration
statement on Form S-2, No. 33-26631).
10.I5 Copy of sublease agreement for Rogue River store dated June 25,
1976, between the registrant and Raymond L. Nidiffer, a director
of the registrant (incorporated by reference to Exhibit 10-Q5 of
the registrant's registration statement on Form S-2, No. 33-
26631).
10.I6 Copy of lease agreement for Coos Bay store dated February 28,
1991, between the registrant and Raymond L. Nidiffer, a director
of the registrant (incorporated by reference to Exhibit 10-I20 to
the registrant's Form 10-K for the fiscal year ended September 27,
1991).
10.I7 Copy of loan guaranties dated June 12, 1980 and September 30, 1988
given by registrant for the benefit of C & K Market, Inc., an
affiliate of Raymond L. Nidiffer, a director of the registrant
(incorporated by reference to Exhibit 10-I12 to the registrant's
Form 10-K for the fiscal year ended September 30, 1989).
10.I8 Copy of stock purchase agreement dated as of June 20, 1994,
between the registrant and C&K Market, Inc., an affiliate of
Raymond L. Nidiffer, a director of the registrant (incorporated by
reference to Exhibit 10.F8 to the registrant's Form 10-K for the
fiscal year ended September 30, 1994).
10.J Copy of sublease agreement for Oroville store dated June 4, 1993,
between the registrant and Food Club of California, Incorporated,
a corporation controlled by Michael S. Werness, a nominee for
director of the registrant.
10.K1 Copy of sublease agreement for Albany store dated February 1,
1994, between the registrant and RAF Limited Liability Company, a
limited liability company controlled by Richard L. Wright, a
nominee for director of the registrant.
10.K2 Copy of sublease agreement for Cottage Grove store effective as of
February 1, 1989, between the registrant and Wright's Foodliner,
Inc., a corporation controlled by Richard L. Wright, a nominee for
director of the registrant.
10.K3 Copy of sublease agreement for Eugene store dated October 27,
1991, between the registrant and Wright's Foodliner, Inc., a
corporation controlled by Richard L. Wright, a nominee for
director of the registrant.
10.K4 Copy of sublease agreement for Lincoln City store dated June 30,
1993, between the registrant and Wright's Foodliner, Inc., a
corporation controlled by Richard L. Wright, a nominee for
director of the registrant.
12 Statement of Computation of Ratio of Adjusted Income to Fixed
Charges.
22 Subsidiaries of the registrant.
27 Financial Data Schedules.
28 Copy of schedule P of the annual statement for Grocers
Insurance Company, a subsidiary of the registrant, as filed with
the State Insurance Departments where the company operates, for
the year ended December 31, 1993.(P)
<PAGE>
<PAGE>
EXHIBIT 4.C
AMENDED AND RESTATED
CREDIT AGREEMENT
Among
UNITED GROCERS, INC.,
as Borrower,
UNITED STATES NATIONAL BANK OF OREGON,
and
SEATTLE-FIRST NATIONAL BANK,
as Banks,
and
SEATTLE-FIRST NATIONAL BANK
as Agent
__________________________
$85,000,000
__________________________
May 31, 1995
<PAGE>
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.01 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . .11
Section 2 REPRESENTATIONS & WARRANTIES . . . . . . . . . . . . . . . . .11
2.01 Incorporation, etc . . . . . . . . . . . . . . . . . . . . . .11
2.02 Qualification. . . . . . . . . . . . . . . . . . . . . . . . .11
2.03 Authorization. . . . . . . . . . . . . . . . . . . . . . . . .11
2.04 Delivery of Documents. . . . . . . . . . . . . . . . . . . . .11
2.05 Valid and Binding Obligations. . . . . . . . . . . . . . . . .11
2.06 Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
2.07 No Violation of Agreement or Law . . . . . . . . . . . . . . .12
2.08 Insolvency, etc. . . . . . . . . . . . . . . . . . . . . . . .12
2.09 Financial Information. . . . . . . . . . . . . . . . . . . . .12
2.10 Litigation; Adverse Facts. . . . . . . . . . . . . . . . . . .12
2.11 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . .13
2.12 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
2.13 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
2.14 Law Compliance . . . . . . . . . . . . . . . . . . . . . . . .14
2.15 Federal Reserve Regulations. . . . . . . . . . . . . . . . . .14
2.16 Title to Properties; Liens . . . . . . . . . . . . . . . . . .14
2.17 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . .14
2.18 Environmental and Safety Health Matters. . . . . . . . . . . .14
2.19 Continued Effectiveness: Reaffirmation. . . . . . . . . . . .15
Section 3 CONDITIONS PRECEDENT TO ADVANCES . . . . . . . . . . . . . . .15
3.01 Conditions Precedent to the Effective Date . . . . . . . . . .15
Section 4 REVOLVING AND OPERATING LINES OF CREDIT. . . . . . . . . . . .16
4.01 The Revolving Line Commitments . . . . . . . . . . . . . . . .16
4.02 The Operating Line Commitments . . . . . . . . . . . . . . . .17
4.03 Requesting Revolving and Operating Advances. . . . . . . . . .18
4.04 Funding Revolving and Operating Advances . . . . . . . . . . .18
4.05 Interest Options . . . . . . . . . . . . . . . . . . . . . . .19
4.06 Repayment Promise. . . . . . . . . . . . . . . . . . . . . . .19
4.07 Special BA Loan Provisions . . . . . . . . . . . . . . . . . .19
4.08 Agent's Fee. . . . . . . . . . . . . . . . . . . . . . . . . .20
4.09 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . .20
Section 5 U. S. BANK OVERNIGHT LINE OF CREDIT. . . . . . . . . . . . . .21
5.01 The Loans. . . . . . . . . . . . . . . . . . . . . . . . . . .21
5.02 Requesting Overnight Advances. . . . . . . . . . . . . . . . .21
5.03 Funding Overnight Advances; Reporting Requirements.21
5.04 Interest Options . . . . . . . . . . . . . . . . . . . . . . .22
5.05 Repayment Promise. . . . . . . . . . . . . . . . . . . . . . .22
5.06 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . .22
Section 6 PAYMENT PROVISIONS APPLICABLE TO ALL BANKS . . . . . . . . . .22
6.01 Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . .22
6.02 Additional Payment in the Event of Prepayment or Failure to
Borrow or Prepay . . . . . . . . . . . . . . . . . . . . . . .23
6.03 Change in Circumstances. . . . . . . . . . . . . . . . . . . .23
6.04 Increased Costs. . . . . . . . . . . . . . . . . . . . . . . .24
6.05 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . .25
6.06 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . .25
6.07 Authorized Officers. . . . . . . . . . . . . . . . . . . . . .25
6.08 Binding Requests . . . . . . . . . . . . . . . . . . . . . . .26
6.09 The Notes. . . . . . . . . . . . . . . . . . . . . . . . . . .26
6.10 Manner of Payments . . . . . . . . . . . . . . . . . . . . . .27
6.11 Application of Proceeds. . . . . . . . . . . . . . . . . . . .27
Section 7 BORROWER'S COVENANTS . . . . . . . . . . . . . . . . . . . . .31
7.01 Preservation of Corporate Existence, Etc.. . . . . . . . . . .31
7.02 Compliance with Laws . . . . . . . . . . . . . . . . . . . . .31
7.03 Other Obligations. . . . . . . . . . . . . . . . . . . . . . .31
7.04 Visitation; Records. . . . . . . . . . . . . . . . . . . . . .31
7.05 Financial Information. . . . . . . . . . . . . . . . . . . . .32
7.06 Notification . . . . . . . . . . . . . . . . . . . . . . . . .32
7.07 Additional Payments; Additional Acts . . . . . . . . . . . . .33
7.08 Working Capital. . . . . . . . . . . . . . . . . . . . . . . .33
7.09 Funded Debt. . . . . . . . . . . . . . . . . . . . . . . . . .33
7.10 Fixed Charge Coverage. . . . . . . . . . . . . . . . . . . . .34
7.11 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
7.12 Minimum Capital and Subordinated Debt. . . . . . . . . . . . .35
7.14 Liquidation, Merger, Sale of Assets, Etc.. . . . . . . . . . .35
7.15 Contingent Indebtedness. . . . . . . . . . . . . . . . . . . .36
7.16 Transactions with or by Affiliates . . . . . . . . . . . . . .36
7.17 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . .37
7.18 No Name Change, Etc. . . . . . . . . . . . . . . . . . . . . .37
7.19 Relocation of Offices. . . . . . . . . . . . . . . . . . . . .37
7.20 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . .37
7.21 Amendments to Private Placement; Prepayments of Private
Placement. . . . . . . . . . . . . . . . . . . . . . . . . . .37
7.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . .37
7.23 Maintenance of Property. . . . . . . . . . . . . . . . . . . .38
7.24 Insurance Company. . . . . . . . . . . . . . . . . . . . . . .38
Section 8 DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . .38
8.01 Payment Failure. . . . . . . . . . . . . . . . . . . . . . . .38
8.02 Performance Failure. . . . . . . . . . . . . . . . . . . . . .38
8.03 Misrepresentation. . . . . . . . . . . . . . . . . . . . . . .38
8.04 Judgments; Attachment. . . . . . . . . . . . . . . . . . . . .39
8.05 Government Action. . . . . . . . . . . . . . . . . . . . . . .39
8.06 Voluntary Bankruptcy . . . . . . . . . . . . . . . . . . . . .39
8.07 Involuntary Bankruptcy . . . . . . . . . . . . . . . . . . . .39
8.08 Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . .40
8.09 Change in Control. . . . . . . . . . . . . . . . . . . . . . .40
8.10 Validity Contest . . . . . . . . . . . . . . . . . . . . . . .40
8.11 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
8.12 Cross-Default. . . . . . . . . . . . . . . . . . . . . . . . .40
8.13 Insurance Claim. . . . . . . . . . . . . . . . . . . . . . . .40
Section 9 REMEDIES ON DEFAULT. . . . . . . . . . . . . . . . . . . . . .41
9.01 Termination. . . . . . . . . . . . . . . . . . . . . . . . . .41
9.02 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . .41
9.03 Specific Remedies. . . . . . . . . . . . . . . . . . . . . . .41
Section 10 AGENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
10.01 Appointment; Successor Agent . . . . . . . . . . . . . . . . .42
10.02 Immunities . . . . . . . . . . . . . . . . . . . . . . . . . .42
10.03 Reliance by Agent. . . . . . . . . . . . . . . . . . . . . . .43
10.04 Rights as a Lender . . . . . . . . . . . . . . . . . . . . . .43
10.05 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . .44
10.06 Indemnification. . . . . . . . . . . . . . . . . . . . . . . .44
10.07 Non-Reliance on Agent. . . . . . . . . . . . . . . . . . . . .44
10.08 Failure to Act . . . . . . . . . . . . . . . . . . . . . . . .45
10.09 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . .45
10.10 Satisfaction of Loans. . . . . . . . . . . . . . . . . . . . .45
10.11 Information. . . . . . . . . . . . . . . . . . . . . . . . . .45
Section 11 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . .45
11.01 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . .45
11.02 Successors and Assigns . . . . . . . . . . . . . . . . . . . .46
11.03 Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . .46
11.04 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .46
11.05 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . .46
11.06 Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . .46
11.07 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . .46
11.08 Complete and Final Agreement . . . . . . . . . . . . . . . . .46
11.09 Modifications, Consents and Waivers. . . . . . . . . . . . . .46
11.10 Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . .47
11.11 Governing Law; Jurisdiction; Attorney Fees . . . . . . . . . .47
11.12 Consent to Jurisdiction; Waiver of Immunities. . . . . . . . .47
11.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . .48
11.14 Other Debt . . . . . . . . . . . . . . . . . . . . . . . . . .48
11.15 Computation of Time Periods. . . . . . . . . . . . . . . . . .48
11.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .48
11.17 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Exhibit A Banker's Acceptance Agreement
Schedule 1 Confirmation
Exhibit B Officers Authorized to Request Advances
Exhibit C-1 Revolving Line Note (Seafirst)
C-2 Revolving Line Note (U. S. Bank)
Exhibit D-1 Operating Line Note (Seafirst)
D-2 Operating Line Note (U. S. Bank)
Exhibit E Overnight Line Note (U. S. Bank)
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated: As of May 31, 1995.
Among: UNITED GROCERS, INC., an Oregon corporation ("Borrower"), whose
address is 6433 S.E. Lake Road, P.O. Box 22187, Milwaukee,
Oregon 97222,
UNITED STATES NATIONAL BANK OF OREGON, a national banking
association ("U.S. Bank"), whose address is 321 S.W. Sixth
Avenue, P.O. Box 4412, Portland, Oregon 97208,
SEATTLE-FIRST NATIONAL BANK, a national banking association
("Seafirst"), whose address is 12th Floor, 701 Fifth
Avenue, P.O. Box 94010, Seattle, Washington 98124, and
SEATTLE-FIRST NATIONAL BANK, a national banking association, in
its capacity as agent for U.S. Bank and Seafirst ("Agent")
whose address is 16th Floor, 701 Fifth Avenue, Seattle,
Washington, 98104.
RECITALS
A. Borrower is primarily in the business of selling food
products and other miscellaneous items to its shareholder members who operate
retail grocery stores. Borrower requires various credit facilities for its
day to day business affairs and operations.
B. On July 31, 1991, Borrower, Banks, Security Pacific Bank
Oregon, and Agent entered into a Credit Agreement providing for a combined
Total Commitment of $80,000,000. From time to time thereafter, the parties
thereto amended the Credit Agreement with the last such amendment being
Amendment No. 10 to Credit agreement and Amendment to Revolving Line Notes and
Operating Line Notes executed by and between the parties hereto and dated as
of April 28, 1995. Such Credit Agreement as amended is hereinafter referred
to as the "Prior Credit Agreement."
C. As of April 20, 1993, the parties hereto and Bank of America
Oregon executed Amendment No. 4 to Credit Agreement. At that time, Bank of
America Oregon was the successor in interest to Security Pacific Bank Oregon.
As of May 28, 1993, all of the rights and obligations of Bank of America
Oregon were assigned to and assumed by Bank of America NT&SA, a national
banking association. As of January 28, 1994, the loans and other advances
made by Bank of America NT&SA were repaid in full and Bank of America NT&SA
was released from all further obligations under the Prior Credit Agreement.
D. The parties hereto now desire to amend and restate the Prior
Credit Agreement to extend the applicable Maturity Dates by one additional
year and to make certain other changes all as set forth below.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby amend
and restate the Prior Credit Agreement in its entirety as of the date hereof.
<PAGE>
Section 1
DEFINITIONS
1.01 Defined Terms. For purposes of this Agreement, the
following terms have the following meanings:
Acceptance Commission means an amount equal to the face amount
of a Banker's Acceptance multiplied by the Acceptance Commission Rate
multiplied by a fraction of which the numerator is the actual number of days
from creation of such Banker's Acceptance to its maturity and the denominator
is 360 (to reflect a computation on the basis of a 360-day year).
Acceptance Commission Rate means with respect to a Banker's
Acceptance, a rate per annum of seventy-five (75) basis points (three-fourths
of one percent).
Advance means any advance of funds by the Banks, or any of them
individually, to, or for the account of, Borrower pursuant to this Agreement,
and refers to any Revolving Advance (which may be a Seafirst Prime Loan or a
LIBOR Loan), any Operating Advance (which may be a Seafirst Prime Loan, a
LIBOR Loan or a BA Loan) and any Overnight Advance (which may be a U.S. Bank
Prime Loan or an Interim Loan).
Affiliate has the meaning set forth in Section 7.16.
Agent means Seattle-First National Bank and any successor Agent
selected in accordance with Section 10.01(b).
BA Loan means an Advance to which the BA Rate of interest is
applicable.
BA Rate means a rate of interest per annum (computed on the
basis of the actual number of days elapsed over a year of 360 days) equal to
the higher of (a) the rate per annum quoted by U.S. Bank on the date of the BA
Loan for discounting a Banker's Acceptance, or (b) the rate per annum quoted
by Seafirst on the date of the BA Loan for discounting a Banker's Acceptance.
Banker's Acceptance means an Eligible Draft (as defined in the
Banker's Acceptance Agreement), with a term not to exceed 92 days' sight,
drawn by Borrower and accepted by U.S. Bank or Seafirst pursuant to this
Agreement and the related Banker's Acceptance Agreement.
Banker's Acceptance Agreement means that certain Amended and
Restated Banker's Acceptance Agreement executed as of the date hereof
substantially in the form of Exhibit A attached hereto.
Banking Day means a day on which banks are not required or
authorized to close in Seattle, Washington or Portland, Oregon, and, if the
applicable Banking Day relates to any LIBOR Loans, in which dealings are
carried on in the London interbank market.
Banks means Seafirst and U.S. Bank and their respective
successors and assigns.
Code means the United States Internal Revenue Code of 1986.
Consolidated Net Tangible Assets has the meaning set forth in
Section 7.11.
Contingent Indebtedness has the meaning set forth in
Section 7.15.
Controlled Group means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
co=on control which, together with Borrower are treated as a single employer
under Section 414(b) or Section 414(c) of the Code.
Default means any of the events of default specified in
Section 8 of this Agreement.
Default Rate means the Interest Rate applicable to each
outstanding Advance from the time of a Default and which equals the Interest
Rate applicable to each outstanding Advance plus 200 basis points (2 percent).
ERISA means the Employee Retirement Income Security Act of
1974, as amended.
Fixed Charge Coverage has the meaning set forth in
Section 7.10.
Fixed Charges has the meaning set forth in Section 7.10.
Funded Debt has the meaning set forth in Section 7.09.
Government Approval means an approval, permit, license,
franchise, right, privilege, authorization, certificate, exemption or consent
of, or granted by, any Government Authority.
Government Authority means the government of the United States
of America, any state or any foreign country, or any political subdivision
thereof or any branch, department, agency,, instrumentality, court, tribunal,
or regulatory authority which constitutes a part or exercises any sovereign
power of any of the foregoing entities.
Incipient Default means an event or act which would, with the
passage of time and/or the giving of notice, constitute a Default.
Indebtedness means for any Person (including Borrower)
(a) all items which in accordance with generally accepted
accounting principles and practices would be included in determining
total liabilities, other than partners' equity, capital stock, surplus
or general contingency or deferred tax reserves, as shown on the
liability side of a consolidated balance sheet of such Person as of the
date the liabilities are determined,
(b) indebtedness secured by any Lien against the assets of the
Person or of any other Person directly or indirectly controlling,
controlled by, or under common control with the Person, whether or not
the indebtedness is assumed,
(c) any other indebtedness or liability for borrowed money or
for the deferred purchase price of property or services for which the
Person, or any other Person directly or indirectly controlling,
controlled by, or under common control with the Person, is directly
liable as obligor, guarantor, or otherwise, or with respect to which the
Person or such other Person otherwise assures a creditor against loss,
and
(d) any other indebtedness or liability of the Person or of
any other Person directly or indirectly controlling, controlled by, or
under common control with the Person, under leases which have been or
should be recorded as capital leases.
Interest Period means
(a) for a BA Loan, a period commencing on the date of the
Advance and expiring no more than 92 days thereafter as selected by
Borrower,
(b) for a LIBOR Loan which is a Revolving Advance, a period
commencing on the date of the Advance and expiring one (1), two (2),
three (3) or six (6) months later as selected by Borrower,
(c) for a LIBOR Loan which is an Operating Advance or an
Overnight Advance, a period commencing on the date of the Advance and
expiring one (1), two (2) or three (3) months later as selected by
Borrower,
(d) for a Prime Loan, a period commencing on the date of the
Advance and expiring on repayment thereof, and
(e) for an Interim Loan, a period commencing on the date of
the Advance and expiring one Banking Day later.
Notwithstanding the foregoing, Borrower may not select an Interest Period for
any Advance extending beyond the applicable Maturity Date.
Interest Rate means the interest rate (i.e., the BA Rate, the
LIBOR Rate, the Seafirst Prime Rate, the U.S. Bank Prime Rate, or the Interim
Rate) selected by Borrower to be applicable to an Advance for the Interest
Period selected by Borrower, and, in the case of amounts not paid when due,
the Default Rate. The Interest Rate shall be fixed for the entire Interest
Period for BA Loans, LIBOR Loans, and Interim Loans. In the event Borrower
does not select an Interest Rate and Interest Period prior to a Revolving
Advance or an Operating Advance, the Seafirst Prime Rate automatically shall
be the applicable Interest Rate. In the event Borrower does not select an
Interest Rate and Interest Period prior to an Overnight Advance, the U.S. Bank
Prime Rate automatically shall be the applicable Interest Rate.
Interim Loan means an Advance to which the Interim Rate is
applicable.
Interim Rate means, for the first day of any Interest Period,
an interest rate expressed as an interest rate per annum which is equal to the
rate of interest established from time to time by U.S. Bank as its "overnight
money market rate" effective as of 10:00 A.M. as of the first day of any
Interest Period for loans of a maturity and an amount similar to the indicated
Interim Loan, plus seventy-five (75) basis points (three-fourths of
one percent).
LIBOR Loan means an Advance to which the LIBOR Rate of interest
is applicable.
LIBOR Rate means a rate of interest per annum (computed on the
basis of the actual number of days elapsed over a year of 360 days) which is
seventy-five (75) basis points (three-fourths of one percent) in excess of the
Euro-dollar Rate in effect for the applicable Interest Period, as adjusted to
take into account from time to time the cost to maintain any reserves, special
deposit insurance or similar expenses if incurred as described in Section 6.04
of this Agreement.
The "Euro-dollar Rate" will be determined on the basis of the
offered rate for deposits in U.S. Dollars for the applicable Interest Period
commencing on the first day of such applicable Interest Period (the "Reset
Date") which appears on the display designated as the "LIBO" page on the
Reuter Monitor Money Rates Service (or such other page as may replace the LIBO
page on that service for the purpose of displaying London interbank offered
rates of major banks) as of 11:00 o'clock a.m., London time, for deposits in
amounts equal to the applicable Loan for the applicable Interest Period, on
the day that is two Banking Days preceding the Reset Date. If at least two
such offered rates appear on such Reuter's screen LIBO page, the Euro-dollar
Rate in respect of that Reset Date will be the arithmetic mean of such offered
rates. If fewer than two offered rates appear, the Euro-dollar Rate will be
determined on the basis of the rates at which deposits in U.S. Dollars are
offered by four major banks (selected by the Agent) in the London interbank
market at approximately 11:00 o'clock a.m., London time, on the day that is
two Banking Days preceding the Reset Date to prime banks in the London
interbank market for deposits in amounts equal to the applicable Loan for the
applicable Interest Period. The Agent will request the principal London
office of each of the four banks to provide a quotation of its rate. If at
least two such quotations are provided, the Euro-dollar Rate will be the
arithmetic mean of the quotations. If fewer than two quotations are provided
as requested, the Euro-dollar Rate in respect of that Reset Date will be the
arithmetic mean of the rates quoted by major banks in New York City (selected
by the Agent) at approximately 11:00 o'clock a.m., New York City time, on that
Reset Date for loans in U.S. Dollars in an amount equal to the applicable Loan
to leading banks in Europe for the applicable Interest Period.
Lien means, for any Person, any security interest, pledge,
mortgage, trust deed, charge, assignment, hypothecation, encumbrance,
attachment, garnishment, execution, or other voluntary or involuntary lien
upon or affecting the revenues of that Person or any real or personal property
in which that Person has, or hereafter acquires, an interest.
Loan Documents means this Agreement, the Notes, the Banker's
Acceptance Agreement and the drafts provided for therein, the corporate
certificates and resolutions of Borrower required hereunder, and any other
documents that the Banks may reasonably require to evidence the credit
facilities herein provided for.
Loans means all BA Loans, Interim Loans, LIBOR Loans, and Prime
Loans made under this Agreement.
Margin Stock has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as in
effect from time to time.
Maturity Date means the following:
(i) with respect to the Overnight Loans, April 30, 1996,
(ii) with respect to the Operating Loans, April 30, 1996, and
(iii) with respect to the Revolving Loans, April 30,
1997.
Members' Equity has the meaning set forth in Subsection 7.09.
Notes means the Revolving Line Notes, the Operating Line Notes
and the Overnight Line Note, together with all amendments, modifications and
renewals thereof.
Occupational Safety and Health Law means the Occupational
Safety and Health Act of 1970 and any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating
to or imposing liability or standards of conduct concerning employee health
and/or safety.
Operating Advance has the meaning set forth in Section 4.02.
Operating Line Commitment has the meaning set forth in Section 4.02.
Operating Line Notes has the meaning set forth in Section 6.09.
Operating Line of Credit means the operating line of credit
provided pursuant to Section 4.02.
Operating Loan means a Loan made pursuant to Section 4.02.
Overnight Advance has the meaning set forth in Section 5.01.
Overnight Line Commitment has the meaning set forth in
Section 5.01.
Overnight Line Note has the meaning set forth in Section 6.09.
Overnight Line of Credit means the overnight line of credit
provided pursuant to Section 5.01.
Overnight Loan means a Loan made pursuant to Section 5.01.
PBGC means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
Person means an individual, corporation, partnership, trust,
unincorporated association, or a Government Authority.
Plan shall mean, at any time, an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (i) maintained by
Borrower or any member of a Controlled Group for employees of Borrower or any
member of such Controlled Group or (ii) maintained pursuant to a collective
bargaining agreement or other arrangement under which more than one employer
makes contributions and to which Borrower or any member of a Controlled Group
is then making or accruing an obligation to make contributions or has within
the preceding five plan years made contributions.
Portfolio Loss Factor has the meaning set forth in
Section 7.15.
Prime Loan means a Seafirst Prime Loan or a U.S. Bank Prime
Loan.
Private Placement Agreement means any agreement currently
existing or hereafter entered into by Borrower for the private placement of
debt securities issued by Borrower.
Requirement of Law means, with respect to any Person, the
articles or certificate of incorporation and bylaws or other organizational or
governing documents of such Person, and any law, treaty, rule, order,
restriction, directive, judgment, decree, injunction, writ, regulation, or a
final and binding determination of an arbitrator or a determination of any
Government Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
Requisite Banks means Banks having at least 66 2/3% of the
Total Commitment.
Revolving Advance has the meaning set forth in Section 4.01.
Revolving Line Commitment has the meaning set forth in
Section 4.01.
Revolving Line Notes has the meaning set forth in Section 6.09.
Revolving Line of Credit means the revolving line of credit
provided pursuant to Section 4.01.
Revolving Loan means a Loan made pursuant to Section 4.01.
Risk Based Capital Rules means any rules or regulations adopted
pursuant to the report entitled "International Convergence of Capital
Measurement and Capital Standards" issued by the Basle Committee on Banking
Regulations and Supervisory Practices, including without limitation, changes
to Regulation H and Regulation Y of the Board of Governors of the Federal
Reserve System issued by such Board on January 19, 1989, and regulations of
the Office of the Comptroller of the Currency, 12 CFR Part 3, Appendix A,
issued by such Office on February 3, 1989, and any succeeding rule or
regulation.
Seafirst Prime Loan means a Prime Loan bearing interest at the
Seafirst Prime Rate.
Seafirst Prime Rate means a rate of interest per annum
(computed on the basis of the actual number of days elapsed over a year of 360
days) which is equal to the rate of interest advertised and published from
time to time by Seafirst as its "prime rate of interest." This published rate
of interest is not necessarily the lowest or best rate of interest made
available by Seafirst to its most creditworthy customers and no
representation, express or implied, is made with respect thereto. The
Seafirst Prime Rate will fluctuate contemporaneously with, and to the full
extent of, any change in Seafirst's published prime rate of interest.
Subordinated Debt has the meaning set forth in Subsection 7.09.
Taxes means any taxes, assessments, duties, levies or other
charges or impositions of any Government Authority on a Person or its assets,
income or franchises, and any interest or penalty related thereto.
Total Capitalization has the meaning set forth in Section 7.09.
Total Commitments means the sum of the Total Operating Line
Commitment, the Overnight Line Commitment and the Total Revolving Line
Commitment and is equal to Eighty-five Million Dollars ($85,000,000).
Total Operating Line Commitment means the sum of the Operating
Line Commitments of both Banks and is equal to Thirtyseven Million Five
Hundred Thousand Dollars ($37,500,000).
Total Revolving Line Commitment means the sum of the Revolving
Line Commitment of both Banks and is equal to Thirtyseven Million Five Hundred
Thousand Dollars ($37,500,000).
UCC means the Uniform Commercial Code as adopted and in effect
in Washington.
Unfunded Vested Liability shall mean, with respect to any Plan,
at any time, the amount (if any) by which (a) the present value of all vested
non-forfeitable benefits under such Plan exceeds (b) the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent evaluation date for such Plan, but only to the extent that such excess
represents a potential liability of Borrower or any member of the Controlled
Group to the PBGC of the Plan under Title IV of ERISA.
U.S. Bank Prime Loan means a Prime Loan bearing interest at
the U.S. Bank Prime Rate.
U.S. Bank Prime Rate means a rate of interest per annum
(computed on the basis of the actual number of days elapsed over a year of 360
days) which is equal to the rate of interest advertised and published from
time to time by U.S. Bank as its "prime rate of interest." This published
rate of interest is not necessarily the lowest or best rate of interest made
available by U.S. Bank to its most creditworthy customers and no
representation, express or implied, is made with respect thereto. The U.S.
Bank prime rate will fluctuate contemporaneously with, and to the full extent
of, any change in U.S. Bank's published prime rate of interest.
1.02 Accounting Terms. Accounting terms not specifically
defined shall be construed, and all accounting procedures performed, in
accordance with generally accepted accounting principles and practices
consistently applied.
SECTION 2
REPRESENTATIONS & WARRANTIES
Borrower makes the following representations and warranties to
induce the Banks to enter into this Agreement and to provide the credit
facilities herein provided:
2.01 Incorporation, etc. Borrower is a duly incorporated
and organized Oregon corporation in good standing. Borrower has the lawful
power and authority to own and lease its assets, to engage in the business and
affairs it now conducts and to execute, deliver and perform its obligations in
accordance with this Agreement.
2.02 Qualification. Borrower is duly qualified and in good
standing as a foreign corporation in any and all jurisdictions, domestic or
foreign, where the ownership or leasing of assets or the nature of its
business and affairs makes such qualification necessary, except where the
failure to be so qualified will not have a material adverse impact on the
business, affairs or assets of Borrower.
2.03 Authorization. Borrower has been duly authorized by
its board of directors, and, if necessary under its bylaws or applicable law,
by its shareholders to enter into this Agreement, to execute and deliver the
Notes and the other Loan Documents, to make these representations and
warranties and to pay and perform its debts and obligations to the Banks in
accordance with the terms and conditions of this Agreement, the Notes, and the
other Loan Documents.
2.04 Delivery of Documents. Borrower will execute and
deliver the Notes and the other Loan Documents herein required promptly when
required to do so by this Agreement.
2.05 Valid and Binding Obligations. This Agreement is, and
the Notes and all other Loan Documents, when executed and delivered to the
Banks, will be the valid and binding obligations of Borrower enforceable in
accordance with their respective terms except as the same may be limited by
bankruptcy, insolvency, reorganization or similar laws or general principles
of equity affecting creditors' rights generally.
2.06 Consent. No consent or approval of any trustee or
holder of any Indebtedness or obligation of Borrower and no Government
Approval will be necessary in connection with the execution, delivery or
performance by Borrower of this Agreement, the Notes, and the other Loan
Documents or its obligations thereunder.
2.07 No Violation of Agreement or Law. Neither the
execution, delivery or performance of this Agreement, the Notes, and the other
Loan Documents nor the repayment of Advances pursuant to this Agreement, the
Notes, and the other Loan Documents will be a default or an act which but for
the passage of time or the giving of notice, or both would be a default under
any other agreement to which Borrower is a party or may be bound, or will
constitute a violation of any Requirement of Law that may materially affect
Borrower or its business and affairs.
2.08 Insolvency, etc. Borrower is not insolvent or the
subject of any receivership, reorganization or liquidation under any federal
or state law.
2.09 Financial Information. The financial statements and
other information previously provided by Borrower to the Banks (or any one of
them) with respect to Borrower are true, complete and correct in all material
respects, accurately state the financial condition of Borrower as of the dates
thereof and no material adverse change has occurred in the financial condition
or business prospects of Borrower since preparation of Borrower's December 30,
1994, financial statement that could or may adversely affect the ability of
Borrower to repay its debts to the Banks, or that could or may adversely
affect Borrower's ability to perform its other obligations as stated in this
Agreement, the Notes, and the other Loan Documents.
2.10 Litigation; Adverse Facts. There is no action, suit,
proceeding or arbitration (whether or not purportedly on behalf of Borrower)
at law or in equity or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, pending or, to the knowledge of Borrower, threatened
against or affecting Borrower or its properties which would materially
adversely affect Borrower's ability to perform its obligations under this
Agreement, the Notes, and other Loan Documents, and there is no basis known to
Borrower for any action, suit or proceeding. To its knowledge and belief
Borrower is not (i) in violation of any applicable Requirement of Law which
materially adversely affects or may materially adversely affect the ability of
Borrower to perform its obligations hereunder, or (ii) subject to or in
default with respect to any final judgment, writ, injunction, decree, rule or
regulation of any Government Authority, which would materially and adversely
affect the ability of Borrower to perform its obligations hereunder. There is
no action, suit, proceeding or investigation pending or, to the knowledge of
Borrower, threatened against or affecting Borrower which would affect the
validity or the enforceability of this Agreement, the Notes or the other Loan
Documents.
2.11 Indebtedness. Borrower is not now in default in the
payment of principal or interest of any Indebtedness of Borrower the aggregate
amount of which exceeds $1,000,000.
2.12 Taxes. Borrower has filed all tax returns required by
law to be filed and has paid all Taxes due from Borrower except those not yet
due and those being or about to be contested in good faith by appropriate
means and with adequate reserves for payment having been established.
2.13 ERISA.
(a) Vested Benefits. The present value of all benefits
vested under all Plans did not, as of the most recent valuation date of such
Plans, exceed the value of the assets of the Plans allocable to such vested
benefits by an amount which would represent a potential material liability of
Borrower and its consolidated subsidiaries or affect materially the ability of
Borrower to perform this Agreement, the Notes and the other Loan Documents.
(b) Prohibited Transactions. To the best of Borrower's
knowledge, no plan or trust created thereunder, or any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as such term
is defined in Section406 or Section2003(a) of ERISA) which could subject such
Plan or any other Plan, any trust created thereunder, or any trustee or
administrator thereof, or any party dealing with any Plan or any such trust to
the tax or penalty on prohibited transactions imposed by Section502 or
Section2003(a) of ERISA.
(c) Reportable Events. There have been no "reportable
events" (as that term is defined in Section4043 of ERISA) whether or not
waived, since the effective date of ERISA.
(d) Funding Deficiency. No Plan or trust created
thereunder has incurred any "accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA) whether or not waived, since the effective
date of ERISA.
(e) Violation of Code. The required allocations and
contributions of all Plans will not violate Section 415 of the Code.
2.14 Law Compliance. Borrower is in compliance with all
applicable federal and state laws (including federal and state anti-trust laws
and laws relating to the environment and to the safety of the workplace) the
noncompliance with which could singly or in the aggregate have a material
adverse impact on the business, affairs, assets, financial condition or
business prospects of Borrower.
2.15 Federal Reserve Regulations. Borrower is not engaged
principally or as one of its important activities in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock (within the
meaning of Federal Reserve Regulation U), and no part of the proceeds of any
Advance will be used to purchase or carry any Margin Stock or to extend credit
to others for the purpose of purchasing or carrying any Margin Stock.
2.16 Title to Properties; Liens. Borrower has good,
sufficient and legal title to all the properties and assets reflected in its
audited consolidated balance sheet dated as of December 30, 1994, except for
assets acquired or disposed of in the ordinary course of business since the
date of such audited consolidated balance sheet. Except as permitted
hereunder, all such properties and assets are free and clear of Liens.
2.17 Disclosure. No representation or warranty of Borrower
contained in this Agreement or any other document, certificate or written
statement furnished to the Banks by or on behalf of Borrower for use in
connection with the transactions contemplated by this Agreement contains any
untrue statement of a material fact or omits to state a material fact (known
to Borrower in the case of any document not furnished by it) necessary in
order to make the statements contained herein or therein not misleading.
There is no fact known to Borrower (other than matters of a general economic
nature) which materially adversely affects the business, operations, property,
assets or condition (financial or otherwise) of Borrower, taken as a whole,
which has not been disclosed herein or pursuant hereto or in such other
documents, certificates and statements furnished to the Banks for use in
connection with the transactions contemplated hereby.
2.18 Environmental and Safety Health Matters. To the best
knowledge of Borrower, Borrower is in compliance with all environmental laws
and Occupational Safety and Health Laws where failure to comply could have a
material adverse effect on the ability of Borrower to perform its obligations
hereunder. Borrower has not received notice of any claims that it is not in
compliance in all material respects with the environmental laws where failure
to comply could have a material adverse effect on the ability of Borrower to
perform its obligations hereunder.
2.19 Continued Effectiveness: Reaffirmation. The foregoing
representations and warranties are now true in all material respects and,
except as herein provided, will continue to be true in all material respects
until all Indebtedness and obligations of Borrower to the Banks are fully paid
and discharged. Borrower further represents and warrants to Agent and each
Bank that as of the date of this Agreement all representations and warranties
made or deemed made pursuant to the Prior Credit Agreement were true and
correct on and as of each date when made or deemed made thereunder and that as
of the moment immediately prior to this Agreement becoming effective, there
was no Default or Incipient Default (as such words were defined in the Prior
Credit Agreement) which had occurred and was continuing under the Prior Credit
Agreement. Each time Borrower requests an Advance and each time Borrower
accepts an Advance hereunder, Borrower shall be deemed to have reaffirmed the
accuracy and completeness of the foregoing representations and warranties, and
with respect to any BA Loans, the representations and warranties contained in
the Banker's Acceptance Agreement, and Borrower shall be deemed to have
certified that Borrower is in every respect in compliance with this Agreement,
the Notes and the other Loan Documents, and that there then exists no Default
or Incipient Default.
SECTION 3
CONDITIONS PRECEDENT TO ADVANCES
3.01 Conditions Precedent to the Effective Date. The
obligation of any Bank to make any Advance is subject to fulfillment of the
following conditions:
(a) Delivery of Loan Documents. Borrower has executed and
delivered all Loan Documents, including such certificates of good standing and
duly adopted director resolutions as the Banks may reasonably require to
establish to the Banks' reasonable satisfaction the corporate organization,
qualification and authority of Borrower to enter into, and to pay and perform
its Indebtedness and obligations to the Banks as stated in this Agreement.
(b) Legal opinion. Counsel to Borrower reasonably
acceptable to the Banks has rendered a written opinion to the Banks that (i)
Borrower is a duly organized Oregon corporation in good standing in Oregon and
duly qualified and in good standing as a foreign corporation in Washington and
California, (ii) Borrower has been duly authorized to execute and deliver this
Agreement, the Notes, the Banker's Acceptance Agreement, and the other Loan
Documents, and to pay and perform its Indebtedness and obligations as stated
therein, and (iii) this Agreement, the Notes, the Banker's Acceptance
Agreement, and the other Loan Documents, which shall be listed in the opinion,
are the valid and binding obligations of Borrower enforceable in accordance
with their respective terms except as the same may be limited by bankruptcy,
insolvency, reorganization or similar laws or general principles of equity
affecting creditors' rights generally.
(c) Defaults, Etc. At the date of such Advance no Default
or Incipient Default shall have occurred and be continuing or will have
occurred as a result of the making of such Advance and the representations and
warranties set forth in Section 2 shall be true on and as of such date with
the same force and effect as if made on and as of such date. On the request
of Agent, Borrower shall, through a duly authorized officer, provide a
certificate to evidence compliance with this condition.
(d) Prior to Maturity Date. Each Advance is requested
prior to the applicable Maturity Date.
(e) Other Information. Banks shall have received such
other statements, opinions, certificates, documents and information with
respect to the matters contemplated by this Agreement as any Bank may
reasonably request.
<PAGE>
SECTION 4
REVOLVING AND OPERATING LINES OF CREDIT
4.01 The Revolving Line Commitments. Subject to the prior
satisfaction of the conditions set forth in Section 3, each Bank severally
agrees on the terms and conditions of this Agreement to make Advances (the
"Revolving Advances") in the principal amount equal to such Bank's
applicable percentage of the Total Revolving Line Commitment set forth below
(such Bank's "Revolving Line Commitment") available to Borrower from time to
time on any Banking Day during the period beginning on the date hereof and
ending on the earlier of the applicable Maturity Date or the termination of
the Commitment pursuant to Section 9.01 (the "Revolving Line Commitment
Period").
Percentage
Lender Interest
Seattle-First
National Bank 50%
U.S. National Bank
of Oregon 50%
As this Commitment is for a revolving line of credit, Borrower may
receive Advances, repay them, and receive additional Advances at all times
until the applicable Maturity Date as long as the aggregate of the Revolving
Advances outstanding at any one time from the Banks does not exceed the Total
Revolving Line Commitment and no Default or Incipient Default shall have
occurred. All Revolving Advances shall be made by the Banks through the
Agent, pro rata, in the same proportion that the Banks' respective Revolving
Line Commitments bear to the Total Revolving Line Commitment, and all
repayments shall be made through the Agent in accordance with Section 6.11. In
no event shall any Bank be required to have aggregate Revolving Advances
outstanding at any one time in excess of its Revolving Line Commitment.
4.02 The Operating Line Commitments. Subject to the prior
satisfaction of the conditions set forth in Section 3, each Bank severally
agrees on the terms and conditions of this Agreement to make Advances (the
"Operating Advances") in the principal amount to such Bank's
applicable percentage of the Total Operating Line Commitment set forth below
(such Bank's "Operating Line Commitment") available to Borrower from time to
time on any Banking Day during the period beginning on the date hereof and
ending on the earlier of the applicable Maturity Date or the termination of
the Commitment pursuant to Section 9.01 (the "Operating Line Commitment
Period").
Percentage
Lender Interest
Seattle-First
National Bank 50%
U.S. National Bank
of Oregon 50%
As this Commitment is for a revolving line of credit, Borrower may
receive Advances, repay them, and receive additional Advances at all times
until the applicable Maturity Date as long as the aggregate of the Operating
Advances outstanding at any one time from the Banks does not exceed the Total
Operating Line Commitment, and no Default or Incipient Default shall have
occurred. All Operating Advances shall be made by the Banks through the
Agent, pro rata, in the same proportion that the Banks' respective Operating
Line Commitments bear to the Total Operating Line Commitment, and all
repayments shall be made through the Agent in accordance with Section 6.11. In
no event shall any Bank be required to have aggregate Operating Advances
outstanding at any one time in excess of its Operating Line Commitment.
4.03 Requesting Revolving and Operating Advances. Borrower shall
request each Revolving and Operating Advance either orally, telephonically, or
in writing. Each request for an Advance must be made by a duly authorized
officer or employee, must specify the date, amount, Interest Rate and Interest
Period selected by Borrower to apply thereto, and must be received by Agent at
Seafirst Agency Services, 16th Floor, 701 Fifth Avenue, Seattle, Washington,
98104 not later than 10:00 a.m., Seattle time, on the Banking Day of a Prime
Loan, not later than 10:00 a.m. three Banking Days before a LIBOR Loan, and
not later than 9:00 a.m. on the Banking Day of a BA Loan. Written
confirmation of all oral and telephonic requests for a BA Loan must be
confirmed in writing no later than 11:00 a.m. on the date of the request.
Each Revolving Advance shall be in the minimum amount of $1,000,000 and
increments of $100,000, and each Operating Advance shall be in the minimum
amount of $1,000,000 and increments of $100,000; provided, however, that Prime
Loans may be in any amount specified by Borrower so long as the applicable
maximum Revolving Line or Operating Line Commitment is not exceeded and
provided further that each Advance under a BA Loan shall be in increments of
$1,000,000. Borrower may request Revolving and Operating Advances to repay
outstanding Revolving and Operating Advances at the end of the applicable
Interest Period of the Advance to be repaid.
4.04 Funding Revolving and Operating Advances. Upon receiving a
request from Borrower for a Revolving or Operating Advance, Agent shall
promptly notify the Banks by telephone that the request has been received and
thereafter confirm the same by telecopy. Except as otherwise provided in
Section 4.07 with respect to BA Loans, the Banks promise to make their pro
rata share of each Advance in the same proportion that their Revolving Line
and Operating Line Commitments bear to the Total Revolving Line Commitment or
Total Operating Line Commitment, as applicable, available to Agent, no later
than noon, Seattle time, on the Advance date proposed by Borrower, and Agent
shall immediately thereafter make the entire Advance available to Borrower by
wiring the Advance to Borrower's general checking account to be maintained at
the Main Branch of U.S. Bank in Portland, Oregon, or at such other place as
may be designated by Borrower in writing.
4.05 Interest Options.
(a) Revolving Advances shall be made to Borrower under one of
the following optional interest rates: Seafirst Prime Rate or the LIBOR Rate.
(b) Operating Advances shall be made to Borrower under one of
the following optional interest rates: Seafirst Prime Rate, LIBOR Rate, or the
BA Rate.
4.06 Repayment Promise. Borrower hereby promises to pay to the
order of each Bank, through the Agent, at the address stated above in the
Recitals, or at such other address as Agent may hereafter designate in writing
to Borrower, (a) an amount equal to the principal amount of all Revolving and
Operating Advances at the end of the applicable Interest Period and in no
event later than the applicable Maturity Date, (b) interest on the outstanding
balance of all Seafirst Prime Loans at the Seafirst Prime Rate monthly in
arrears on the first day of each and every calendar month and in no event
later than the applicable Maturity Date, (c) interest on the outstanding
balances of all LIBOR Loans at the applicable LIBOR Rates on the expiration of
any Interest Period, or in the case of an Interest Period of six (6) months
for LIBOR Loans that are Revolving Advances, each three (3) month anniversary
of the commencement of that Interest Period, or at the applicable Maturity
Date, whichever occurs first, (d) interest on the outstanding balances of any
Loan, Advance or portion of either that shall not be paid when due hereunder
at a rate of interest equal to the Default Rate from the first day following
the date such payment shall have become due until paid, (e) all amounts owing
with respect to BA Loans in accordance with Section 4,07, (f) all fees and
additional amounts payable to the Banks hereunder, and (g) the amount of any
Revolving or Operating Advances to the extent necessary to cause the
outstanding Revolving and Operating Advances to be no greater than the
applicable limitations set forth in Sections 4.01 and 4.02. This promise of
payment will be further evidenced by the Revolving Line Notes and the
Operating Line Notes.
4.07 Special BA Loan Provisions. All BA Loans shall be evidenced
by Banker's Acceptances created by the Banks in equal amounts. With respect
to each Banker's Acceptance, Borrower agrees to pay the accepting Bank an
Acceptance Commission and to reimburse said Bank for expenses incurred by said
Bank including, but not limited, to wire charges, courier charges, and
postage. The Acceptance Commission and expenses shall be collected at the
time the net proceeds of each Banker's Acceptance are made available to
Borrower. The net proceeds of a Banker's Acceptance shall be the face amount
of the Banker's Acceptance minus the applicable Discount and minus the
Acceptance Commission. The Banks shall make the net proceeds of their
respective Banker's Acceptances available to Borrower by transferring or
wiring them to Borrower's general checking account at the Main Branch of U.S.
Bank in Portland or such other account as may be designated in writing by
Borrower. On the last day of the Interest Period of each BA Loan or on the
applicable Maturity Date, whichever first occurs, Borrower shall pay Agent, an
amount equal to the aggregate face amount of the Banker's Acceptances
comprising such BA Loan, to be applied in equal amounts to the applicable
Banker's Acceptances. In the event Borrower does not pay the amount due with
respect to any BA Loan when due, Borrower shall be deemed to have made a
request to Agent for a Seafirst Prime Loan in an amount equal to such amount
due, and subject to the prior satisfaction of the conditions set forth in
Section 3, each of the Banks shall make such Prime Loan pro rata in the same
proportion that its Operating Line Commitment bears to the Total Operating
Line Commitment, the proceeds of which shall be applied by Agent to repay such
BA Loan. All BA Loans shall be further subject to the terms and conditions of
the Banker's Acceptance Agreement.
4.08 Agent's Fee. Borrower promises to pay to Agent an agent's
fee as agreed in writing between Agent and Borrower, in advance, throughout
the term of this Agreement payable upon execution of this Agreement and upon
each anniversary thereof.
4.09 Commitment Fee. Borrower promises to pay Agent, for the
benefit of the Banks, quarterly in arrears on the first Banking Day of each
calendar quarter a commitment fee equal to
(a) 25 basis points (one-quarter of one percent) per annum
times the average daily unused portion of the Total Revolving Line Commitment
during the immediately preceding calendar quarter, and
(b) 25 basis points (one-quarter of one percent per annum
times the average daily unused portion of the Total Operating Line Commitment
during the immediately preceding calendar quarter.
Upon 60 days' advance written notice by Borrower to all of the Banks,
Borrower may reduce the maximum amount of the Total Revolving Line Commitment
and/or the Total Operating Line Commitment, provided, that after giving effect
to such reduction, the aggregate principal amount of the outstanding
applicable Loans does not exceed the applicable Commitment then in effect.
Any such reduction shall be in an amount not less than an amount equal to the
lesser of (a) One Million Dollars ($1,000,000), and (b) the applicable
Commitment then in effect, and shall permanently reduce each Bank's Revolving
Line Commitment or Operating Line Commitment, as applicable, in the same
proportion that such Bank's Revolving Line Commitment or Operating Line
Commitment bears to the Total Revolving Line Commitment or Total Operating
Line Commitment, as applicable.
SECTION 5
U.S. BANK OVERNIGHT LINE OF CREDIT
5.01 The Loans. U.S. Bank agrees on the terms and conditions of
this Agreement to make Advances (the "Overnight Advances") of up to
$10,000,000 (the "Overnight Line Commitment") available to Borrower from time
to time on any Banking Day during the period beginning on the date hereof and
ending on the earlier of the applicable Maturity Date or the termination of
the Commitment pursuant to Section 9.01 (the "Overnight Line Commitment
Period"). As this Commitment is for a revolving line of credit, Borrower may
receive Advances, repay them and receive additional Advances at all times
until the applicable Maturity Date as long as the aggregate of the Overnight
Advances outstanding at any one time from U.S. Bank does not exceed
$10,000,000, and no Default or Incipient Default has occurred. All Overnight
Advances and repayments shall be made by and to U.S. Bank in accordance with
Section 6.11. In no event shall U.S. Bank be required to have aggregate
Overnight Advances outstanding at any one time in excess of the Overnight Line
Commitment.
5.02 Requesting Overnight Advances. Borrower shall request each
Overnight Advance orally, telephonically, or in writing. Each request for an
Advance must be made by a duly authorized officer or employee, must specify
the date, amount, Interest Rate and Interest Period selected by Borrower to
apply thereto, and must be received by U.S. Bank not later than 10:00 a.m.
Portland time on the Banking Day of the requested loan. Each Advance under
Section 5 shall be in the minimum amount of $100,000 provided, however, that
Prime Advances may be in any amount specified by Borrower so long as the
Overnight Line Commitment is not thereby exceeded. Borrower may request
Overnight Advances to repay outstanding Overnight Advances at the end of the
applicable Interest Period of the Advance to be repaid.
5.03 Funding Overnight Advances; Reporting
Requirements. Upon receiving a request from Borrower for an Overnight
Advance, U.S. Bank shall make the Advance available to Borrower by wiring the
Advance to Borrower's general checking account at the Main Branch of U.S. Bank
in Portland, Oregon, or at such other place as may be designated by Borrower
in writing. U.S. Bank shall provide Seafirst promptly upon request information
with respect to Overnight Advances made to Borrower, including without
limitation information regarding date, amount, Interest Rate, Interest Period,
and payments made by Borrower with respect to such Advances.
5.04 Interest Options. Overnight Advances shall be made to
Borrower under one of the following optional interest rates: U.S. Bank Prime
Rate or Interim Rate.
5.05 Repayment Promise. Borrower hereby promises to pay to U.S.
Bank's order, at the address stated above, or such other address as U.S. Bank
may hereafter designate in writing to Borrower, (a) an amount equal to the
principal amount of all Overnight Advances at the end of the applicable
Interest Period and in no event later than the applicable Maturity Date, (b)
interest on the outstanding balance of all U.S. Bank Prime Loans at the U.S.
Bank Prime Rate monthly on the first day of each and every calendar month and
in no event later than the applicable Maturity Date, (c) interest on the
outstanding balances of all Interim Loans at the Interim Rate at the end of
the applicable Interest Period and in no event later than the applicable
Maturity Date, (d) interest on the outstanding balances of any Loan, Advance
or portion of either that shall not be paid when due hereunder at a rate of
interest equal to the Default Rate from the first day following the date such
payment shall have become due until paid, (e) all fees and additional amounts
payable to U.S. Bank hereunder, and (f) the amount of any Overnight Advances
to the extent necessary to cause the outstanding Overnight Advances to be no
greater than the applicable limitations set forth in Section 5.01. This
promise of payment will be further evidenced by the Overnight Line Note.
5.06 Commitment Fee. Borrower promises to pay U.S. Bank
quarterly in arrears on the first Banking Day of each calendar quarter a
commitment fee equal to 25 basis points (one-quarter of one percent) per annum
times the average daily unused portion of the Overnight Line Commitment during
the immediately preceding calendar quarter. Upon 60 days advance written
notice by Borrower to Agent and the Banks, Borrower may permanently reduce the
amount of the Overnight Line of Credit.
SECTION 6
PAYMENT PROVISIONS APPLICABLE TO ALL BANKS
6.01 Prepayments. Any Prime Loan may be prepaid in whole or in
part at any time. Borrower may not prepay a BA Loan or an Interim Loan. Any
LIBOR Loan may be prepaid in full at any time on the number of Banking Days
notice provided in Section 4.03 and 5.02 for requesting Advances with respect
to such Loan, provided, that prepayment on a date other than the final day of
the Interest Period shall be subject to payment of compensation as set out in
Section 6.02. The notice of such prepayment shall specify the Loan to be
prepaid, the date and amount of prepayment, and the applicable Interest Rate
and Interest Period relating to such Loan. Any prepayment shall be
accompanied by all interest accrued thereon to the date of such prepayment.
6.02 Additional Payment in the Event of Prepayment or Failure to
Borrow or Prepay. Borrower agrees, upon demand by any Bank (which demand
shall be accompanied by a statement setting forth the basis for the
calculations of the amount being claimed) to pay such Bank such additional
amount as may be necessary to compensate the Bank for any loss or additional
expense which such Bank may sustain or incur (including, without limitation,
any loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Bank to fund or maintain, LIBOR Loans
or Interim Loans and any loss of the Bank's margin) as reasonably determined
by the Bank, as a result of:
(a) any payment or prepayment of any LIBOR Loan or Interim
Loan on a date other than the last day of the Interest Period for such Loan;
or
(b) any failure of Borrower to borrow any LIBOR Loan or
Interim Loan on a date specified in a request made therefor pursuant to
Sections 4.03 or 5.02.
For purposes of the foregoing clause (a), the payment required hereunder
shall apply in all circumstances where a Loan is paid prior to the end of the
Interest Period, regardless of whether such payment is voluntary, required in
order to cause outstanding Advances to be no greater than the applicable
Commitments, or the result of the Agent's or either Bank's collection efforts
or the acceleration of such Loans.
6.03 Change in Circumstances. The Banks have provided Borrower
the prerogative of choosing Interest Rates other than the Seafirst Prime Rate
or the U.S. Bank Prime Rate based on current legal and economic circumstances.
However, if there is a future change in circumstances beyond the control of
the Banks, either by reason of market conditions or applicable law, rule,
regulation or interpretation by Government Authority or central bank, whether
or not it has the force of law, which makes unlawful, impossible or
impractical for any Bank to continue to offer to its customers one or more of
such Interest Rates and any Bank in fact no longer offers such Interest Rates
to its customers, then the Interest Rate so affected shall immediately become
unavailable hereunder, the Loan or Loans to which such Interest Rate is
applicable will be considered prepaid as of the date of such illegality,
impossibility or impracticality, and Borrower shall select a new Interest Rate
and Interest Period to be applicable. If no selection is made within three
Banking Days following notice by any Bank to Borrower of such illegality,
impossibility or impracticality and the unavailability of the affected
Interest Rate, the Seafirst Prime Rate shall be applicable.
6.04 Increased Costs. If any Bank determines that either (i) any
Requirement of Law or the introduction of or any change in any Requirement of
Law or in the interpretation or administration thereof by any Government
Authority charged with the interpretation or administration thereof from the
date hereof or (ii) compliance with any guideline or request from any such
Government Authority (whether or not having the force of law) has or would
have the effect of reducing the rate of return on the capital of such Bank or
any corporation controlling such Bank as a consequence of or with reference to
this Agreement or the making of Loans or the advance by such Bank of any other
sums hereunder, below the rate which the Bank or such other corporation could
have achieved but for the introduction, change or compliance (taking into
account the policies of the Bank or corporation with regard to capital), then
Borrower shall from time to time, upon demand by such Bank, pay to the Bank
within five (5) Banking Days after the date specified in such notice and
demand, additional amounts sufficient to compensate the Bank or other
corporation for such reduction, together with interest on each such amount
from the date said amount is due until payment in full thereof at the Seafirst
Prime Rate. A certificate as to such amounts, submitted to Borrower by the
Bank, shall be conclusive and binding for all purposes, absent manifest error.
The Banks agree to notify Borrower of any circumstances that would cause
Borrower to pay additional amounts pursuant to this Section 6.04, provided
that failure to give such notice shall not affect Borrower's obligation to pay
such additional amounts hereunder.
Without in any way limiting the foregoing, if any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System), special deposit, or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Bank's
applicable lending office shall be imposed or deemed applicable or any other
condition affecting its LIBOR Loans or its obligation to make LIBOR Loans
shall be imposed on any Bank or its applicable lending office or the London
interbank LIBOR market; and as a result thereof there shall be any increase in
the cost to such Bank of agreeing to make or making, funding, or maintaining
LIBOR Loans (except to the extent already included in the determination of the
applicable LIBOR Rate), or there shall be a reduction in the amount received
or receivable by that Bank or its applicable lending office, then Borrower
shall from time to time, upon written notice from and demand by that Bank in
accordance with the foregoing paragraph, pay to that Bank, within five Banking
Days after the date specified in such notice and demand, additional amounts
sufficient to compensate the Bank or other corporation for such reduction,
together with interest on each such amount from the date such amount is due
until payment in full thereof at the Seafirst Prime Rate.
6.05 Capital Adequacy. If any Bank shall reasonably determine
that adoption, or application in the instance of the Risk Based Capital Rules,
of any law, rule, regulation, directive, interpretation, treaty or guideline
regarding capital adequacy, or any change in the interpretation or
administration thereof, whether or not having the force of law, increases the
amount of capital required or expected to be maintained by such Bank or any
corporation controlling such Bank and such increase is based upon the
existence of the Bank's obligations hereunder and as a result thereof the rate
of return on the Bank's capital or assets is reduced below that which the Bank
would have achieved but for such adoption or change, then from time to time,
upon demand from the Bank, Borrower shall pay to such Bank such amount or
amounts as will compensate the Bank for such reduction (which amount shall not
include any amounts with respect to penalties imposed on the Bank). The
determination of any amount to be paid by Borrower under this section shall
take into consideration the policies of the Bank making demand, or any
corporation controlling the Bank, with respect to capital adequacy and shall
be based upon any reasonable averaging, attribution and allocation methods. A
certificate of the Bank setting forth the amount or amounts as shall be
necessary to compensate the Bank as specified in this subsection shall be
delivered to Borrower and shall be conclusive absent manifest error.
6.06 Costs and Expenses. Borrower promises to pay all reasonable
out-of-pocket costs and expenses incurred by the Banks and Agent in connection
with the closing, administration and collection of the credit facilities
herein provided. Such costs and expenses specifically include the Banks' and
Agent's reasonable attorneys' fees and disbursements incurred in connection
with preparation of the Loan Documents, collection of Advances, interest, fees
and costs, and enforcement of this Agreement and the Loan Documents, whether
or not litigation is involved.
6.07 Authorized Officers. The list of officers and employees
initially authorized to request Advances, is attached hereto as Exhibit B.
Borrower may amend that list from time to time by supplements executed by the
president and the chief financial officer. The Agent and Banks may act in
reliance upon any oral, telephonic, or written, request believed in good faith
to have been authorized by any of the persons identified on Exhibit B.
6.08 Binding Requests. Each request for each Advance shall be
irrevocable and binding on Borrower and, in respect of any Advance comprised
of Interim Loans, LIBOR Loans or BA Loans specified in such request, if such
Advances are not made as a result of any failure to fulfill on or before the
date specified for such Advance the applicable conditions set forth in
Sections 3, 4, or 5, Borrower shall indemnify the Banks against any loss or
expense incurred by the Banks as a result of such failure, including, without
limitation, any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by the Banks to fund the
Advance to be made by it.
6.09 The Notes.
(a) The Revolving Advances shall be evidenced by and
repayable with interest in accordance with amended and restated promissory
notes in the form of Exhibits C-1 and C-2 hereto, payable to the order of each
Bank, dated the date of this Agreement and in the principal amount of such
Bank's Revolving Line Commitment (the "Revolving Line Notes").
(b) The Operating Advances shall be evidenced by and
repayable with interest in accordance with amended and restated promissory
notes in the form of Exhibits D-1 and D-2 hereto, payable to the order of each
Bank, dated the date of this Agreement and in the principal amount of such
Bank's Operating Line Commitment (the "Operating Line Notes").
(c) The Overnight Advances shall be evidenced by and
repayable with interest in accordance with an amended and restated promissory
note in the form of Exhibit E hereto, payable to the order of U.S. Bank, dated
the date of this Agreement and in the principal amount of the Overnight Line
Commitment (the "Overnight Line Note").
Each Bank shall record in its records, or at its option on the schedule
attached to its Note, the date and amount of each Advance, the Interest Rate
applicable to such Advance and the Interest Period. The aggregate unpaid
principal amount so recorded shall be presumptive evidence of the principal
amount owing and unpaid on the Notes. The failure to so record any such
amount or error in so recording such amount shall not, however, limit or
otherwise affect the obligations of Borrower hereunder or under the Notes to
repay the principal amount of the Advances together with all interest accruing
thereon.
6.10 Manner of Payments.
(a) All payments of principal and interest on any
Revolving or Operating Advance and the Revolving and Operating Line Notes and
all other amounts payable hereunder by Borrower to the Banks shall be made by
paying the same in U.S. Dollars and in immediately available funds to Agent in
Seattle not later than noon Seattle time on the date on which such payment is
due. Any payment made after noon Seattle time on any Banking Day shall be
deemed to have been received on the next Banking Day and interest shall accrue
on that day.
(b) All payments of principal and interest on any
Overnight Advance and the Overnight Note and all other amounts payable
hereunder by Borrower to U.S. Bank in respect of the Overnight Commitment
shall be made by paying the same in U.S. Dollars and in immediately available
funds to U.S. Bank not later than 3:00 p.m., Portland time, on the date on
which such payment is due. Any payment made after 3:00 p.m., Portland time,
on any Banking Day shall be deemed to have been received on the next Banking
Day and interest shall accrue on that day.
(c) All computations of interest and fees shall be made
on the basis of a year of 360 days for the actual number of days (including
the first day but excluding the last day) occurring in the period for which
such interest or fees are payable.
(d) Whenever any payment hereunder or under any Note
shall be due other than on a Banking Day, such payment shall be made on the
next succeeding Banking Day and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may
be; unless, and notwithstanding anything to the contrary in this Agreement, in
the case of any payment which is due on the last day of an Interest Period,
such extension would cause the payment to be made in the next following
calendar month, in which case such payment shall be made on the next preceding
Banking Day.
6.11 Application of Proceeds.
(a) Before Default. Any payment made by Borrower or
received for Borrower's account shall be applied as follows if after applying
such payment no Default or Incipient Payment Default shall have occurred and
be continuing:
(i) Payments made by Borrower to, or received for
Borrower's account by, U.S. Bank shall be applied to amounts due in respect of
Overnight Advances in accordance with the following priorities:
(A) First, to expenses and indemnities due
to U.S. Bank hereunder or under any other Loan Document;
(B) Second, to fees due to U.S. Bank under
Section 5.06;
(C) Third, to interest due on any Overnight
Advances;
(D) Fourth, to repay principal then due in
respect of Overnight Advances;
(E) Fifth, to prepay principal of such of the
Overnight Advances as may be designated by Borrower if such prepayment is
permitted in a notice provided contemporaneously with any such payment and, in
the absence of any such designation, as U.S. Bank may elect; and
(F) Sixth, if all amounts due to U.S. Bank in
respect of the Overnight Advances have been paid in full and such Advances
have been fully repaid, U.S. Bank shall immediately transfer amounts
remaining, if any, to Agent for application pursuant to Section 6.11(a)(ii).
(ii) Payments made by Borrower to, or received for
Borrower's account by Agent shall be applied to amounts due in respect of
Revolving Advances and Operating Advances in accordance with the following
priorities:
(A) First, to expenses and indemnities due to
Agent, Seafirst and U.S. Bank hereunder or under any other Loan Documents;
(B) Second, to fees due to Agent and Banks
under Sections 4.08 and 4.09;
(C) Third, to interest due on any Operating
Advance or Revolving Advance;
(D) Fourth, to repay principal then due in
respect of the Operating Advances and Revolving Advances;
(E) Fifth, to prepay principal of such of the
Revolving or Operating Advances as may be designated by Borrower in a notice
provided contemporaneously with any such payment and, in the absence of any
such designation, to such of the Revolving Advances as Agent may elect until
all Revolving Advances are paid in full and, thereafter, to such of the
Operating Advances as Agent may elect; and
(F) Sixth, if all amounts due to Banks in
respect of the Revolving Advances and the Operating Advances have been paid in
full and such Advances have been fully repaid, Agent shall immediately
transfer amounts remaining, if any, to U.S. Bank for application pursuant to
Section 6.11(a)(i).
(b) Payments after Default. Any payment made by Borrower
or received or obtained for Borrower's account (whether received by U.S. Bank,
Seafirst, or Agent) shall be applied as follows if after applying such payment
a Default or Incipient Payment Default shall have occurred and be continuing:
(i) On the date of such payment, the Revolving Line
of Credit, the Operating Line of Credit and the Overnight Line of Credit shall
each be assigned a percentage (such Line of Credit's "Default
Payment Percentage") which shall be a fraction (expressed as a decimal) for
which the numerator is the sum of (A) all fees, expenses, indemnities and
interest accrued under or in respect of such Line of Credit through such date
(whether or not then due) and (B) the outstanding principal balance for all
Advances made under such Line of Credit, and the denominator is the sum of (A)
all fees, expenses, indemnities and interest accrued under the Loan Documents
through such date (whether or not then due) and (B) the outstanding principal
balance for all Advances. For purposes of Section 6.11(b), fees, expenses and
indemnities which are not incurred in respect of any one Line of Credit or
which are incurred in respect of more than one Line of Credit, shall be deemed
to have been accrued in respect of the Revolving Line of Credit.
(ii) A portion of each payment equal to the product
of the Line of Credit's Default Payment percentage and the total amount of the
payment made shall be applied to the Indebtedness incurred in respect of such
Line of Credit in the following order of priority:
(A) First, to expenses and indemnities accrued
thereunder;
(B) Second, to fees due in respect thereof;
(C) Third, to interest due on any Advances
made thereunder;
(D) Fourth, to repay the principal then due in
respect of any Advances made thereunder; and
(E) Fifth, to prepay principal of such of the
Advances as are made thereunder and as are selected by the Requisite Banks for
payment or, in the case of Advances made under the Overnight Line of Credit,
as are selected by U.S. Bank for payment.
(iii) Banks each agree to immediately advise Agent as
to any payment received from Borrower or for Borrower's account and, if after
applying such payment a Default or Incipient Payment Default shall have
occurred and be continuing, to immediately disburse such payment (or portions
thereof) to the other Banks in accordance with instructions received from
Agent, which instructions shall be drawn to result in an application of
proceeds as herein provided for.
(c) Setoffs. If any Bank shall obtain any payment for
Borrower's account through the exercise of any right of counterclaim, setoff,
banker's lien or similar rights, in excess of that portion of the payment to
which it would otherwise be entitled to receive pursuant to the terms of
Sections 6.11(a), 6.11(b), and 6.11(d), such Bank shall forthwith purchase
from the other Banks such participations in the Advances made by them as shall
be necessary to cause such purchasing Bank to share the excess payment with
them in the same proportion as such payment would have been shared had it been
received as a voluntary payment from Borrower pursuant to the terms of
Section 6.11(a) or (b) as the case may be. If any of such excess payment is
afterwards recovered from such purchasing Bank, the purchase of the
participations shall be rescinded and the purchase price restored, without
interest, to the extent of such recovery. Borrower authorizes the purchase of
such participations and agrees that any Bank so purchasing a participation
from another Bank may exercise all of its rights to payment (including the
right of setoff) with respect to such participation as fully as if such Bank
were the direct creditor of Borrower in the amount of such participation.
(d) General Provisions. Where, pursuant to the foregoing
Sections 6.11(a) and 6.11(b), amounts are to be applied to Borrower's
obligations to pay commitment fees, interest or principal in respect of any
particular Revolving Advance or Operating Advance, the amount to be so applied
shall be applied to Borrower's obligations and disbursed to the Banks pro rata
in the same proportion that their respective Commitments bear to the sum of
all Commitments for the applicable Line of Credit, and Agent will remit such
amounts to the other Banks promptly upon the receipt thereof. Whenever
pursuant to the terms of Section 6.11(a) or (b) above, the Agent or any Bank
is authorized to elect particular loans for prepayment, it shall, to the
extent consistent with the foregoing order of priority elect to cause Prime
Loans to be prepaid prior to the prepayment of any other Loans. As used in
this Section 6.11 "Incipient Payment Default" shall mean an event which but
for the passage of time would constitute a Default described in Section 8.01.
SECTION 7
BORROWER'S COVENANTS
At all times prior to the later of (a) the latest Maturity Date or
(b) the date on which all obligations of Borrower under this Agreement and the
Loan Documents have been performed in full, Borrower agrees to do all of the
following unless the Requisite Banks or all Banks, as applicable pursuant to
Section 11.09 hereof, shall otherwise give their prior consent in writing:
7.01 Preservation of Corporate Existence, Etc. Borrower will
preserve and maintain its corporate existence, rights, and privileges in
Oregon and will qualify and remain qualified as a foreign corporation in
Washington and California and in each other jurisdiction where such
qualification is necessary or advisable in view of the business and operations
of Borrower or the ownership of its properties.
7.02 Compliance With Laws. Borrower will comply in all material
respects with all laws, regulations, rules, and orders of any Government
Authority applicable to Borrower or to its operations or property, except any
thereof whose validity is being contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof.
7.03 Other Obligations. Borrower will pay and discharge before
the same shall become delinquent (after giving effect to all applicable grace
periods) all Indebtedness, Taxes, and other obligations for which Borrower is
liable or to which its income or property is subject and all claims for labor
and materials or supplies which, if unpaid, might become by law a lien upon
the assets of Borrower, except any thereof whose validity or amount is being
contested in good faith by Borrower in appropriate proceedings, and except
other Indebtedness, Taxes, and other obligations which, in the aggregate do
not exceed $1,000,000; provided, however, that the foregoing exceptions to
this covenant shall not extend to any obligation of Borrower identified in
Sections 7,17 or 8.11.
7.04 Visitation; Records. Borrower will keep adequate records
and books in which complete entries will be made, in accordance with generally
accepted accounting principles consistently applied, reflecting all financial
transactions of Borrower. At any reasonable time and from time to time
Borrower will permit the Agent and Banks to examine and make copies of and
abstracts from Borrower's records and books and to visit the properties of
Borrower and to discuss the affairs, finances, and accounts of Borrower with
any of its officers.
7.05 Financial Information. Borrower will deliver to the Banks
and the Agent (a) as soon as available and in any event within 120 days after
the end of each fiscal year of Borrower, the consolidated balance sheet of
Borrower as of the end of such fiscal year and the related consolidated
statements of income and retained earnings and statement of changes in the
financial position of Borrower for such year, accompanied by the audit report
thereon by independent, certified public accountants acceptable to the Banks
(which report shall be prepared in accordance with generally accepted
accounting principles consistently applied and shall not be qualified by
reason of restricted or limited examination of any material portion of
Borrower's records and shall contain no disclaimer of opinion or adverse
opinion); (b) as soon as available and in any event within 60 days after the
end of each of the first three fiscal quarters of Borrower, the unaudited
consolidated and consolidating balance sheet and statement of income and
retained earnings of Borrower as of the end of such fiscal quarter (including
the fiscal year to the end of such fiscal quarter), accompanied by a
certificate of the chief financial officer of Borrower that such unaudited
consolidated and consolidating balance sheet and statement of income and
retained earnings have been prepared in accordance with generally accepted
accounting principles consistently applied and present fairly the financial
position and the results of operations of Borrower as of the end of and for
such fiscal quarter and setting forth calculations demonstrating that at the
end of such quarter Borrower was in compliance with Sections 7.08 through
7.13, inclusive, and Sections 7.15, and further stating that as of the close
of such fiscal quarter no Default or Incipient Default had occurred and was
continuing; and (c) such other statements, reports, and other information as
the Banks may reasonably request concerning the financial condition of
Borrower.
7.06 Notification. Promptly after learning thereof Borrower will
provide the Banks and the Agent with (a) the details of any action,
proceeding, investigation, or claim against or affecting Borrower instituted
before any court, arbitrator, or Government Authority or, to Borrower's
knowledge threatened to be instituted, which, after taking into account the
likelihood of success, might reasonably result in a judgment or order against
Borrower (in excess of insurance coverage and when combined with all other
pending or threatened claims) of more than $1,000,000; (b) if Borrower or any
member of the Controlled Group gives or is required to give notice to the PBGC
of any "reportable event" (as defined in subsections (b)(1)(2)(5)(6) of
Section 403 of ERISA) with respect to any Plan (or the Internal Revenue
Service gives notice to the PBGC of any "Reportable Event" as defined in
subsection (c)(2) of Section 4043 of ERISA and Borrower attains knowledge
thereof) which might constitute grounds for termination of such Plan under
Title IV of ERISA, or knows that the plan administrator of any Plan has given
or is required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the PBGC; (c)
notice thereof if any representation or warranty set forth in this Agreement
proves to have been incorrect in any material respect when made; and (d)
notice thereof if any Default or Incipient Default occurs, together with a
statement of the action Borrower is taking or proposes to take with respect
thereto.
7.07 Additional Payments; Additional Acts. From time to time,
Borrower will (a) pay or reimburse the Agent and Banks on request for all
Taxes imposed on this Agreement (other than taxes based on the Agent's or any
Bank's net income, items of tax preference, or gross receipts) and for all
expenses, including legal fees, actually incurred by the Agent or any Bank in
connection with the preparation or modification of this Agreement, the Notes,
the Banker's Acceptance Agreement, or the other Loan Documents hereunder or
the enforcement by judicial proceedings or otherwise of any rights of the
Agent or any Bank hereunder or under the Notes, the Banker's Acceptance
Agreement, or the other Loan Documents; and (b) obtain and promptly furnish to
each of the Banks and the Agent evidence of all such Government Approvals as
may be required to enable Borrower to comply with its obligations under this
Agreement, the Notes, the Banker's Acceptance Agreement, or the other Loan
Documents.
7.08 Working Capital. Borrower shall maintain, on a consolidated
basis, a ratio of current assets to current liabilities of at least 1.3 to
1.0. For purposes of this Section 7.08 current assets shall not include (i)
any deferred assets other than prepaid items such as insurance, Taxes, or
other similar items; (ii) any amounts due from corporations which are
subsidiaries of Borrower or of any other Person directly or indirectly
controlling, controlled by, or under common control with Borrower; and (iii)
an amount equal to the appropriate deduction for depreciation, depletions,
obsolescence, amortization, valuation, contingency, or other reserves
determined in accordance with generally accepted accounting principles. For
purposes of this Section 7.08, current liabilities shall not include Funded
Debt maturing within one year from the date of determination whether or not
extendable at the option of Borrower.
7.09 Funded Debt. Borrower shall maintain on a consolidated
basis a ratio of Funded Debt to Total Capitalization of not more than 0.8 to 1
and a ratio of Funded Debt minus Subordinated Debt to Total Capitalization of
not more than .55 to 1. "Funded Debt" means Indebtedness which matures by its
terms more than one year from the date it was originally incurred, or is
unconditionally renewable or extendable at the option of the debtor to a date
more than one year from such date, or which arises under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of more than one year from such date including the current portion of
such Indebtedness. "Total Capitalization" means the sum of Members' Equity
and Funded Debt. "Members' Equity" means, as of any date of determination,
the consolidated balance sheet "members equity" of Borrower determined in
accordance with generally accepted accounting principles consistently applied.
"Subordinated Debt" means Indebtedness of Borrower which by its terms provides
that no payments or distributions may be made thereon or in respect thereto at
any time when a default has occurred and is continuing under a document
providing for repayment of Indebtedness of Borrower for borrowed money (other
than such Subordinated Debt) or for the payment by Borrower of the purchase
price of tangible property.
7.10 Fixed Charge Coverage. Borrower shall maintain on a
consolidated basis a ratio of Fixed Charge Coverage (for the four most recent
fiscal quarters) of at least 1.4 to 1.0. "Fixed Charge Coverage" means for any
period the ratio derived from dividing (a) the sum of net income for such
period (before income taxes, patronage dividends, and extraordinary items)
plus Fixed Charges by (b) Fixed Charges. "Fixed Charges" means the sum of (a)
interest expense on all Indebtedness, (b) the amortization of any discount
applied in advancing Funded Debt to Borrower, and (c) gross rental expense net
of pass-through rental income from Borrower's members.
7.11 Liens. Borrower shall not create, assume, or suffer to
exist any Lien upon its assets except (i) Liens on Borrower's Milwaukee,
Oregon, and Medford, Oregon, properties securing mortgage indebtedness
relating to such properties and any extensions, refinancing, or renewals
thereof in an amount not exceeding the amount of such indebtedness prior to
such extension, refinancing, or renewal; (ii) capital lease obligations; (iii)
Liens to secure indebtedness for the deferred price of property acquired after
the date hereof, but only if such Liens are limited to such property and its
proceeds; (iv) Liens imposed by law (such as mechanic's liens) incurred in
good faith in the ordinary course of business which are not delinquent or
which remain payable without penalty or the validity or amount of which are
being contested in good faith by appropriate proceeding upon stay of execution
of the enforcement thereof; or (v) deposits or pledges under worker's
compensation, unemployment insurance, social security, or similar laws or made
to secure the performance of bids, tenders, contracts (except for the
repayment of borrowed money) or leases, or to secure statutory obligations or
surety or appeal bonds or to secure indemnity, performance, or other similar
bonds given in the ordinary course of business. Without limiting the
generality of the foregoing, Borrower shall not pledge, grant a security
interest in, or otherwise permit a Lien to encumber all or any portion of its
accounts receivables, chattel paper, documents, instruments, general
intangibles, or inventories. Notwithstanding any of the foregoing, the total
amount secured by all Liens (excluding the Liens described in clause (iii)
above) shall not at any time exceed 15 percent of Borrower's Consolidated Net
Tangible Assets as of such time. "Consolidated Net Tangible Assets" shall be,
on a consolidated basis, the difference between total assets and current
liabilities, excluding, however, from the determination of total assets (i)
all assets which should be classified as intangible assets (such as good will,
patents, trademarks, copyrights, and franchises) and (ii) to the extent not
already deducted from total assets, all reserves including those for deferred
income taxes, depreciation, obsolescence, or amortization of properties, and
(iii) all capital stock or other investments by Borrower in any direct or
indirect subsidiary of Borrower other than in (x) UGIC, Ltd., Borrower's
Bermuda investment subsidiary, or (y) a subsidiary having all or substantially
all of its operations in the United States.
7.12 Minimum Capital and Subordinated Debt. Borrower shall
maintain the sum of Subordinated Debt and Members' Equity at a total of not
less than $75,000,000.
7.13 Member Notes Receivable Ratio. Borrower shall maintain, on
a consolidated basis, a Member Portfolio at not more than 150% of Consolidated
Net Tangible Assets. "Member Portfolio" means the sum of (i) all Indebtedness
of members to Borrower or any of its subsidiaries which have not been sold;
plus (ii) all investments by Borrower or any of its subsidiaries in Borrower's
members; plus (iii) all Indebtedness of members of Borrower or any of its
subsidiaries which have been sold with recourse to Borrower or any of its
subsidiaries at 50% or greater. As used herein, "Consolidated Net Tangible
Assets" shall have the meaning given in Section 7.11.
7.14 Liquidation, Merger, Sale of Assets, Etc.
Borrower shall not liquidate, dissolve, or enter into any merger,
consolidation, joint venture, partnership, or other combination nor sell,
lease, dispose of such portion of its business or assets (excepting sales of
goods in the ordinary course of business and excepting sales of notes pursuant
to note purchase agreements) as constitutes a substantial portion thereof
provided, however, so long as no Default or Incipient Default shall have
occurred and be continuing or will occur as a result of such merger or
consolidation, Borrower may merge or consolidate with any Person provided that
the surviving Person be a corporation duly incorporated and validly existing
under the laws of any state in the United States and provided further that
such surviving corporation expressly assume Borrower's obligations under this
Agreement in a writing delivered to the Banks. Without limitation on the
foregoing, Borrower, and its consolidated subsidiaries, shall not in any
fiscal year sell in excess of 10 percent of their Consolidated Net Tangible
Assets; unless the proceeds of such sale or sales are reinvested within 12
months in assets to be owned and utilized by Borrower in the ordinary course
of its business; provided, however, in determining compliance with the
foregoing requirement, sales of the following assets will be disregarded: (a)
individual assets having a book value of less than $250,000, not to exceed in
the aggregate One Million Five Hundred Thousand Dollars ($1,500,000) in any
fiscal year, and (b) Indebtedness of Borrower's members to Borrower incurred
in Borrower's equipment, store and inventory financing for such members.
7.15 Contingent Indebtedness. Borrower shall not, at any time,
have outstanding Contingent Indebtedness in an amount exceeding the sum of (a)
$6,000,000 and (b) 50 percent of Borrower's consolidated cumulative net income
between September 29, 1990, and the date of determination. "Contingent
Indebtedness" shall, as of any date of determination, mean the sum of (i)
guaranties of the obligations of others (excluding the guaranty of lease
obligations of Borrower's members to the extent such lease obligations are
insured) and (ii) the product of (x) the Portfolio Loss Factor and (y) the
total principal amount of indebtedness owed by Borrower's members to Borrower
in respect of store and equipment financing which has been sold by Borrower on
a recourse basis. The term "Portfolio Loss Factor" shall mean the greater of
(i) five times the average for the three most recently ended fiscal years of
Borrower of the actual losses incurred during each such fiscal year on the
portfolio of indebtedness owed to Borrower (or to a buyer of such indebtedness
from Borrower) by members for equipment and store financing divided by the
average principal amount of such portfolio during such fiscal year or (ii)
3 percent.
7.16 Transactions With or by Affiliates. Borrower will not
directly or indirectly enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease, or exchange of any
property) with any of Borrower's Affiliates on terms that are less favorable
to Borrower than those which might be obtained at the time from Persons who
are not Affiliates. Borrower will not permit or suffer by any Affiliate it
directly or indirectly controls the sale or other disposition of substantially
all the assets of such Affiliate, except in the ordinary course of such
Affiliate's business; and Borrower will not permit or suffer the sale or
issuance by any such Affiliate of any of its stock of any class, except to
Borrower. An "Affiliate" is any Person (or group of related Persons) that (a)
directly or indirectly controls or is controlled by or under common control
with Borrower, or (b) owns more than 5 percent of Borrower's voting stock, or
(c) is a director or officer of Borrower.
7.17 ERISA Compliance. Neither Borrower nor any member of the
Controlled Group nor any Plan of any of them will: (a) engage in any
"prohibited transaction" as such term is defined in Section406 or
Section2003(a) of ERISA; (b) incur any "accumulated funding deficiencies" (as
such term is defined in Section302 of ERISA) whether or not waived; (c)
terminate any "employee pension benefit plan," as such term is used in ERISA,
in a manner which could result in the imposition of a Lien on any property of
Borrower or any member of the Controlled Group pursuant to Section4068 of
ERISA; or (d) violate state or federal securities laws applicable to any Plan.
7.18 No Name Change, Etc. Borrower will not change its name,
identity, or corporate structure in any manner.
7.19 Relocation of Offices. Borrower will give Agent at least 60
days' prior written notice of any relocation of its chief executive offices or
the offices where Borrower's books and records are kept.
7.20 Use of Proceeds. Borrower will use Advances only for
working capital needs.
7.21 Amendments to Private Placement; Prepayments of Private
Placement. Borrower will promptly provide to Banks a copy of each Private
Placement Agreement and shall notify the Banks at least five (5) days in
advance of the execution thereof. Borrower will not agree to or permit to be
made any amendments to nor request any waivers of the terms of any Private
Placement Agreement if such a waiver or waivers pertains to an increase in the
commitment amounts thereunder or to the terms of repayment thereof or of any
promissory notes issued thereunder. Borrower shall give to Agent, for
distribution to each of the Banks prompt written notice and a copy of any
anticipated amendment to or requested waiver of any financial covenants
contained in or reduction in the commitment amounts under each Private
Placement Agreement, and shall give to Agent for distribution to the Banks a
substantially contemporaneous confirming notice and a copy of any amendment or
waiver actually made or granted. Borrower shall not make any prepayments in
respect of any Private Placement Agreement or any of the promissory notes
issued pursuant thereto.
7.22 Insurance. Borrower will keep in force upon all of its
properties and operations policies of insurance carried with responsible
companies in such amounts and covering all such risks as shall be customary in
the industry.
7.23 Maintenance of Property. Borrower will maintain and
preserve all of its properties in good working order and condition, ordinary
wear and tear excepted, and will from time to time make all needed repairs,
renewals or replacements so that the efficiency of such properties shall be
fully maintained and preserved.
7.24 Insurance Company. Borrower shall cause Grocers Insurance
Company, an Oregon corporation or any successor thereto ("GIC"), a
wholly-owned subsidiary of Grocers Insurance Group, which in turn is a
wholly-owned subsidiary of Borrower, to (a) comply in all material respects
with all laws, regulations, rules and orders of any Government Authority
applicable to GIC, except any thereof whose validity is being contested in
good faith by appropriate proceedings upon stay of execution of the
enforcement thereof, and (b) keep in force upon all of its operations policies
of reinsurance carried with responsible companies in such amounts and covering
all such risks as shall be customary in the industry.
SECTION 8
DEFAULT
TIME IS OF THE ESSENCE. The occurrence of any one or more of the
following shall be an event of default under this Agreement, the Notes, and
the other Loan Documents:
8.01 Payment Failure. Borrower fails to make any payment of
principal owing under this Agreement, the Notes, or the other Loan Documents
when due or any payment of interest, cost or expense owing under this
Agreement, the Notes, or the other Loan Documents within five banking days
following the due date thereof.
8.02 Performance Failure. Borrower fails to observe or perform
any other covenant, obligation or condition to be performed or satisfied under
this Agreement, the Notes, or the other Loan Documents and, except in the case
of a breach of Section 7.03 (for which there shall be no cure period), (a)
such failure shall remain unremedied for 30 days after written notice from
Agent, to perform or satisfy the covenant, obligation or condition and (b)
Borrower shall not have substantially commenced to observe or perform and
thereafter diligently completed observance or performance if complete
observance or performance is not possible within 30 days.
8.03 Misrepresentation. Any representation, warranty, statement,
report or certificate made by Borrower in this Agreement or otherwise provided
to the Agent or the Banks is not true and correct in all material respects
when made.
8.04 Judgments; Attachment. A final judgment or judgments is/are
entered against Borrower for the payment of more than $1,000,000 which is/are
not covered by insurance and not satisfied or appealed within 30 days
following entry, or all or a substantial part of the assets of Borrower are
attached, seized, subject to writ or warrant or are levied on or come into the
possession or control of a receiver, trustee, custodian or assignee for the
benefit of creditors.
8.05 Government Action. Borrower is enjoined or restrained or in
any way prevented by order of a court or other Government Authority having
jurisdiction from conducting all or a substantial part of its business affairs
and/or operations.
8.06 Voluntary Bankruptcy. Borrower shall (i) file a petition
seeking relief for itself under Title 11 of the United States Code, as now
constituted or hereafter amended, or file an answer consenting to, admitting
the material allegations of or otherwise not contesting, or fail timely to
contest a petition filed against it seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended; or (ii) file a
petition or answer with respect to relief under the provisions of any other
now existing or future applicable bankruptcy, insolvency, or other similar law
of the United States of America or any state thereof or of any other
jurisdiction providing for the reorganization, winding-up or liquidation of
corporations or any arrangement, composition, extension or adjustment with
creditors.
8.07 Involuntary Bankruptcy. An order for relief shall be
entered against Borrower under Title 11 of the United States Code, as now
constituted or hereafter amended, which order is not dismissed within sixty
(60) days of the entry thereof; or an order, judgment or decree shall be
entered against Borrower by operation of law or by a court having jurisdiction
in the premises adjudging it a bankrupt or insolvent under, or ordering relief
against it under, or approving as properly filed a petition seeking relief
against it under, the provisions of any other now existing or future
applicable bankruptcy, insolvency or other similar law of the United States of
America or any state thereof or of any other jurisdiction providing for the
reorganization, winding-up or liquidation of corporations or any arrangement,
composition, extension or adjustment with creditors, or appointing a receiver,
liquidator, assignee, sequestrator, trustee or custodian of Borrower or of any
substantial part of its property, or ordering the reorganization, winding-up
or liquidation of its affairs, which order is not dismissed within sixty (60)
days of the entry thereof.
8.08 Insolvency. Borrower shall be insolvent or shall (i) make a
general assignment for the benefit of its creditors or (ii) consent to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, or custodian of all or a substantial part of its property, or (iii)
admit its insolvency or inability to pay its debts generally as they become
due, or (iv) fail generally to pay its debts as they become due, or (v) take
any action (or suffer any action to be taken by its directors or shareholders)
looking to the dissolution or liquidation of Borrower.
8.09 Change in Control. Any Person, or group of Persons directly
or indirectly under common control, shall obtain in excess of 50 percent of
the outstanding voting stock of Borrower.
8.10 Validity Contest. The validity or enforceability of this
Agreement, the Notes, or any other Loan Document is contested by Borrower or
there is a denial of liability by Borrower.
8.11 ERISA. Borrower or any member of the Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess of $1,000,000
which it shall have become liable to pay to the PBGC or to a Plan under
Section 515 of ERISA or Title IV of ERISA; or notice of intent to terminate a
Plan or Plans (other than a multi-employer plan, as defined in Section 4001(3)
or ERISA), having aggregate Unfunded Vested Liabilities in excess of
$5,000,000 shall be filed under Title IV of ERISA by Borrower, any member of
the Controlled Group, any plan administrator, or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate any such Plan or Plans.
8.12 Cross-Default. The occurrence of an Event of Default under
the Banker's Acceptance Agreement (as defined therein) or an event of default
under any other Loan Document; the occurrence of a "Termination Event" as such
term is defined in any note purchase agreement or the occurrence of any other
event which would entitle any party committed to purchase notes under a note
purchase agreement to terminate such commitment prior to its scheduled
expiration; or the failure of Borrower to pay when due $1,000,000 or more of
indebtedness for borrowed money now or hereafter owing to any Person or
Persons.
8.13 Insurance Claim. A claim or claims that would normally be
covered by insurance according to industry practices is/are made against GIC
for the payment of more than $1,000,000 individually or in the aggregate which
is/are not covered by reinsurance; or all or a material part of GIC's
reinsurance policies shall be terminated for any reason.
SECTION 9
REMEDIES ON DEFAULT
Upon any Default hereunder, the Agent and the Banks shall have the right
to exercise any one or more of the following remedies in addition to such
other remedies as may be available under law:
9.01 Termination. Agent, may, and shall upon the request of the
Requisite Banks, immediately terminate the Commitments; provided, however,
that in the case of any event described in Sections 8.06, 8.07 or 8.08, the
Commitments shall automatically terminate.
9.02 Acceleration. Agent, may, and shall upon the request of the
Requisite Banks, declare the principal of and the interest on any Loan and the
Notes and all other sums payable by Borrower under the Loan Documents to be
immediately due and payable, whereupon the same shall become immediately due
and payable without protest, presentment or demand, all of which are hereby
expressly waived, provided, however, that in the case of any event described
in Sections 8.06, 8.07 and 8.08, the principal of, and accrued interest on,
the Notes shall become immediately due and payable, both as to principal and
interest, without presentment, demand, protest, all of which are hereby
expressly waived, anything contained herein or in the Notes to the contrary
notwithstanding. Agent shall use its best efforts to provide same day notice
of acceleration to Borrower, provided, however, that failure to give such
notice shall not affect the rights of the Agent and Banks hereunder.
9.03 Specific Remedies. The Agent and Banks may exercise or
pursue any remedy or cause of action permitted by this Agreement, the Notes,
the Banker's Acceptance Agreement, any Loan Document or applicable law. The
rights and remedies provided by law, this Agreement, the Notes, and the other
Loan Documents are cumulative and not exclusive, and the exercise or partial
exercise of any right, power or remedy shall not preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
SECTION 10
AGENCY
10.01 Appointment; Successor Agent.
(a) The Banks hereby appoint Agent to act as
administrative agent in connection with the Loans provided for in this
Agreement. Agent shall have such powers as are reasonably necessary or
appropriate to carry out its rights and responsibilities as agent as expressly
set forth in this Agreement, together with such powers as are reasonably
incidental thereto.
(b) Agent may give written notice of resignation at any
time to the Banks and Borrower and may be removed at any time with cause by
the Requisite Banks. Upon such resignation or removal, the Requisite Banks
shall have the right to appoint a successor agent. If no successor agent
shall have been so appointed by the Requisite Banks and shall have accepted
such appointment within thirty (30) days after the retiring Agents giving of
notice of resignation or the Requisite Banks' removal of the retiring Agent,
then the retiring Agent may on behalf of the Banks, appoint a successor agent,
which shall be (i) a Bank, or (ii) a bank organized under the laws of the
United States or of any state thereof, or any affiliate of such bank, and
having a combined capital and surplus of at least Five Hundred Million Dollars
($500,000,000). Upon the acceptance of any appointment as Agent hereunder by
a successor agent, such successor agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. Until the acceptance by such a successor
agent, the retiring Agent shall continue as "Agent" hereunder. After any
retiring Agent's resignation or removal hereunder as Agent shall become
effective, the provisions of this Section 10 shall bind it and inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
10.02 Immunities. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement, nor by reason of this
Agreement be a trustee or fiduciary for the Banks (except that the foregoing
disclaimer pertaining to Agent not being a trustee or fiduciary shall not
apply with respect to money actually received by Agent from Borrower which
under the terms of the Loan Documents is to be remitted to Banks). Agent
shall not be responsible to the Banks for any recitals, statements,
representations, or warranties contained in this Agreement, the Notes, or the
other Loan Documents, or in any certificate or other document referred to or
provided for in, or received by the Banks under the Loan Documents, or for the
value, validity, effectiveness, genuineness, enforceability, or sufficiency of
this Agreement, the Notes, or the other Loan Documents or any other document
referred to or provided for therein, or for any failure by Borrower to perform
any of its obligations thereunder. Agent may employ agents and
attorneys-in-fact and shall not be responsible, except as to money or
securities received by it or its authorized agents, for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. Neither Agent nor any of its directors, officers, employees,
or agents shall be liable or responsible for any action taken or omitted to be
taken by it or them hereunder or in connection herewith, except for its or
their own gross negligence or willful misconduct.
10.03 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice, or other communication (including any thereof by
telephone, telex, facsimile, telegram, or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper
person or persons, and upon advice and statements of legal counsel,
independent accountants, and other experts selected by Agent. As to any
matters not expressly provided for by this Agreement, including enforcement or
collection of the Loans and the Advances, Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or
refrain from acting (and shall be fully protected in so acting or refraining)
upon the instructions of the Requisite Banks, and such instruction shall be
binding upon all Banks, provided that Agent shall not be required to take any
action which exposes it to personal liability or which is contrary to the Loan
Documents or applicable law, and provided further, that this Section 10 shall
not be amended without the prior written consent of Agent (acting for its own
account).
10.04 Rights as a Lender. With respect to the Loans made by it,
Seafirst in its capacity as a lender shall have the same rights and powers
hereunder as the Banks. Whenever this Agreement calls for a unanimous
decision by the Banks or for a decision by the Requisite Banks, Seafirst, as
lender, shall be entitled to vote its proportionate share. Seafirst, as
lender, and its affiliates may (without having to account therefor to the
Banks) accept deposits from, lend money to, and generally engage in any kind
of banking, trust, or other business with Borrower and any of its affiliates
as if it were not acting as Agent, and Seafirst, as lender, may accept fees
and other consideration from Borrower for services in connection with the Loan
Documents or otherwise without having to account for the same to the Banks
except that the Banks shall be entitled to their share of the commitment fees
specified in Section 4.09 of this Agreement, pro rata, in the same proportion
that their respective Revolving Line and Operating Line Commitments bear to
the Total Revolving Line Commitment or all Total Operating Line Commitment, as
applicable, for which such items are received. U. S. Bank shall be entitled
to its fees specified in Section 5.06. The agent's fee specified in
Section 4.08 of this Agreement shall be exclusively the property of Agent.
10.05 Defaults. Agent shall not be deemed to have knowledge of
the occurrence of a Default (other than the nonpayment of principal, interest,
or fees on the Revolving or Operating Loans) unless Agent has received notice
from Borrower or any Bank specifying such Default or officers of Seafirst
acting in their capacity as officers of Agent with respect to Borrower's
account have actual knowledge of the occurrence of a Default. Agent shall
(subject to Section 10.08) take such action with respect to any Default or
Incipient Default as shall be decided by the Requisite Banks. Without
limiting the foregoing, Agent shall comply with Sections 9.01, 9.02, and
11.09.
10.06 Indemnification. The Banks agree to indemnify Agent (to the
extent not reimbursed by Borrower pursuant to the Loan Documents, but without
limiting the obligations of Borrower under the Loan Documents), pro rata, in
the same proportion that their respective Commitments bear to the sum of all
Commitments of all Banks, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by, or asserted against Agent, in any way relating to or arising out
of the Loan Documents or any other documents contemplated hereby or the
transactions contemplated hereby (excluding, unless a Default has occurred and
is continuing, normal administrative costs and expenses incident to the
performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or of any such other documents, provided that the Banks shall not
be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of Agent.
10.07 Non-Reliance on Agent. The Banks agree that they have,
independently and without reliance on Agent, and based on such documents and
information as they have deemed appropriate, made their own credit analysis of
Borrower and decision to enter into this Agreement and that they will,
independently and without reliance upon Agent, and based on such documents and
information as they shall deem appropriate at the time, continue to make their
own analysis and decisions in taking or not taking action under this
Agreement. Agent shall not be required to keep itself informed as to the
performance or observance by Borrower of the Loan Documents or any other
document referred to or provided for therein or to inspect the properties or
books of Borrower. Except for notices, reports, and other documents and
information expressly required to be furnished to the Banks by Agent
hereunder, Agent shall not have any duty or responsibility to provide the
Banks with any (credit or other information concerning the affairs, financial
condition, or business of Borrower which may come into the possession of Agent
or any of its affiliates.
10.08 Failure to Act. Except for action expressly required of
Agent hereunder, Agent shall in all cases be fully justified in failing or
refusing to act under the Loan Documents unless it shall be indemnified to its
satisfaction by the Banks, pro rata, in the same proportion that their
respective Commitments bear to the sum of all Commitments of all Banks,
against any and all liability and expense which may be incurred by Agent by
reason of taking or continuing to take any such action.
10.09 Records. Agent agrees to keep at all times proper books of
account and records reflecting the interest of the Banks in the Revolving and
Operating Loans, which records shall be accessible for inspection by Banks at
all times during normal business hours.
10.10 Satisfaction of Loans. Agent may accept payment in full of
the Loans according to their terms and shall be entitled to satisfy or assign
the Notes upon such payment in full, but any such assignment shall be without
recourse and without representation or warranty, either express or implied.
10.11 Information. Agent agrees to provide the Banks promptly
upon request with the following credit information during the term of the
Loans: (a) accrual status; and (b) status of payments of principal, interest,
and fees for the Revolving and Operating Loans. Agent also agrees to provide
the Banks promptly after receipt thereof with financial statements and other
documents received by Agent from Borrower or Banks under the Loan Documents
except where Borrower is obligated to deliver such statements and other
documents directly to the Banks under the terms of the Loan Documents.
SECTION 11
MISCELLANEOUS
11.01 Assignment. Borrower may not assign, pledge, transfer,
hypothecate or otherwise dispose of its rights or obligations under this
Agreement without all of the Banks' prior written consent. A breach of this
provision, directly or indirectly, also shall be a Default and shall not vest
any rights in the purported transferee. The Banks each agree that they will
not sell, transfer, encumber, or assign all or any part of their interest in
the Loans without the prior written approval of the Agent, which approval
shall not be unreasonably withheld. However, the Banks each may assign their
interest in the Loans or sell participation or syndication interests in the
Loans without the consent or approval of Borrower.
11.02 Successors and Assigns. This Agreement and the Notes shall
benefit and be binding upon the respective successors and assigns of the Banks
and Borrower.
11.03 Conflict. The terms and conditions of this Agreement, the
Notes, the Banker's Acceptance Agreement, and the other Loan Documents are
intended to complement and supplement each other and are to be construed so as
to be consistent and complementary but in the event of direct conflict, the
terms and conditions of this Agreement shall prevail.
11.04 Notices. Except for requests for Advances under
Section 4.03 and 5.02 hereof, any notice required or allowed hereunder shall
be effective only if given in writing by certified mail, return receipt
requested, or by courier delivery where a receipt is obtained, at the address
stated above or at such other address as a party hereafter may state by
written notice.
11.05 Captions. The captions are merely for convenience and are
not a substantive part of this Agreement.
11.06 Recitals. The recitals are incorporated into this Agreement
by this reference.
11.07 Exhibits. The exhibits are incorporated into this Agreement
by this reference.
11.08 Complete and Final Agreement. This Agreement is the
complete and final agreement of the parties superseding all previous oral and
written agreements and understandings and no provision can or will be waived
or modified by conduct or oral agreement either before or after execution of
this Agreement. There is no ambiguity in this Agreement which would justify
the use of parol evidence.
11.09 Modifications, Consents and Waivers. No failure or delay
on the part of the Agent or any Bank in exercising any power or right under
any Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power under any Loan Document preclude
any other or future exercise thereof or the exercise of any other right or
power. The remedies provided in the Loan Documents are cumulative and are not
exclusive of any remedies provided by law. No amendment, modification or
waiver of any provision of any Loan Document, nor consent to any departure by
Borrower therefrom, shall in any event be effective unless the same shall be
in writing and signed or consented to by the Requisite Banks, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment,
modification, waiver or consent shall, unless in writing and signed by all the
Banks, do any of the following: (i) waive any of the conditions specified in
Section 3; (ii) increase the Commitment of any Bank or subject the Banks to
any additional obligation; (iii) reduce the principal of, or interest on, the
Notes or any fees hereunder; (iv) postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees hereunder; (v) take any
action which requires the signing of all the Banks pursuant to the terms of
any Loan Document; (vi) change the percentage of the Commitments, or the
number of Banks, which shall be required for the Banks or any of them to take
any action under any Loan Document; or (vii) amend, modify or waive
Sections 7.05, 7.08 through 7.15, or this Section 11.09; and, provided,
further, that no amendment, modification, waiver or consent shall, unless in
writing and signed by Agent, in addition to the Banks required hereinabove to
take such action, affect the rights and duties of Agent under any Loan
Document. No notice to or demand on the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in similar or other
circumstances.
11.10 Right of Setoff. Upon the occurrence of a Default, the
Banks shall have the right, but not the obligation, to setoff and apply all
deposits of every kind held by the Banks and their affiliates or obligations
owed by the Banks and their affiliates to Borrower against the Indebtedness
and obligations of Borrower under this Agreement, the Notes and the other Loan
Documents.
11.11 Governing Law; Jurisdiction; Attorney's Fees. Washington
law shall govern construction and enforcement of this Agreement, the Notes and
the other Loan Documents. If suit or action should be instituted to enforce
the terms of this Agreement, the Notes, the Loan Documents or any of them, the
prevailing party shall be entitled to such sum from the other party as the
court shall adjudge reasonable attorney's fees at trial, on appeal or on any
review thereof.
11.12 Consent to Jurisdiction; Waiver of Immunities. Borrower
hereby irrevocably submits to the jurisdiction of any state or federal court
sitting in Seattle, King County, Washington, in any action or proceeding
brought to enforce or otherwise arising out of or relating to any Loan
Document and irrevocably waives to the fullest extent permitted by law any
objection which it may now or hereafter have to the laying of venue in any
such action or proceeding in any such forum, and hereby further irrevocably
waives any claim that any such forum is an inconvenient forum.
11.13 Severability. If any provision of this Agreement is
hereafter determined to be illegal or unenforceable, that provision shall be
deemed deleted without invalidating the remaining provisions and, to the
extent permitted by law, Borrower waives any provision of law which renders
any provision illegal or unenforceable.
11.14 Other Debt. Borrower expressly agrees that the payment and
performance of the Indebtedness evidenced by this Agreement, the Notes and the
other Loan Documents shall not be inferior or subordinate to, but rather shall
rank no less than pari passu with, all other Indebtedness of Borrower, except
to the extent such other Indebtedness shall be secured by a Lien described in
Section 7.11 hereof.
11.15 Computation of Time Periods. In the computation of periods
of time from a date to a later date, "from" means "from and including" and
"to" and "until" each means "to but excluding."
11.16 Counterparts. This Agreement may be executed in any number
of counterparts, all of which when taken together shall be deemed a single
original.
11.17 Notice. Borrower is hereby given the following notice:
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
<PAGE>
IN WITNESS WHEREOF the parties have executed and delivered this Amended
and Restated Credit Agreement on the date first written above.
BANKS:
SEATTLE-FIRST NATIONAL BANK,
in its capacity as Bank
By
Its
UNITED STATES NATIONAL BANK OF
OREGON
By
Its
AGENT:
SEATTLE-FIRST NATIONAL BANK,
in its capacity as Agent
By
Its
BORROWER:
UNITED GROCERS, INC.
By /s/ Alan C. Jones
Its President
<PAGE>
Exhibit A
AMENDED AND RESTATED
BANKER'S ACCEPTANCE AGREEMENT
This Amended and Restated Banker's Acceptance Agreement (this
"Agreement") is entered into as of this 31st day of May, 1995, by the
undersigned pursuant to the Amended and Restated Credit Agreement of even date
herewith (the "Credit Agreement") among United Grocers, Inc. ("Customer"),
United States National Bank of Oregon ("U.S. Bank") and Seattle-First National
Bank ("Seafirst") (collectively, the "Banks") and Seafirst as "Agent" for the
Banks. This Agreement amends and restates that certain prior Banker's
Acceptance Agreement made by and among the parties hereto as of July 31, 1991.
In consideration of the Banks accepting in accordance with the
Credit Agreement drafts drawn on the Banks by Customer, Customer hereby agrees
as follows:
1. Credit Agreement. All of the terms of the Credit Agreement
are incorporated herein by this reference. All terms capitalized in this
Agreement shall have the meaning ascribed to such terms in the Credit
Agreement.
2. Warranties. With respect to each draft presented for
acceptance, Customer warrants and agrees that:
(a) Each draft presented for acceptance and discounting
will be an Eligible Draft. "Eligible Draft" means a draft that is eligible
for discount under the Federal Reserve Act (12 U.S.C. Section 372) and is
eligible for purchase under rules and regulations established from time to
time by the Federal Reserve Bank of New York.
(b) The draft will grow out of one or more transactions
involving the importation or exportation of goods or will grow out of one or
more transactions involving the domestic shipment of goods, or the draft will
be secured throughout the life of the draft by warehouse receipts or similar
documents conveying or securing title and covering readily marketable staples.
(c) Completion of each transaction related to a draft is
anticipated to occur on or before the maturity date of such draft.
(d) The maturity of each draft will be consistent with the
period usually and reasonably necessary to finance transactions of such kind.
(e) Customer holds a sales contract, purchase order or
letter of credit for each transaction underlying the acceptance, and holds
shipping documents conveying or securing title to the goods shipped.
(f) No drafts other than the presented draft have been or
shall be outstanding with respect to goods covered by any presented draft.
(g) The draft is payable in United States dollars and its
amount does not exceed the lesser of the sales price or fair market value of
the goods and the tenor of the draft does not exceed 92 days' sight to run.
(h) If a draft is accepted by the Banks and discounted,
the proceeds will be used solely to finance and consummate the shipping or
storage of the goods.
(i) The information furnished the Banks by Customer upon
request for financing is true and complete.
(j) No security interest in the goods pertaining to the
drafts shall be granted by Customer to any party except the Banks and there
will be no other financing of such goods outstanding during the life of the
accepted draft related thereto.
(k) The minimum amount of any draft issued by either Bank
shall be $500,000 and all drafts shall be in even multiples of $500,000. All
drafts issued by a Bank in response to a request from Customer shall be in
equal amounts to the other Bank.
3. Requests for Financing. Each request for a draft should be
made to:
Seattle-First National Bank
Seafirst Agency Services
Columbia Seafirst Center
701 Fifth Avenue, 16th Floor
Seattle, WA 98104
Attention: Brenda Little, Agency Officer
or to such other place as Agent may designate. Such requests may be oral,
telephonic, telegraphic, electronic, or in writing in the format described in
Schedule 1 attached hereto. If a request is made orally or by telephonic
communication, written confirmation must be received by Agent at the above
address before 11:00 a.m. of the day on which the oral or telephonic
communication request was made. All requests must be by persons authorized to
make such requests by Customer as shown on Exhibit B to the Credit Agreement
or any substitute or additional personnel hereafter specified in writing by
Customer. The Banks may act in reliance upon any oral, telephonic, or written
request believed in good faith to have been authorized by any of the persons
identified on Exhibit B to the Credit Agreement. The Banks shall not be
responsible for (a) any loss, costs, or expenses incurred by Borrower in
connection with any drafts, documents, or instruments delivered by Borrower to
either Bank in connection herewith; (b) any default, negligence, misfeasance,
suspension, insolvency, or bankruptcy, of any correspondent or agent of either
Bank to whom any such drafts, documents, or instruments may be entrusted; (c)
any loss or delay, in transmission or otherwise, on any such drafts;
documents, or instruments or the proceeds thereof; or (d) any delay,
interruption, omission, or error in transmission or delivery of any message.
4. Completion of Drafts. At Customer's option, by providing
the Banks with presigned, prenumbered but otherwise blank drafts, Customer
authorizes Banks to complete such drafts from time to time on Customer's
behalf in accordance with Customer's instructions. Banks each will
acknowledge receipt of all such incomplete drafts received by it and hold them
in safekeeping prior to completion.
5. Disbursement. Banks will deposit the net proceeds of each
draft accepted and discounted by it to Customer's account Number 020-0011-757
with U.S. Bank's Main branch in Portland, or such other account as Customer
may designate in writing. The net proceeds of a draft shall be the face
amount of the draft less the applicable Discount and less the Acceptance
Commission.
6. Payment. Customer agrees to pay Agent at its head office in
Seattle, or such other place as Agent may instruct in United States currency
the following:
(a) the face amount of each draft accepted by either Bank
payable on maturity of the draft in immediately available funds;
(b) the Banks' applicable fees or commissions in effect at
the time of the service for which they are charged, payable on demand;
(c) all costs and expenses, including wire charges,
courier charges, postage, and reasonable attorney fees and legal costs,
incurred by either Bank in connection with any draft accepted by, either Bank
or in connection with this Agreement, payable on demand; and
(d) interest on any of the above amounts not paid when due
from the date due until paid at the highest rate permitted by law not
exceeding the Seafirst Prime Rate (changing as the Seafirst Prime Rate
changes) plus 2 percent per annum, payable on demand.
7. Covenants. Customer agrees as follows:
(a) To maintain complete and accurate records and books of
account concerning the transactions giving rise to any drafts accepted by
either Bank.
(b) To permit the Agent, the Banks or their respective
agents to examine or inspect Customer's books and records of account at such
reasonable times as they may request.
(c) To provide the Banks with such information as Banks may
reasonably request with respect to the Customer's financial condition, the
transaction giving rise to any draft, or any of the matters provided for
herein.
(d) To procure promptly any necessary licenses for the
shipment of, or for the payment for, the goods constituting the subject matter
of the draft and to comply with all domestic laws, regulations, and orders
relating to the transactions out of which the drafts arise.
(e) To maintain in good condition and repair all goods
constituting the subject matter of the draft and to insure the same, and
Customer's records and writings evidencing or relating to such goods, against
all risks normally insured against in Customer's business or in the particular
transaction or as Banks may reasonably require, and to assign to or make the
loss payable to the Agent or Banks if the Banks so request.
(f) Upon request, to furnish the Banks with such trade
documents and other evidence deemed necessary by the Banks to establish that
the presented draft is an Eligible Draft.
(g) To indemnify the Banks from: (i) all loss or damage to
either Bank arising out of their acceptance of, or any other action taken by
either Bank in connection with, the drafts other than loss or damage resulting
from such Bank's gross negligence or willful misconduct, and (ii) all costs
and expenses (including reasonable legal expenses and attorneys' fees whether
on trial or appeal) arising out of either Bank's acceptance of the drafts or
incident to the collection of amounts owed by Customer on the drafts or the
enforcement of the Banks' rights.
(h) To indemnify the Banks from any penalties and/or
reserve assessments, both current and retroactive, which the Banks or either
of them may from time to time be required to pay by any branch, agency, or
department of the federal government in connection with any draft if the draft
is accepted and it is later determined that such draft is not an Eligible
Draft.
8. Events of Default. The occurrence of any of the following
shall constitute an Event of Default:
(a) Customer fails to pay when due any obligation
hereunder or otherwise owing to Seafirst or U.S. Bank;
(b) Customer breaches any other covenant herein;
(c) Any oral or written representation, warranty, or other
statement made by Customer to the Banks shall prove false or materially
misleading; or
(d) A Default occurs under the Credit Agreement.
Upon any Event of Default, at the Banks' option, the Banks may declare any and
all indebtedness owing by Borrower with respect to a draft to be immediately
due and payable without notice or demand and/or exercise any right or remedy
available at law and shall have all rights specified under the Credit
Agreement.
9. Authority. The termination of authority granted to any of
the Banks' employees or Customer's employees at any time designated to act for
any purpose on any Bank's behalf or Customer's behalf hereunder, shall not
affect any action taken by such employee prior to receipt by the Banks or by
Customer, as the case may be, of written notice terminating such employee's
authority.
10. Modifications. Customer agrees that in the event of any
mutually agreed modification of the terms of any draft, this Agreement shall
be effective with respect to such draft as modified.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
BANKS:
UNITED STATES NATIONAL BANK
OF OREGON
By
Title
SEATTLE-FIRST NATIONAL BANK
By
Title
CUSTOMER:
UNITED GROCERS, INC.
By
Title
<PAGE>
Schedule 1
Date:
Seattle-First National Bank
Seafirst Agency Services
Columbia Seafirst Center
701 Fifth Avenue, 16th Floor
Seattle, WA 98104
Attention: Brenda Little, Agency Officer
Subject: AMENDED AND RESTATED BANKER'S ACCEPTANCE AGREEMENT
DATED AS OF May 31, 1995
Ladies and Gentlemen:
This confirms our conversation with on
, 19____, in which we requested that you execute draft(s) in your
possession in the face amount described below for Seafirst which will be
utilized for the creation of banker's acceptance(s) and that you likewise
instruct United States National Bank of Oregon to execute drafts, in an
identical face amount, in its possession for the same purpose. Said banker's
acceptance are to be discounted with the net proceeds credited to our account
no. 020-0011-757 with United States National Bank of Oregon.
These banker's acceptances cover the financing of the [CHOOSE ONE:
imported shipments/exported shipments/domestic shipments] of goods described
below. We certify that no other financing is outstanding on these
transactions. At your request we shall provide you with copies of invoices,
bills of lading, and other pertinent shipping information to evidence the
shipments listed. All shipments are invoiced from our Milwaukie, Oregon,
headquarters.
Amounts: Seafirst $US
U.S. Bank $US
Total Amount: $
Date:
Maturity:
Tenor: days
All In Rate: ____ percent per annum
US$ Amount Shipped To (State)* Commodity
* If shipped within Oregon, city must be specified.
UNITED GROCERS, INC.
By
Authorized Signature
<PAGE>
Exhibit B
Officers Authorized to Request Advances
NAME OFFICE
Alan C. Jones President, Secretary
George P. Fleming Assistant Secretary
John W. White Vice President
<PAGE>
EXHIBIT C-1
[REVOLVING LINE NOTE (SEAFIRST)]
AMENDED AND RESTATED
PROMISSORY NOTE
$18,750,000 Seattle, Washington
May 31, 1995
For value received, UNITED GROCERS, INC., an Oregon corporation
("Borrower"), promises to pay to the order of SEATTLE-FIRST NATIONAL BANK, a
national banking association ("Seafirst) at its offices at 701 Fifth Avenue,
Seattle, Washington 98104, or at such other address as the holder of this Note
may designate in writing, the principal amount of each Advance made to
Borrower by Seafirst, as agent for itself, under Section 4.01 of the Amended
and Restated Credit Agreement of even date herewith between Borrower,
Seafirst, and United States National Bank of Oregon (the "Credit Agreement"),
payable on the last day of the Interest Period for such Advance, together with
interest from the date hereof as follows: (a) interest on the outstanding
balances of all Seafirst Prime Loans at the Seafirst Prime Rate monthly in
arrears on the first day of each and every calendar month and in no event
later than the applicable Maturity Date, and (b) interest on the outstanding
balances of all LIBOR Loans at the LIBOR Rates applicable thereto on the
expiration of the applicable Interest Period or in the case of an Interest
Period of six (6) months, each three- (3-) month anniversary of the
commencement of that Interest Period, or at the applicable Maturity Date,
whichever first occurs.
Notwithstanding the foregoing, all Advances and all interest shall
be due and payable no later than the applicable Maturity Date. All payments
shall be applied in accordance with Section 6.11 of the Credit Agreement.
Upon the occurrence of a Default, as defined in the Credit
Agreement, the holder of this Note may declare the entire amount owing under
this Note immediately due and payable. All amounts not paid when due shall
bear interest at the "Default Rate" specified in the Credit Agreement. The
failure of the holder of this Note promptly to exercise the holder's rights
hereunder in the event any default shall not constitute a waiver of such
rights while such default continues nor a waiver of such rights in connection
with any future default. Borrower hereby waives presentment, demand, notice,
and protest.
In the event the holder of this Note retains an attorney(s) for
the purpose of collecting the indebtedness evidenced by this Note, Borrower
shall pay holder's reasonable attorney fees and collection costs, even though
no civil action is filed on this Note. If an action is filed, Borrower shall
pay such additional sum as the trial judge and any appellate court may adjudge
reasonable as attorney fees in the action, including any appeal, along with
statutory costs and disbursements and together with interest on said sums at
the Default Rate from the date the fees, costs, and disbursements are
incurred.
<PAGE>
This Note is governed in all respects by the terms of the Credit
Agreement, as amended from time to time. The combined outstanding principal
balances owed on this Note drawn by Borrower pursuant to the Credit Agreement
may not exceed at any one time $18,750,000. All terms capitalized herein
shall have the meaning ascribed to such terms in the Credit Agreement. This
Note continues, amends and restates that prior Promissory Note made by
Borrower in favor of Seafirst as of March 13, 1992, as the same was amended
from time to time thereafter.
UNITED GROCERS, INC.
By /s/ Alan C. Jones
Its President
By /s/ John W. White
Its Vice President
<PAGE>
EXHIBIT C-2
[REVOLVING LINE NOTE (U.S. BANK)]
AMENDED AND RESTATE
PROMISSORY NOTE
$18,750,000 Seattle, Washington
May 31, 1995
For value received, UNITED GROCERS, INC., an Oregon corporation
("Borrower"), promises to pay to the order of UNITED STATES NATIONAL BANK OF
OREGON, a national banking association ("U.S. Bank"), through SEATTLE-FIRST
NATIONAL BANK, a national banking association ("Seafirst"), as agent for U.S.
Bank, at the offices of Seafirst at 701 Fifth Avenue, Seattle, Washington
98104, or at such other address as the holder of this Note may designate in
writing, the principal amount of each Advance made to Borrower by U.S. Bank
through Seafirst, as agent for U.S. Bank, under Section 4.01 of the Amended
and Restated Credit Agreement of even date herewith between Borrower,
Seafirst, and U.S. Bank ("Credit Agreement"), payable on the last day of the
Interest Period for such Advance, together with interest from the date hereof
as follows: (a) interest on the outstanding balances of all Seafirst Prime
Loans at the Seafirst Prime Rate monthly in arrears on the first day of each
and every calendar month and in no event later than the applicable Maturity
Date, and (b) interest on the outstanding balances of all LIBOR Loans at the
LIBOR Rates applicable thereto on the expiration of the applicable Interest
Period, or in the case of an Interest Period of six (6) months, each three-
(3-) month anniversary of the commencement of that Interest Period, or at the
applicable Maturity Date, whichever first occurs.
Notwithstanding the foregoing, all Advances and all interest shall
be due and payable no later than the applicable Maturity Date. All payments
shall be applied in accordance with Section 6.11 of the Credit Agreement.
Upon the occurrence of a Default, as defined in the Credit
Agreement, the holder of this Note may declare the entire amount owing under
this Note immediately due and payable. All amounts not paid when due shall
bear interest at the "Default" Rate" specified in the Credit Agreement. The
failure of the holder of this Note promptly to exercise the holder's rights
hereunder in the event of any default shall not constitute a waiver of such
rights while such default continues nor a waiver of such rights in connection
with any future default. Borrower hereby waives presentment, demand, notice,
and protest. In the event the holder of this Note retains an attorney(s) for
the purpose of collecting the indebtedness evidenced by this Note, Borrower
shall pay holder's reasonable attorney fees and collection costs, even though
no civil action is filed on this Note. If an action is filed, Borrower shall
pay such additional sum as the trial judge and any appellate court may adjudge
reasonable as attorney fees in the action, including any appeal, along with
statutory costs and disbursements and together with interest on said sums at
the Default Rate from the date the fees, costs, and disbursements are
incurred.
<PAGE>
This Note is governed in all respects by the terms of the Credit
Agreement, as amended from time to time. The combined outstanding principal
balances owed on this Note drawn by Borrower pursuant to the Credit Agreement
may not exceed at any one time $18,750,000. All terms capitalized herein
shall have the meaning ascribed to such terms in the Credit Agreement. This
Note continues, amends and restates that prior Promissory Note made by
Borrower in favor of U.S. Bank as of March 13, 1992, as the same was amended
from time to time thereafter.
UNITED GROCERS, INC.
By /s/ Alan C. Jones
Its President
By /s/ John W. White
Its Vice President
<PAGE>
EXHIBIT D-1
[OPERATING LINE NOTE (SEAFIRST)]
AMENDED AND RESTATED
PROMISSORY NOTE
$18,750,000 Seattle, Washington
May 31, 1995
For value received, UNITED GROCERS, INC., an Oregon corporation
("Borrower"), promises to pay to the order of SEATTLE-FIRST NATIONAL BANK, a
national banking association ("Seafirst"), at its offices at 701 Fifth Avenue,
Seattle, Washington 98104, or at such other address as the holder of this Note
may designate in writing, the principal amount of each Advance made to
Borrower by Seafirst as agent for itself, under Section 4.02 of the Amended
and Restated Credit Agreement of even date herewith between Borrower,
Seafirst, and United States National Bank of Oregon (the "Credit Agreement"),
payable on the last day of the Interest Period for such Advance, together with
interest from the date hereof as follows: (a) interest on the outstanding
balances of all Seafirst Prime Loans at the Seafirst Prime Rate monthly in
arrears on the first day of each and every calendar month and in no event
later than the applicable Maturity Date, (b) interest on the outstanding
balances of all LIBOR Loans at the LIBOR Rates applicable thereto on the
expiration of the applicable Interest Period or at the applicable Maturity
Date, whichever first occurs, and (c) all amounts owing with respect to BA
Loans in accordance with Section 4.07 of the Credit Agreement.
Notwithstanding the foregoing, all Advances and all interest shall
be payable no later than the applicable Maturity Date. All payments shall be
applied in accordance with Section 6.11 of the Credit Agreement.
Upon the occurrence of a Default, as defined in the Credit
Agreement, the holder of this Note may declare the entire amount owing under
this Note immediately due and payable. All amounts not paid when due shall
bear interest at the "Default Rate" specified in the Credit Agreement. The
failure of the holder of this Note promptly to exercise the holder's rights
hereunder in the event of any default shall not constitute a waiver of such
rights while such default continues nor a waiver of such rights in connection
with any future default. Borrower hereby waives presentment, demand, notice,
and protest.
In the event the holder of this Note retains an attorney(s) for
the purpose of collecting the indebtedness evidenced by this Note, Borrower
shall pay holder's reasonable attorney fees and collection costs, even though
no civil action is filed on this Note. If an action is filed, Borrower shall
pay such additional sum as the trial judge and any appellate court may adjudge
reasonable as attorney fees in the action, including any appeal, along with
statutory costs and disbursements and together with interest on said sums at
the Default Rate from the date the fees, costs, and disbursements are
incurred.
<PAGE>
This Note is governed in all respects by the terms of the Credit
Agreement, as amended from time to time. The combined outstanding principal
balances owed on this Note drawn by Borrower pursuant to the Credit Agreement
may not exceed at any one time $18,750,000. All terms capitalized herein
shall have the meaning ascribed to such terms in the Credit Agreement. This
Note continues, amends and restates that prior Promissory Note made by
Borrower in favor of Seafirst as of March 13, 1992, as the same was amended
from time to time thereafter.
UNITED GROCERS, INC.
By /s/ Alan C. Jones
Its President
By /s/ John W. White
Its Vice President
<PAGE>
EXHIBIT D-2
[OPERATING LINE NOTE (U.S. BANK)]
AMENDED AND RESTATED
PROMISSORY NOTE
$18,750,000 Seattle, Washington
May 31, 1995
For value received, UNITED GROCERS, INC., an Oregon corporation
(Borrower"), promises to pay to the order of UNITED STATES NATIONAL BANK OF
OREGON, a national banking association ("U.S. Bank"), through SEATTLE-FIRST
NATIONAL BANK, a national banking association ("Seafirst"), as agent for U.S.
Bank, at the offices of Seafirst at 701 Fifth Avenue, Seattle, Washington
98104, or at such other address as the holder of this Note may designate in
writing, the principal amount of each Advance made to Borrower by U.S. Bank
through Seafirst, as agent for U.S. Bank, under Section 4.02 of the Amended
and Restated Credit Agreement of even date herewith between Borrower,
Seafirst, and U.S. Bank (the "Credit Agreement"), payable on the last day of
the Interest Period as for such Advance, together with interest from the date
hereof as follows: (a) interest on the outstanding balances of all Seafirst
Prime Loans at the Seafirst Prime Rate monthly in arrears on the first day of
each and every calendar month and in no event later than the applicable
Maturity Date, (b) interest on the outstanding balances of all LIBOR Loans at
the LIBOR Rates applicable thereto on the expiration of the applicable
Interest Period or at the applicable Maturity Date, whichever first occurs,
and (c) all amounts owing with respect to BA Loans in accordance with Section
4.07 of the Credit Agreement.
Notwithstanding the foregoing, all Advances and all interest shall
be due and payable no later than the applicable Maturity Date. All payments
shall be applied in accordance with Section 6.11 of the Credit Agreement.
Upon the occurrence of a Default, as defined in the Credit
Agreement, the holder of this Note may declare the entire amount owing under
this Note immediately due and payable. All amounts not paid when due shall
bear interest at the "Default Rate" specified in the Credit Agreement. The
failure of the holder of this Note promptly to exercise the holder's rights
hereunder in the event of any default shall not constitute a waiver of such
rights while such default continues nor a waiver of such rights in connection
with any future default. Borrower hereby waives presentment, demand, notice
and protest.
In the event the holder of this Note retains an attorney(s) for
the purpose of collecting the indebtedness evidenced by this Note, Borrower
shall pay holder's reasonable attorney fees and collection costs, even though
no civil action is filed on this Note. If an action is filed, Borrower shall
pay such additional sum as the trial judge and any appellate court may adjudge
reasonable as attorney fees in the action, including any appeal, along with
statutory costs and disbursements and together with interest on said sums at
the Default Rate from the date the fees, costs, and disbursements are
incurred.
<PAGE>
This Note is governed in all respects by the terms of the Credit
Agreement, as amended from time to time. The combined outstanding principal
balances owed on this Note drawn by Borrower pursuant to the Credit Agreement
may not exceed at any one time $18,750,000. All terms capitalized herein
shall have the meaning ascribed to such terms in the Credit Agreement. This
Note continues, amends and restates that prior Promissory Note made by
Borrower in favor of U.S. Bank as of March 13, 1992, as the same was amended
from time to time thereafter.
UNITED GROCERS, INC.
By /s/ Alan C. Jones
Its President
By /s/ John W. White
Its Vice President
<PAGE>
EXHIBIT E
[OVERNIGHT LINE NOTE (U.S. BANK)]
AMENDED AND RESTATED
PROMISSORY NOTE
$10,000,000 Seattle, Washington
May 31, 1995
For value received, UNITED GROCERS, INC., an Oregon corporation
("Borrower"), promises to pay to the order of U.S. BANK NATIONAL BANK OF
OREGON, a national banking association ("U.S. Bank"), at its offices at
321 S.W. 6th Ave., Portland, Oregon 97204, or at such other address as the
holder of this Note may designate in writing, the principal amount of each
Advance made to Borrower by U.S. Bank under Section 5.01 of the Amended and
Restated Credit Agreement of even date herewith between Borrower, Seattle-
First National Bank, and U.S. Bank (the "Credit Agreement") payable on the
last day of the Interest Period for such Advance, together with interest from
the date hereof as follows: (a) interest on the outstanding balances of
all U.S. Bank Prime Loans at the U.S. Bank Prime Rate monthly in arrears on
the first day of each and every calendar month and in no event later than the
applicable Maturity Date, and (b) interest on the outstanding balances of all
Interim Loans at the Interim Rates at the end of the applicable Interest
Period and in no event later than the applicable Maturity Date.
Notwithstanding the foregoing, all Advances and all interest shall
be due and payable no later than the applicable Maturity Date. All payments
shall be applied in accordance with Section 6.11 of the Credit Agreement.
Upon the occurrence of a Default, as defined in the Credit
Agreement, the holder of this Note may declare this entire amount owing under
this Note immediately due and payable. All amounts not paid when due shall
bear interest at the "Default Rate" specified in the Credit Agreement. The
failure of the holder of this Note promptly to exercise the holder's rights
hereunder in the event of any default shall not constitute a waiver of such
rights while such default continues nor a waiver of such rights in connection
with any future default. Borrower hereby waives presentment, demand, notice,
and protest.
In the event the holder of this Note retains an attorney(s) for
the purpose of collecting the indebtedness evidenced by this Note, Borrower
shall pay holder's reasonable attorney fees and collection costs, even though
no civil action is filed on this Note. If an action is filed, Borrower shall
pay such additional sum as the trial judge and any appellate court may adjudge
reasonable as attorney fees in the action, including any appeal, along with
statutory costs and disbursements and together with interest on said sums at
the Default Rate from the date the fees, costs, and disbursements are
incurred.
<PAGE>
This Note is governed in all respects by the terms of the Credit
Agreement, as amended from time to time. The combined outstanding principal
balances owed on this Note drawn by Borrower pursuant to the Credit Agreement
may not exceed at any one time $10,000,000. All terms capitalized herein
shall have the meaning ascribed to such terms in the Credit Agreement. This
Note continues, amends and restates that prior Promissory Note made by
Borrower in favor of Security Pacific Bank Oregon as of March 13, 1992, as the
same was assigned and amended from time to time thereafter.
UNITED GROCERS, INC.
By /s/ Alan C. Jones
Its President
By /s/ John W. White
Its Vice President
<PAGE>
EXHIBIT 4.F3
Execution Copy
SECOND AMENDMENT TO
LOAN PURCHASE AND SERVICING AGREEMENT
DATED AS OF MAY 13, 1994
This SECOND AMENDMENT TO LOAN PURCHASE AND SERVICING AGREEMENT
DATED AS OF MAY 13, 1994 AND AMENDED AS OF JULY 15, 1994 (this "Second
Amendment") is entered into as of this 28th day of September, 1995 by and
between United Resources, Inc., as Seller and Servicer ("United Resources"),
United Grocers, Inc., as Guarantor (the "Guarantor") and National Consumer
Cooperative Bank, as Buyer (the "Buyer").
WHEREAS, United Resources, the Guarantor and the Buyer entered into
a certain Loan Purchase and Servicing Agreement dated as of May 13, 1994 and
amended as of July 15, 1994 (the "Agreement") which provides for United
Resources to sell and Buyer to purchase Loans satisfying the terms and
conditions of the Agreement; and
WHEREAS, the parties to the Agreement desire to amend the Agreement
to provide for the purchase of certain "Rays' Loans" and to provide for the
sharing of the Guaranty Amount and the "Holdback Guaranty Amount" as described
herein.
NOW, THEREFORE, for full and fair consideration, the parties hereto
agree as follows:
1. Amendments. (a) The following definitions in Section 1.01
of Article I of the Agreement are hereby amended to read as follows:
"Guaranty Amount" shall mean, at any time, an amount equal to (a)
the sum of (i) fifteen percent (15%) of the Purchase Price of each
Preferred Loan, (ii) forty-nine percent (49%) of the Purchase Price of
each Standard Loan, and (iii) one hundred percent (100%) of the Purchase
Price of each Full Recourse Loan, minus (b) all amounts previously
remitted or paid hereunder by Guarantor to Buyer pursuant to the Guaranty
or the Holdback Guaranty; provided, however, that at no time shall the
Guaranty Amount be less than the sum of the Purchase Price of the sum of
the three largest Loans or the sum of the three largest Aggregate
Exposures, whichever is greater at such time.
"Loan" shall mean each loan originated by Seller in the ordinary
course of its business and sold and transferred (in its entirety or
through a participation interest therein) to the Buyer pursuant to this
Agreement, together with the rights and obligations of a holder thereof,
payments thereon and proceeds therefrom, the Loans originally subject to
this Agreement being identified on the Loan Schedule. "Loan" shall also
include any Renewal Loan or Rays' Loan accepted by the Buyer under this
Agreement.
"Maximum Purchase Amount" shall mean $28,750,000, unless otherwise
increased or reduced by the parties hereto.
"Principal Balance" shall mean, with respect to any Loan, at any
date of determination, (i) the principal balance of the Loan (or if a
participation interest in such Loan is being purchased hereunder, the
product of (a) the percentage participation interest specified with
respect to such Loan in the Loan Schedule times (b) the principal balance
of the Loan) outstanding as of the applicable Cut-Off Date, after
application of the principal payments received on or before such date,
minus (ii) the sum of (a) the principal portion of the Monthly Payments
received during each Due Period ending prior to the most recent Payment
date, which were distributed pursuant to Section 5.07 on any previous
Payment Date, and (b) all Principal Prepayments, Payaheads, Insurance
Proceeds, Net Liquidation Proceeds, Guaranty Payments, payments under the
Holdback Guaranty and Repurchase Proceeds to the extent applied by the
Servicer as recoveries of principal in accordance with the provisions
hereof, which were distributed pursuant to Section 5.07 on any previous
Payment Date.
(b) The following definitions are hereby added to Section 1.01
of Article I of the Agreement:
"Holdback Guaranty" shall mean the Guaranty provided by the
Guarantor pursuant to Section 2.01(a) of the Holdback Guaranty Agreement.
"Holdback Guaranty Agreement" shall mean the Guaranty Agreement
(Holdback Program) dated as of September 28, 1995, by and between United
Grocers, Inc., as guarantor, and NCB, in the form of Exhibit Q attached
hereto.
"Holdback Guaranty Amount" shall mean the "Guaranty Amount"
available under the Holdback Guaranty Agreement.
"Holdback Loan Purchase Agreement" shall mean the Loan Purchase and
Servicing Agreement (Holdback Program) dated as of September 28, 1995, by
and between United Resources, as seller and servicer, and NCB, as buyer.
"Rays' Loan" shall mean certain loans relating to the Rays'/C&K
Market sold by United Resources to NCB pursuant to the Holdback Loan
Purchase Agreement and repurchased by United Resources pursuant to
Section 7.04 of the Holdback Loan Purchase Agreement after any such Rays'
Loan satisfies the Loan eligibility requirements set forth in
Section 4.02 of the Agreement.
(c) Section 2.01A of the Agreement is hereby amended to read as
follows:
SECTION 2.01A Incremental Purchase. (a) Subject to the terms
and conditions hereof, the Seller may at any time prior to June 30, 1996
(or such later date as is approved by Buyer) sell to the Buyer and the
Buyer shall purchase from the Seller certain identified Loans and
Property related thereto (each, an "Incremental Purchase"); provided,
however, that no Incremental Purchase shall be for a principal amount of
less than $2,000,000 (or such lesser amount as is approved by Buyer)
(other than the final Incremental Purchase which may be in such lesser
amount as agreed to by Buyer or such other lesser amount as is approved
by Buyer) and provided further, that the Buyer shall not be obligated to
make an Incremental Purchase (or any portion thereof) to the extent such
Purchase (or any portion thereof), together with all previous Incremental
Purchases, would exceed the Maximum Purchase Amount.
(b) Subject to the terms and conditions hereof (other than the
payment of any fees or expenses relating to such Incremental Purchase),
Buyer hereby agrees to make one or more Incremental Purchases of Rays'
Loans having an aggregate Principal Balance of not more than $2,000,000.
(c) The Seller shall provide the Buyer with written notice of its
intention to request an Incremental Purchase in the form of Exhibit E
hereto no later than ten (10) Business Days before each Incremental
Purchase and shall provide the Buyer with at least five (5) Business Days
to review the Loan Files relating to each Incremental Purchase. Upon
satisfaction of all terms and conditions contained herein, Buyer shall
pay to the Seller the Purchase Price of each Incremental Purchase on the
applicable Closing Date.
(d) Section 7.01 (a) of the Agreement is hereby amended to read
as follows:
SECTION 7.01 Guarantor's Guaranty and Repurchase Guaranty. In
order to induce Buyer to purchase the Loans, Guarantor hereby agrees to
provide the following guaranties:
(a) Guarantor hereby agrees to provide to the Buyer a Guaranty
of Liquidation Losses, equal at any time to the then current Guaranty
Amount. After a Loan has become a Liquidated Loan and the amount of
Liquidation Loss thereon has been determined, the Buyer shall notify
Guarantor of the amount of Liquidation Loss and, within five (5) Business
Days of receipt of such notice, Guarantor shall make a Guaranty Payment
to the Buyer in the amount of such Liquidation Loss; provided, however,
that Guarantor's obligation to make a Guaranty Payment shall be limited
to first, the then available Guaranty Amount, and if the Guaranty Amount
is exhausted, the then available Holdback Guaranty Amount.
(e) A new subsection (d) is added to Section 7.01 of the
Agreement and reads as follows:
(d) The parties to this Agreement hereby expressly acknowledge
that the Guaranty Amount will be available to support the Holdback
Guaranty to the extent the Holdback Guaranty Amount has been exhausted
and conversely, that the Holdback Guaranty Amount will be available to
support Guarantor's Guaranty hereunder to the extent the Guaranty Amount
is exhausted.
(f) A new Termination Event is added as subsection (h) of
Section 10.01 of the Agreement and reads as follows:
(h) Termination Event under Holdback Loan Purchase Agreement. A
Termination Event shall have occurred and be continuing under the
Holdback Loan Purchase Agreement.
(g) Section 10.02 of the Agreement is amended to read as follows:
SECTION 10.02 Consequences of Termination Event. If any
Termination Event shall occur and be continuing, then in any such case
and at any time thereafter so long as such Termination Event shall be
continuing, the Buyer may, at its option, immediately terminate Buyer's
obligations to make Incremental Purchases and to accept Renewal Notes
hereunder.
In addition, upon the occurrence of any Termination Event specified
in (c), (d) or (e) of Section 10.01 or a Termination Event arising out of
Servicer's or Guarantor's insolvency or involvement in a voluntary or
involuntary bankruptcy proceeding, subject to the provisions of
Section 11.15, this Agreement shall automatically and immediately
terminate.
Thereafter, and before exercising any other remedies provided
herein or by applicable law, Buyer may, at its option, require that
Seller repurchase all Loans and related Property Notes for the Purchase
Amount within two 2 Business Days of receipt of notice from the Buyer of
its election to cause the repurchase of all Loans. In addition, Buyer
may pursue all other rights and remedies available herein and by
applicable law including, without limitation, its rights to pursue
collection from the Seller in an amount equal to the applicable Purchase
Amount.
(h) A new Section 11.15 is added to the Agreement and reads as
follows:
SECTION 11.15 Term of Agreement. This Agreement shall
terminate upon the earlier to occur of (i) the reduction of the aggregate
Principal Balance of the Loans (including Liquidated Loans as to which
there remain unpaid Liquidation Losses) to zero or (ii) the date on which
this Agreement is automatically terminated following the occurrence of
any of the specified Termination Events pursuant to Section 10.02;
provided, however, that (a) the rights accrued to the Buyer prior to such
termination, (b) the obligations of the Guarantor under this Agreement,
and (c) the indemnification provisions set forth in Section 11.02 shall
be continuing and shall survive any termination of this Agreement.
2. Capitalized Terms. Capitalized terms used in this Second
Amendment and not otherwise defined shall have the meanings given them in the
Agreement.
3. Ratification. Except as specifically amended hereby, all of
the terms and conditions of the Agreement shall remain in full force and
effect. All references to the Agreement in any other document or instrument
shall be deemed to mean such Agreement as amended by this Second Amendment.
This Second Amendment shall not constitute a novation of the Agreement, but
shall constitute an amendment thereof. The parties hereto agree to be bound
by the terms and obligations of the Agreement, as amended by this Second
Amendment, as though the terms and obligations of the Agreement were set forth
herein.
4. Effectiveness. The amendments provided for by this Second
Amendment shall become effective when duly executed by each of the parties
hereto.
5. Counterparts. This Second Amendment may be executed in any
number of counterparts and by separate parties hereto on separate
counterparts, each of which when executed shall be deemed an original, but all
such counterparts taken together shall constitute one and the same instrument.
6. Governing Law. THIS SECOND AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed by their respective officers or agents thereunto duly
authorized as of the date first above written.
UNITED RESOURCES, INC., as Seller and
as Servicer
By /s/ George P. Fleming
Its President
By /s/ Alan C. Jones
Its Vice President
UNITED GROCERS, INC., as Guarantor
By /s/ Alan C. Jones
Its President
By /s/ George P. Fleming
Its Assistant Secretary
NATIONAL CONSUMER COOPERATIVE BANK,
as Buyer
By
Its
By
Its
<PAGE>
EXHIBIT 10.D1c
INSTALLMENT NOTE
$---------------- ----------------------
THE UNDERSIGNED ("Borrowers"), jointly and severally, promise to
pay to the order of ----------------------, a ------------ corporation
("Payee"), at ----------------------
- -------------------------, or to its assigns (the "Bank"), or at such other
address as the Bank may specify to the Borrowers in writing, the sum of ------
- -------------------------------------
($----------), payable in ------------ (---) consecutive monthly installments
of ----------------------------- ($-----------), the first payment to be made
on -------------------- with subsequent payments to be made on the same day of
each month thereafter until the final payment becomes due on -----------------
- -----.
The outstanding principal balance will bear interest at a fixed
rate of ---------- percent. The interest rate will be assessed at Prime rate
plus -------- percentage points and will be adjusted every six months using
the prime rate published by
- ------------------ plus ------- percentage points. Any such change in the
interest rate will cause a change in the monthly payment to ensure payment in
full of the existing balance over the remaining amortization period. Interest
shall be payable monthly on the same day as the principal, until the whole
sum, principal and interest, has been paid.
This Note may be prepaid in whole or in part at any time. All such
prepayments will be applied first to the payment of other charges, fees, and
expenses under this Note and any other Related Document, as defined below,
second to the payment of accrued interest, and third to principal installments
due hereunder in inverse order of maturity.
This Note is issued in connection with and is subject to the terms
of a security agreement between the Borrowers and
- ------------------/United Grocers, Inc., and to additional documents
guaranteeing the obligations hereunder or granting liens to secure same.
Reference is made to such loan agreement and additional documents for other
terms under which amounts payable hereunder may become immediately due and
owing. Although ---------------------- may sell, assign, or otherwise
transfer this Note to a third party, this Note will continue to be subject to
the loan agreement and such other documents.
The Borrowers agree that until this Note is paid in full Borrowers
shall (1) do all things necessary to maintain its status as a member in good
standing of Untied Grocers, Inc., and (2) purchase product through United
Grocers, Inc., to the extent that a certain percentage may be required in the
Related Documents or other agreements that may exist between Borrowers, Payee,
or United Grocers, Inc.
The occurrence of any of the following events shall constitute an
Event of Default under this Note: (i) any default in the payment of this
Note; (ii) any breach or default under other Related Documents or other
agreements that may exist between Borrower, Payee, or United Grocers, Inc.;
(iii) Borrowers fail to purchase the required percentage of product from
United Grocers, Inc., that may be required in the Related Documents or other
agreements that exist between Borrowers, Payee, or United Grocers, Inc.; (iv)
Borrowers shall no longer be a member in good standing of United Grocers,
Inc.; (v) either the Payee or Bank in good faith shall believe the prospect of
payment of this Note is substantially impaired due to a materially adverse
change in Borrowers' financial condition. Upon the occurrence of an Event of
Default and at any time thereafter, the holder of this Note may, at its
option, declare this Note to be immediately due and payable and thereupon this
Note shall become due and payable for the entire unpaid principal balance of
this Note plus accrued interest and other charges on this Note without any
presentment, demand, protest, or other notice of any kind. If this Note is
placed in the hands of an attorney for collection, Borrowers promise and agree
to pay the reasonable attorney fees and collection costs of the holder of this
Note even though no suit or action is filed hereon; if a suit or an action is
filed, the Borrowers must pay such reasonable attorney fees as shall be fixed
by the court or courts in which the suit or action, including any appeal
therein, is tried, heard, and decided. The Borrowers agree that their
obligations hereunder are absolute and unconditional and shall continue for so
long as any amounts payable hereunder remain unpaid, without any defense or
set off.
--------------------------------
By-------------------------------
Name:----------------------------
Title:---------------------------
By-------------------------------
Name:----------------------------
Title:---------------------------
--------------------------------
By-------------------------------
Name:----------------------------
Title:---------------------------
By-------------------------------
Name:----------------------------
Title:---------------------------
INDIVIDUALLY:
---------------------------------
---------------------------------
<PAGE>
EXHIBIT 10.D1d
RENEWAL NOTE
FOR A FIXED RATE LOAN
$
------------------------ ----------------------
THE UNDERSIGNED ("Borrowers"), jointly and severally, promise to
pay to the order of -------------------------, a ----------------- corporation
("Payee"), at -----------------------,
- ------------------------------------, or to its assigns (the "Bank"), or at
such other address as the Bank may specify to the Borrowers in writing, the
sum of ----------------------------
($-------------), payable in --------------- (---) consecutive monthly
installments of -----------------------------------------
($-----------), including interest, the first payment to be made on ----------
- ----------, with subsequent payments to be made on the same day of each month
thereafter until the final payment becomes due on -------------------------.
The outstanding principal balance will bear interest at a fixed
rate of -------- percent. The interest rate will be assessed at Prime rate
plus ------- percentage points and will be adjusted every six months using the
prime rate published by ---------------------------- plus ------ percentage
points. Any such change in the interest rate will cause a change in the
monthly payment to ensure payment in full of the existing balance over the
remaining amortization period. Interest shall be payable monthly on the same
day as the principal, until the whole sum, principal and interest, has been
paid.
This Note may be prepaid in whole or in part at any time. All such
prepayments will be applied first to the payment of other charges, fees, and
expenses under this Note and any other Related Document, as defined below,
second to the payment of accrued interest and third to principal installments
due hereunder in inverse order of maturity.
This Note is a renewal of an earlier promissory note (No. -------)
in the principal amount of ----------------------
- --------------------- ($-------------) executed as of ----------
- ------------------- (the Prior Note), by Borrowers in favor of Payee or United
Grocers, Inc., an Oregon corporation, and is secured by and guaranteed by the
Loan Agreement, Security Agreement, and all other documents and instruments
(as from time to time were amended, collectively, the "Related Documents").
Reference is made to such Related Documents for additional terms under which
the amounts evidenced hereby may become immediately due and owing. To the
extent that the interest rate provision or any other provision of this Note is
inconsistent with a provision of the Loan Agreement or other Related Document,
the terms of this Note shall be deemed to amend such inconsistent term in the
Related Documents without affecting or invalidating the remaining provisions
thereof.
The Borrowers agree that until this Note is paid in full Borrowers
shall (1) do all things necessary to maintain its status as a member in good
standing of United Grocers, Inc., and (2) purchase product through United
Grocers, Inc., to the extent that a certain percentage may be required in the
Related Documents or other agreements that may exist between Borrower, Payee,
or United Grocers, Inc.
All payments becoming due hereunder should be made to
- ------------------------------ at ---------------------------.
The occurrence of any of the following events shall constitute an
Event of Default under this Note: (i) any default in the payment of this
Note; (ii) any breach or default under other Related Documents or other
agreements that may exist between Borrower, Payee, or United Grocers, Inc.;
(iii) Borrowers fail to purchase the required percentage of product from
United Grocers, Inc., that may be required in the Related Documents or other
agreements that exist between Borrower, Payee, or United Grocers, Inc.; (iv)
Borrowers shall no longer be a member in good standing of United Grocers,
Inc.; (v) either the Payee or Bank in good faith shall believe the prospect of
payment of this Note is substantially impaired due to a materially adverse
change in Borrowers' financial condition. Upon the occurrence of an Event of
Default and at any time thereafter, the holder of this Note may, at its
option, declare this Note to be immediately due and payable and thereupon this
Note shall become due and payable for the entire unpaid principal balance of
this Note plus accrued interest and other charges on this Note without any
presentment, demand, protest, or other notice of any kind. If this Note is
placed in the hands of an attorney for collection, Borrowers promise and agree
to pay the reasonable attorney fees and collection costs of the holder of this
Note even though no suit or action is filed hereon; if a suit or an action is
filed, the Borrowers must pay such reasonable attorney fees as shall be fixed
by the court or courts in which the suit or action, including any appeal
therein, is tried, heard, and decided. The Borrowers agree that their
obligations hereunder are absolute and unconditional and shall continue for so
long as any amounts payable hereunder remain unpaid, without any defense or
set off.
This Renewal Note shall not be effective if, prior to ------ days
before the maturity of the Prior Note, Borrowers are notified by Payee that it
elects not to renew the Prior Note. In such event, this Renewal Note is of no
effect and the Borrowers' indebtedness is due in accordance with the terms of
the Prior Note.
----------------------------------
Name:-----------------------------
Title:----------------------------
By--------------------------------
Name:-----------------------------
Title:----------------------------
By--------------------------------
INDIVIDUALLY:
----------------------------------
----------------------------------
<PAGE>
EXHIBIT 10.D1i
AMENDMENT TO INSTALLMENT NOTE AND SECURITY AGREEMENTS
WHEREAS, the Note dated -------------------, in the amount of $----
- ---------; and Amendment to said Note dated ------------------- in the amount
of $------------; and Amendment to said Note dated ------------------, in the
amount of $----------; and Amendment to said Note dated -----------------, in
the amount of $----------------; and Amendment to said Note dated ------------
- ------, in the amount of $------------; and Amendment to said Note dated -----
- -------------, in the amount of $---------------, has a balance owing of $----
- ----------, known as Loan No. -----; and
WHEREAS, the Borrower requests additional financing in the amount
of $------------- for purchase of new fixtures and equipment at --------------
- ------.
NOW, THEREFORE, it is agreed as follows:
1. The new funds of $------------- shall be repaid according to
the Installment Note attached hereto marked Exhibit A; said Note shall be
known as Loan -----------.
2. Loans -------- and --------- together with interest shall be
secured under the Security Agreements respectively dated --------------------
and -----------------, and any subsequent Amendments and Security Agreements,
continuing the terms and conditions thereof, and said agreements are hereby
ratified and reaffirmed.
3. Inventory at ------------------------------------ shall be
maintained at all times at a level of not less than $-------------- cost to
Borrower.
4. Covenants. So long as any part of the Note remains unpaid, the
Borrower covenants as follows:
(a) The Borrower will not assign, mortgage, or pledge any part of
the assets of Borrower or incur any further indebtedness except for short-term
credit for the purchase of goods and services on open account.
(b) The Borrower shall furnish to the Lender quarterly financial
statements consisting of a balance sheet and an operating statement in a form
and by an accountant satisfactory to the Lender on --------------------.
(c) The Lender, acting through its officers, agents, attorneys,
and accountants, including an independent certified public accountant hired by
it, shall have the right to examine the books of the Borrower at all
reasonable times.
5. Insurance
(a) The Borrower shall maintain standard form fire, extended
coverage, vandalism, and malicious mischief insurance insuring the merchandise
inventory, fixtures, trade fixtures, and equipment at -------------------
dba --------------------- to at least the actual cash value, with loss payable
clauses in favor of the Lender and its assignee.
(b) The Borrower shall obtain and maintain in full force and
effect for the length of the loan an irrevocable collateral assignment to
United Grocers, Inc., and/or its subsidiaries and/or its assignees on a life
policy on the life of --------------------- for the total amount of the loans,
$-----------------.
6. Loan Costs. The Borrower agrees to pay a loan application fee
of $----------, together with any and all costs incident to filing Uniform
Commercial Code Financing Statements.
7. Events of Default. Upon occurrence of any of the following
specified events of default:
(a) Any material representation or warranty made by the Borrower
herein, or pursuant to, or in writing in connection with the making of this
Agreement, or the loan hereunder, shall prove to have been untrue in any
material respect when made; or
(b) The Borrower shall default in the due and punctual payment of
either principal or interest on the Note; or
(c) The Borrower shall default in due performance or observance of
any term, covenant, or agreement contained in Paragraphs 4, 5 and 6 of this
Agreement; or
(d) The Borrower shall default in due performance or observance of
any other agreement contained herein, and such default shall continue uncured
for a period of ---------- (---) days after written notice to the Borrower
from the holder of the Note; or
(e) Any obligation of the Borrower for the payment of borrowed
money is not paid when due, whether at any expressed due date or at any
accelerated maturity; or
(f) The Borrower shall make any assignment for the benefit of
creditors, or shall be adjudged bankrupt, or any proceedings shall be
commenced by the Borrower under any bankruptcy reorganization, arrangement,
insolvency, readjustment of debt or liquidation law or statute of the federal
or any state government, whether now or hereafter in effect, or any such
proceeding shall be instituted against the Borrower and an order approving the
petition is entered, or such proceedings shall remain undismissed for a period
of ------ (---) days, or the Borrower by any action shall indicate its
approval or consent to or acquiescence in any such proceedings or in the
appointment of a trustee or receiver of the Borrower, or of all or
substantially all of the assets of the Borrower, or any such trustee or
receiver shall not be discharged within the period of --------
(---) days after the appointment thereof;
THEN, and in any such event, if any such default shall then
continue, the Lender may by written notice to the Borrower, addressed to it at
its principal place of business or at such other address as the Borrower may
hereafter designate to the Lender in writing, declare the principal and
interest accrued on the Note to be due and payable, which principal and
interest shall thereupon forthwith be due and payable, without presentment,
demand, protest, or other notice of any kind, all of which are hereby
expressly waived. The Borrower agrees to pay reasonable attorney fees
incurred in enforcing the Lender's rights and remedies after default under
this Agreement, including any fees incurred on appeal.
8. Waiver. Neither the failure nor any delay on the part of the
Lender to exercise any right, power, or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power, or privilege preclude any other or further exercise thereof, or the
exercise of any right, power, or privilege.
9. Benefit. This Agreement shall be binding upon and inure to the
benefit of the Lender and its successors and assigns.
10. Construction. This agreement shall be governed by and
construed in accordance with the laws of the state of Oregon.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on ---
- ---------------.
BORROWERS: ----------------------------------
By--------------------------------
Name:-----------------------------
Title:----------------------------
By--------------------------------
Name:-----------------------------
Title:----------------------------
INDIVIDUALLY:
----------------------------------
----------------------------------
LENDER/SECURED PARTIES: ----------------------------------
By--------------------------------
Name:-----------------------------
Title:----------------------------
UNITED GROCERS, INC.
By--------------------------------
<PAGE>
EXHIBIT 10.F1
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT entered into this 15th day of December, 1993, by
and between UNITED GROCERS, INC., an Oregon corporation, hereinafter
designated as Sublessor, and Robert A. Lamb and Gale Lasko, partners in
Wilsonville Partnership, hereinafter jointly and severally designated as
Sublessee;
W I T N E S S E T H
WHEREAS, the Sublessor has entered into a Lease dated February 7, 1985,
with United Southwest Development, for a supermarket located in Troutdale
Plaza at Troutdale Road and Stark Street, City of Troutdale, County of
Multnomah, State of Oregon, commencing on the date set forth in the attached
Exhibit "A," a copy of which is hereby incorporated by reference, as fully as
if its terms and conditions were herein set forth. Lessor's interest in said
lease having been assigned to Paul Rex Holland, December, 1991.
WHEREAS, Sublessee's desire to sublet said premises to and through
March 31, 2005, commencing on December 14, 1993, and Sublessor is willing to
so sublet in accordance with the terms and conditions hereinafter set forth;
now, therefore,
IT IS HEREBY AGREED as follows:
(1) Sublessor hereby sublets unto Sublessees those premises described
in said Exhibit "A," for the term described.
1.1 The Sublessees, so long as they are not in default hereunder,
shall be granted the right to exercise the renewal options contained in
Exhibit "A," as set forth in said Exhibit, upon the condition that Sublessees
are not in default and provide Sublessor with lease guaranty insurance for the
renewal term. Said insurance shall be in form and substance acceptable to
Sublessor and shall designate Sublessor as the insured thereunder.
(2) Sublessees covenant and agree to pay for the whole of said term the
same rental, together with all affirmative covenants including, without
limitation, those pertaining to basic rent, percentage of gross sales, taxes,
assessments, insurance and all of the covenants and obligations to be
performed by Sublessees, as set forth in said Exhibit "A," and to make such
payments and provide such performance when due by the terms of the lease and
amendments thereto.
(3) Sublessees shall, upon execution hereof, pay any and all rental, or
security deposits, as required pursuant to the terms and conditions of said
Exhibits "A."
(4) Sublessees shall be bound by the same responsibilities, rights,
privileges and duties as Sublessor, as enumerated in Exhibit "A", except for
provisions of paragraph 45 and paragraph 3, which rights are retained by
Sublessors, and covenants and agrees to fully indemnify and hold Sublessor
harmless from any and all responsibility and/or liability which Sublessor may
incur by virtue of said Exhibit "A," and/or Sublessees' occupancy of the
premises. Furthermore, Sublessees shall be bound by any subsequent amendment,
revision, supplement or addition to the prime lease between Sublessor and the
prime Lessor, and to keep the Sublessor indemnified against all actions,
claims and demands whatsoever in respect to said exhibit "A," and Sublessees
use of the demised premises.
4.1 Assignment and Subletting. Sublessees acknowledge that provisions
for extension options and assignment and subletting in the Lease are
applicable to the prime Lessor and Sublessor only. Sublessees will not assign
this Sublease or sublet the premises without the prior written consent of
Sublessor which may be granted or withheld in its absolute discretion. A
direct or indirect transfer of ownership and control of a majority of the
voting stock of a corporate Sublessees, by whatever demands, shall be deemed
an assignment of this Sublease for the purposes of this paragraph.
Notwithstanding the foregoing, if Sublessee's desire to transfer by sale,
gift, or as a result of death, its interest herein to its lawful issue, the
Sublessor shall not unreasonably withhold consent to such a transfer,
provided, such transferee agrees that it holds such interest subject to the
restrictions and conditions contained in this sublease agreement.
4.2 Covenants, Representations and Warranties.
(a) Membership in United Grocers, Inc. Upon execution and during
the term hereof, Sublessees agree to maintain or cause to be maintained the
membership of the store in good standing in United Grocers, in accordance with
the Bylaws of United Grocers, as long as this Sublease remains in effect
(b) Purchases from Sublessor. Sublessees agree that throughout
the term of the Sublease and any extensions or renewals thereof, except as
hereinafter provided, Sublessees will purchase from Sublessor not less than
fifty-eight percent (58%) of its retail sales of all goods and merchandise
required by it for resale on the premises to the extent that Sublessor shall
now or hereafter be able to supply such goods and merchandise to the
Sublessees, and Sublessor will supply all of Sublessees' requirements at such
prices and on such terms as are reasonably comparable to those offered by
Sublessor to other purchasers from Sublessor carrying on businesses similar to
that of the Sublessees in Portland, Oregon. If, at any time, the Sublessees
contend that Sublessor is not able to supply particular goods or merchandise
customarily stocked by retail supermarkets in Portland, or that terms offered
by Sublessor are not reasonably comparable to those offered by Sublessor to
other purchasers described above, the Sublessees shall so advise Sublessor in
writing, specifying such contention with particularity. If, within 30 days
after receipt of such notice, Sublessor does not offer to supply goods or
merchandise so specified or does not advise Sublessees that the terms and
conditions offered are reasonably comparable to those offered to such other
purchasers, Sublessees shall be free to secure such specified goods and
merchandise from any source which it desires. If Sublessor demonstrates that
it is offering reasonably comparable terms, and Sublessees nonetheless
purchase from another source, such purchase or purchases shall not be an
exception from the 58% requirement specified above. If the above percentage
requirements are not complied with, it shall constitute a default hereunder.
In the event of a breach of this purchase covenant, Sublessor may terminate
this sublease and, in addition to the remedies hereinafter offered Sublessor,
Sublessee agrees to pay Sublessor, as liquidated damages, and not as a penalty
or forfeiture, a sum computed as follows:
1. The average weekly purchases from the date of the
agreement to the date of the breach shall be determined;
2. the average weekly purchases so determined shall then
be multiplied by the number of weeks from the date of the breach to the
end of the term of the purchase agreement; and
3. The computed sum shall be multiplied by two and
one-quarter percent (2-1/4%) to determine the liquidated damages due and
owing Sublessor by reason of Sublessee's default. Said sum shall become
immediately due and owing within 15 days from date of written notice of
the liquidated damages.
(c) Sublessees covenant that as long as this Sublease remains in
effect, and for an additional period of six (6) months thereafter, Sublessees
shall not directly or indirectly sell or permit the sale of the store and the
owners of Sublessees shall not directly or indirectly sell controlling
interests in Sublessees (whether in one or a series of related transactions)
without first offering to sell said store or controlling interest, as the case
may be, to Sublessor upon the same terms and conditions as the Sublessees or
their owners, as the case may be, are prepared to accept from a third party.
Prior to such sale by the Sublessees or their owners, the Sublessees shall
first notify Sublessor of the desire to sell the store or controlling interest
in the Sublessees and of all the terms and conditions of such sale and shall
provide to Sublessor all documents, instruments, agreements, offers,
acceptances, appraisals, inventories, equipment lists, leases, financial
statements and such other material and information as Sublessor may reasonably
request to aid in its decision to exercise or decline its right to purchase as
hereinafter provided. Within 30 days following receipt of such notice of
desire to sell and all materials and information reasonably requested by
Sublessor, Sublessor shall advise Sublessees whether Sublessor elects to
purchase or declines to purchase the store or such controlling interest upon
the offered terms and conditions. If Sublessor shall elect to purchase,
Sublessor shall purchase and the Sublessees or their owners shall sell, such
retail grocery business or such controlling interest, as the case may be, all
on the terms set forth in the offer. If Sublessor declines the purchase, the
Sublessees or their owners shall be free to sell the store or controlling
interest, as the case may be, upon (and only upon) the terms and conditions
offered as aforesaid to Sublessor; provided that such sale is consummated
within 120 days following the date Sublessor declined the purchase, and if
such sale is not consummated in accordance with the offered terms and
conditions within said 120-day period, the provisions of this paragraph shall
apply again and no subsequent sale of any portion of the offered store or
controlling interest may be effected without again offering the same to
Sublessor as provided herein. Sublessor may waive its rights under this
section provided such waiver is in writing. The foregoing provisions shall
not apply to transfers of assets or interests by sale, gift or as a result of
death to the lawful issue of Sublessees, or transfers of assets to a
corporation or partnership or transfers of a controlling interest to a trust
as long as such corporation, partnership or trust is controlled by the
transferor; provided such transferee agrees that it holds such assets or
controlling interest subject to the restrictions contained in this paragraph.
(d) Sublessees represent and warrant that there are no brokers,
finders or other persons entitled to any fee, commission or other compensation
in connection with this Sublease, and agree to hold Sublessor harmless from
any claims for such fees, commissions and/or compensation.
(e) Sublessees hereby represent and warrant to Sublessor that the
financial statements, appraisals and other documents submitted to Sublessor in
connection herewith or pursuant hereto are and shall be true, correct,
complete and accurate in every respect and said financial statements fairly
and accurately present the assets, liabilities, financial condition and
results of operations reflected herein.
(5) Security Agreement.
5.1 Grant, Collateral and Obligations. Sublessees and Sublessor
agree that this Sublease shall constitute a security agreement within the
meaning of the Oregon Uniform Commercial Code (hereinafter referred to as the
"Code") with respect to:
(a) required cash deposits (as defined in the Bylaws of
Sublessor) presently or hereafter held by or deposited with Sublessor by
Sublessees;
(b) any and all patronage rebates and rebate notes
representing patronage rebates (as defined in the Bylaws of Sublessor) earned
or hereafter earned by reason of patronage of Sublessor by Sublessees;
(c) subject to liens securing purchase money financing
therefor as described in Exhibit "X," all trade, store and other fixtures and
all leasehold improvements and all equipment and other personal property of
Sublessees used or useful in the operation of the store in or on the premises,
whether now owned or hereafter acquired including, without limitation, the
property described in Exhibit "Y", attached hereto, if any; and
(d) all replacements of substitutions for, and additions to
the foregoing, and the proceeds thereof (all of said personal property and the
replacements, substitutions and additions thereto and the proceeds thereof
being sometimes hereinafter collectively referred to as the "Collateral"), and
that a security interest in and to the Collateral is hereby granted to the
Sublessor, and the Collateral and all of the Sublessees' right, title and
interest therein are hereby assigned to the Sublessor, all to secure all
presently existing or hereafter incurred direct, indirect, absolute or
contingent indebtedness, liabilities and other obligations of Sublessees to
Sublessor (referred to as "the Obligations" herein) including, but not limited
to, the payment of all rent and other sums and the performance of all other
obligations of Sublessees under the Sublease, all renewals and extensions
thereof, the price of goods, services and merchandise purchased by Sublessees
from Sublessor from time to time, and all costs of collection, legal expenses
and attorneys' fees paid or incurred by Sublessor in enforcing any rights in
respect to the Obligations or in connection with assembling, collecting,
selling or otherwise dealing with or realizing upon the Collateral.
5.2 Security Agreement Warranties. In addition to and without limiting
the force or effect of any other covenants, representations and warranties of
Sublessees contained in this Sublease, Sublessees hereby covenant, represent
and warrant to and with Sublessor as follows:
(a) Sublessees are the owners of the Collateral free and clear of
liens, security interests and encumbrances of every kind and description,
except liens, security interests and encumbrances securing indebtedness to
Sublessor and liens described on Exhibit "X," hereto to which Secured Party
has consented ("Permitted Liens").
(b) Sublessees will not sell, dispose of, encumber or permit any
other security interest, lien or encumbrance to attach to the Collateral
except the security interest of Sublessor and the Permitted Liens.
(c) All tangible Collateral shall be kept at Sublessees' place(s)
of business located on the premises, and Sublessees shall not permit the same
to be removed therefrom without the prior written consent of Sublessor.
(d) Sublessees shall keep the tangible Collateral at all times
insured against risks of loss or damage by fire (including so-called extended
coverage), theft and such other casualties as Sublessor may reasonably
require, all in such amounts, under such forms of policies, upon such terms,
for such periods and written by such companies or underwriters as Sublessor
may approve. All such policies of insurance shall name Sublessor as loss
payee thereon as its rates may appear and shall provide for at least 30 days'
prior written notice of modification or cancellation to Sublessor. Sublessees
shall furnish Sublessor with certificates of such insurance or other evidence
satisfactory to Sublessor as to compliance with the provisions of this
paragraph. Sublessor may act as attorney-in-fact for Sublessees in making,
adjusting and settling claims under and canceling such insurance and endorsing
Sublessees' name on any drafts drawn by insurers of the Collateral.
(e) Sublessees will keep the Collateral in good order and repair,
shall not waste or destroy the Collateral or any part thereof, and shall not
use the Collateral in violation of any statute, ordinance or policy of
insurance thereon. Sublessor may examine and inspect the Collateral at any
reasonable time or times, wherever located.
(f) Sublessees will pay promptly when due all taxes and
assessments upon the Collateral or for its use or operation or upon this
Sublease or upon any instruments evidencing the Obligations.
(g) Sublessees will pay promptly when due all indebtedness secured
by any lien or other security interest in the Collateral, whether superior or
junior to the security interest established hereby.
5.3 Additional Remedies. Upon any default hereunder and at any
time thereafter (such default not having previously been cured), Sublessor at
its option may declare all Obligations immediately due and payable and shall
have the remedies of a secured party under the Uniform Commercial Code of
Oregon (the "Code"), including without limitation the right to take immediate
and exclusive possession of the Collateral.
5.4 Financing Statements. Sublessees will at their own cost and
expense, upon demand, furnish to Sublessor such financing statements and other
documents in form satisfactory to Sublessor and will do all such acts and
things as Sublessor may at any time or from time to time request or as may be
necessary or appropriate to establish and maintain a perfected security
interest in the Collateral.
5.5 Attorneys' Fees. In the event of the institution of any suit
or action to terminate this Sublease, or to enforce the terms or provisions
hereto, Sublessees shall and do hereby agree to pay, in addition to the costs
and disbursements provided by statute, reasonable attorneys' fees in such
proceedings or on any appeal from any judgment or decree entered therein.
(6) Default. The following shall constitute a default under this
Sublease:
6.1 Any failure by Sublessees to pay, when due, rent or any other
amount due under the Lease or to perform any other obligation of Sublessor
under the Lease or any other default under the Lease which continues for up to
one-half of the cure period as defined in the lease, provided with respect
thereto in the Lease;
6.2 Any failure by Sublessees to pay when due rent or any other
amount due under this Sublease or to perform when due any other obligation of
Sublessees hereunder;
6.3 If any warranty, representation or statement made or
furnished to Sublessor by or on behalf of the Sublessees is false in any
material respect when made or furnished;
6.4 Any failure by Sublessees to pay when due and/or satisfy any
other present or hereinafter incurred indebtedness or obligation of Sublessees
to Sublessor, including but not limited to those arising from Sublessees'
purchases of goods and services from Sublessor any other loans or leases
Sublessees may have or enter into with Sublessor, and Sublessees' obligations
under the Bylaws of Sublessor and its application for membership in Sublessor;
6.5 If Sublessees vacate or abandon the premises or allow the
premises to remain vacant or unoccupied;
6.6 If Sublessees make an assignment for the benefit of
creditors, or if, with or without Sublessees' acquiescence, a petition in
bankruptcy is filed against Sublessees, or Sublessees are adjudicated a
bankrupt or insolvent, or a trustee, receiver or liquidator is appointed for
all or part of Sublessees' assets, or a petition or answer is filed by or
against Sublessees seeking or acquiescing in any reorganization, liquidation
or similar relief under any federal, state or local law relating to
bankruptcy, insolvency or other relief for debtors; and
6.7 If Sublessees seer or otherwise dispose of all or any
substantial portion of the assets of Sublessees located at or associated with
the store, other than inventory sold at retail in the ordinary course of
business.
(7) Remedies. In the event of any default under this Sublease:
7.1 Sublessor shall have the right at its election then or at any
time thereafter, upon notice to Sublessees, to terminate this Sublease or to
Sublessees' rights of possession in the premises without terminating this
Sublease;
7.2 Sublessor shall have the immediate right, whether or not the
Sublease shall have been terminated pursuant to paragraph 7.1, to re-enter and
repossess the premises or any part thereof by force, summary proceedings,
ejectment or any other legal or equitable process, and without any liability
on Sublessor's part for such entry, repossession or removal;
7.3 Sublessor may (but shall be under no obligation to), whether
or not this Sublease shall have been terminated pursuant to paragraph 7.1,
resublet the premises, or any part thereof, in the name of Sublessees,
Sublessor or otherwise, without notice to Sublessees, for such term or terms
and for such uses as Sublessor, in its absolute discretion, may determine and
may collect and receive rents payable by reason of such resubletting (without
any liability for any failure to collect such rents);
7.4 Sublessor may (but shall be under no obligation to) procure
any insurance, pay any rentals, taxes or liens, make any repairs, pay any sums
required to be paid, and to do and perform such other acts as may be required
of Sublessees hereunder, and any payments so made shall bear interest at the
rate of 12 percent per annum from the time of such payment until repaid; and
7.5 Sublessor may exercise any and all other rights and remedies
afforded to the prime Lessor upon default under the Lease and any and all
other rights and remedies Sublessor may have as provided herein, pursuant to
the laws of the State of Oregon. In addition to the other remedies provided
above, Sublessor shall be entitled to current damages and final damages as
provided in paragraph (8) below, and, to the extent permitted by applicable
law, to injunctive relief in case of the violation, or attempted or threatened
violation, of any of the provisions of this Sublease, or to a decree
compelling performance of this Sublease.
7.6 No expiration or termination of this Sublease, repossession
of the premises or any part thereof, or resubletting of the premises or any
part thereof, whether pursuant to the above paragraph or by operation of law
or otherwise, shall relieve Sublessees of their liabilities and obligations
under this Sublease, all of which shall survive such expiration, termination,
repossession or resubletting.
(8) Damages.
8.1 Current Damages. In the event of any expiration or
termination of this Sublease or repossession of the premises or any part
thereof by reason of the occurrence of an event of default, Sublessees will
pay to Sublessor the rent and other sums required to be paid by Sublessees for
the period to and including the date of such expiration, termination or
repossession; and, thereafter, until the end of what would have been the term
in the absence of such expiration, termination or repossession, and whether or
not the premises or any part thereof shall have been resublet, Sublessees
shall be liable to Sublessor for, and shall pay to Sublessor, as liquidated
and agreed current damages the rent and other sums which would be payable
under this Sublease by Sublessees in the absence of such expiration,
termination or repossession, less the net proceeds, if any, of any
resubletting effected for the account of Sublessees, after deducting from such
proceeds all of Sublessor's expenses reasonably incurred in connection with
such resubletting (including, without limitation, all repossession costs,
brokerage commissions, legal expenses, attorney's fees, employee expenses,
alteration costs and expenses of preparation for such resubletting).
Sublessees will pay such current damages on the days on which rent would have
been payable under this Sublease in the absence of such expiration,
termination or repossession, and Sublessor shall be entitled to recover the
same from Sublessees on each such day.
8.2 Final Damages. At any time after such expiration or
termination of this Sublease or repossession of the premises or any part
thereof by reason of the occurrence of an event of default, whether or not
Sublessor shall have collected any current damages pursuant to paragraph 8.1,
Sublessor shall be entitled to recover from Sublessees, and Sublessees will
pay to Sublessor on demand, as and for liquidated and agreed final damages for
Sublessees' default and in lieu of all current damages beyond the date of such
demand (it being agreed that it would be impracticable or extremely difficult
to fix the actual damages), an amount equal to the excess, if any, of (a) the
rent and other sums which would be payable under this Sublease from the date
of such demand (or, if it be earlier, the date to which Sublessees shall have
satisfied in full their obligations under paragraph 8.1 to pay current
damages) for what would be the then unexpired term in the absence of such
expiration, termination or repossession, discounted to present value at an
assumed interest rate of seven percent (7%) per annum over (b) the then net
rental value of the premises discounted to present value at an assumed intern
rate of seven percent (7%) per annum for the same period. Rental value shall
be established by reference to the terms and conditions upon which Sublessor
resublets the premises if such resubletting is accomplished within a
reasonable period of time after such expiration, or repossession, and
otherwise established on the basis of Sublessor's estimates and assumptions of
fact regarding market and other relevant circumstances, which shall govern
unless shown to be erroneous. If any statute or rule of law shall validly
limit the amount of such liquidated final damages to less than the amount
above agreed upon, Sublessor shall be entitled to the maximum amount allowable
under such statute or rule of law.
(9) Rights Cumulative, Nonwaiver. No right or remedy herein conferred
upon or reserved to Sublessor is intended to be exclusive of any other right
or remedy, and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity or by statute. The failure of Sublessor to
insist at any time upon the strict performance of any covenant or agreement or
to exercise any option, right, power or remedy contained in this Sublease
shall not be construed as a waiver or relinquishment thereof for the future.
No waiver by Sublessor of any provision of this Sublease shall be deemed to
have been made whether due in the receipt of rent or otherwise, unless
expressed in writing and signed by Sublessor.
(10) Notices. Any notice or demand required or permitted to be given
under this Sublease shall be deemed to have been properly given when, and only
when, the same is in writing and has been deposited in the United States Mail,
with postage prepaid, to be forwarded by registered or certified mail and
addressed to the party to be notified at the address appearing below its
signature. Such addresses may be changed from time to time by serving of
notice as above provided.
(11) Right of Refusal: If, during the term of this sublease, or any
extension hereof, Sublessee or any successor to Sublessee shall receive a bona
fide offer to purchase the business being operated under this sublease, i.e.,
goodwill, fixtures and/or equipment and inventory or the property of which the
premises are a part, which offer is acceptable to Sublessee, Sublessor shall
have the right to purchase the business (or the property) upon the same terms
and conditions. Sublessee agrees to immediately, upon receipt of such offer,
to give Sublessor written notice of the terms and conditions thereof, and the
Sublessor shall have the right, for thirty (30) days after receipt of such
notice, to exercise its option to purchase under the identical terms and
conditions of such offer. Sublessor's exercise of its option shall be given
in writing, within said thirty-day period.
IN WITNESS WHEREOF, the parties have executed the foregoing Sublease
Agreement the day and year first above written.
SUBLESSOR SUBLESSEE: Wilsonville Partnership
United Grocers, Inc. /s/ Robert A. Lamb
Robert A. Lamb
By: /s/ Alan C. Jones /s/ Gale Lasko
President/CEO Gale Lasko
<PAGE>
EXHIBIT "X"
<PAGE>
EXHIBIT "Y"
All present and hereinafter acquired inventory, equipment, fixtures and
capital stock of United Grocers, Inc.
<PAGE>
EXHIBIT 10.F2
Exhibit H
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT entered into this 25th day of June, 1991,
by and between UNITED GROCERS, INC., an Oregon corporation, hereinafter
designated as Sublessor, and Robert A. Lamb, Patsy R. Lamb, Gale L. Lasko and
Sandra L. Lasko, - DBA Wilsonville Thriftway, hereinafter jointly and
severally designated as Sublessees;
W I T N E S S E T H:
WHEREAS, the Sublessor has entered into a Lease dated August 7,
1990, with Capital Realty Corp., an Oregon corporation, for a supermarket
located at 8255 S. Wilsonville Road, Wilsonville, Oregon, commencing on the
date set forth in the attached Exhibit "A," a copy of which is hereby
incorporated by reference, as fully as if its terms and conditions were herein
set forth.
WHEREAS, Sublessees desire to sublet said premises for a period of
20 years, commencing on date set forth in paragraph 8 of Exhibit "A," and
Sublessor is willing to so sublet in accordance with the terms and conditions
hereinafter set forth; now, therefore,
IT IS HEREBY AGREED as follows:
(1) Sublessor hereby sublets unto Sublessees those premises
described in said Exhibit "A," for the term of 20 years.
(2) Sublessees covenant and agree to pay for the whole of said
term the same rental, together with all affirmative covenants including,
without limitation, those pertaining to basic rent, percentage of gross sales,
taxes, assessments, insurance and all of the covenants and obligations to be
performed by Sublessees, as set forth in said Exhibit "A," and to make such
payments and provide such performance when due by the terms of the lease and
amendments thereto.
(3) Sublessees shall, upon execution hereof, pay any and all
rental, or security deposits, as required pursuant to the terms and conditions
of said Exhibits "A."
(4) Sublessees shall be bound by the same responsibilities,
rights, privileges and duties as Sublessor, as enumerated in Exhibit "A," and
covenants and agrees to fully indemnify and hold Sublessor harmless from any
and all responsibility and/or liability which Sublessor may incur by virtue of
said Exhibit "A," and/or Sublessees' occupancy of the premises. Furthermore,
Sublessees shall be bound by any subsequent amendment, revision, supplement or
addition to the prime lease between Sublessor and the prime Lessor, and to
keep the Sublessor indemnified against all actions, claims and demands
whatsoever in respect to said Exhibit "A," and Sublessees use of the demised
premises.
(5) Default. The following shall constitute a default under this
Sublease:
5.1 Any failure by Sublessees to pay when due rent or any
other amount due under the Lease or to perform when due any other obligation
of Sublessor under the Lease or any other default under the Lease which
continues for up to one-half of the cure period provided with respect thereto
in the Lease;
5.2 Any failure by Sublessees to pay when due rent or any
other amount due under this Sublease or to perform when due any other
obligation of Sublessees hereunder;
5.3 If any warranty, representation or statement made or
furnished to Sublessor by or on behalf of the Sublessees is false in any
material respect when made or furnished;
5.4 Any default under any document securing or guarantying
the obligations of Sublessees under this Sublease;
5.5 Any failure by Sublessees to pay when due and/or
satisfy any other present or hereinafter incurred indebtedness or obligation
of Sublessees to Sublessor, including but not limited to those arising from
Sublessees' purchases of goods and services from Sublessor any other loans or
leases Sublessees may have or enter into with Sublessor, and Sublessees'
obligations under the Bylaws of Sublessor and its application for membership
in Sublessor;
5.6 If Sublessees vacate or abandon the premises or allow
the premises to remain vacant or unoccupied;
5.7 If Sublessees make an assignment for the benefit of
creditors, or if, with or without Sublessees' acquiescence, a petition in
bankruptcy is filed against Sublessees, or Sublessees are adjudicated a
bankrupt or insolvent, or a trustee, receiver or liquidator is appointed for
all or part of Sublessees' assets, or a petition or answer is filed by or
against Sublessees seeking or acquiescing in any reorganization, liquidation
or similar relief under any federal, state or local law relating to
bankruptcy, insolvency or other relief for debtors; and
5.8 If Sublessees sell or otherwise dispose of all or any
substantial portion of the assets of Sublessees located at or associated with
the store, other than inventory sold at retail in the ordinary course of
business (i.e., at the full retail price customarily charged therefor or at a
reduced price pursuant to a retail sale in which the price reduction and sale
duration are typical of sales of other retail grocery businesses similarly
situated).
(6) Remedies. In the event of any default under this Sublease:
6.1 Sublessor shall have the right, at its election then or
at any time thereafter, upon notice to Sublessees, to terminate this Sublease
or to terminate Sublessees' rights of possession in the premises without
terminating this Sublease;
6.2 Sublessor shall have the immediate right, whether or
not the Sublease shall have been terminated pursuant to paragraph 6.1, to
re-enter and repossess the premises or any part thereof by force, summary
proceedings, ejectment or any other legal or equitable process, all without
any liability on Sublessor's part for such entry, repossession or removal;
6.3 Sublessor may (but shall be under no obligation to),
whether or not this Sublease shall have been terminated pursuant to paragraph
6.1, resublet the premises, or any part thereof, in the name of Sublessees,
Sublessor or otherwise, without notice to Sublessees, for such term or terms
and for such uses as Sublessor, in its absolute discretion, may determine and
may collect and receive rents payable by reason of such resubletting (without
any liability for any failure to collect such rents);
6.4 Sublessor may (but shall be under no obligation to)
procure any insurance, pay any rentals, taxes or liens, make any repairs, pay
any sums required to be paid, and to do and perform such other acts as may be
required of Sublessees hereunder, and any payments so made shall bear interest
at the rate of 12 percent per annum from the time of such payment until
repaid; and
6.5 Sublessor may exercise any and all other rights and
remedies afforded to the prime Lessor upon default under the Lease and any and
all other rights and remedies Sublessor may have pursuant to the laws of the
state of Oregon. In addition to the other remedies provided above, Sublessor
shall be entitled to current damages and final damages as provided in
paragraph (7) below, and, to the extent permitted by applicable law, to
injunctive relief in case of the violation, or attempted or threatened
violation, of any of the provisions of this Sublease, or to a decree
compelling performance of this Sublease.
6.6 No expiration or termination of this Sublease,
repossession of the premises or any part thereof, or resubletting of the
premises or any part thereof, whether pursuant to the above paragraph or by
operation of law or otherwise, shall relieve Sublessees of their liabilities
and obligations under this sublease, all of which shall survive such
expiration, termination, repossession or resubletting.
(7) Damages.
7.1 Current Damages. In the event of any expiration or
termination of this Sublease or repossession of the premises or any part
thereof by reason of the occurrence of an event of default, Sublessees will
pay to Sublessor the rent and other sums required to be paid by Sublessees for
the period to and including the date of such expiration, termination or
repossession; and, thereafter, until the end of what would have been the term
in the absence of such expiration, termination or repossession, and whether or
not the premises or any part thereof shall have been resublet, Sublessees
shall be liable to Sublessor for, and shall pay to Sublessor, as liquidated
and agreed current damages the rent and other sums which would be payable
under this Sublease by Sublessees in the absence of such expiration,
termination or repossession, less the net proceeds, if any, of any
resubletting effected for the account of Sublessees, after deducting from such
proceeds all of Sublessor's expenses reasonably incurred in connection with
such resubletting (including, without limitation, all repossession costs,
brokerage commissions, legal expenses, attorney's fees, employee expenses,
alteration costs and expenses of preparation for such resubletting).
Sublessees will pay such current damages on the days on which rent would have
been payable under this Sublease in the absence of such expiration, termina-
tion or repossession, and Sublessor shall be entitled to recover the same from
Sublessees on each such day.
7.2 Final Damages. At any time after any such expiration
or termination of this Sublease or repossession of the premises or any part
thereof by reason of the occurrence of an event of default, whether or not
Sublessor shall have collected any current damages pursuant to paragraph 7.1,
Sublessor shall be entitled to recover from Sublessees, and Sublessees will
pay to Sublessor on demand, as and for liquidated and agreed final damages for
Sublessees' default and in lieu of all current damages beyond the date of such
demand (it being agreed that it would be impracticable or extremely difficult
to fix the actual damages), an amount equal to the excess, if any, of (a) the
rent and other sums which would be payable under this Sublease from the date
of such demand (or, if it be earlier, the date to which Sublessees shall have
satisfied in full their obligations under paragraph 7.1 to pay current
damages) for what.would be the then unexpired term in the absence of such
expiration, termination or repossession, discounted to present value at an
assumed interest rate of seven percent (7%) per annum, over (b) the then net
rental value of the premises discounted to present value at an assumed
interest rate of seven percent (7%) per annum for the same period. Rental
value shall be established by reference to the terms and conditions upon which
Sublessor resublets the premises if such resubletting is accomplished within a
reasonable period of time after such expiration, termination or repossession,
and otherwise established on the basis of Sublessor's estimates and
assumptions of fact regarding market and other relevant circumstances, which
shall govern unless shown to be erroneous. If any statute or rule of law
shall validly limit the amount of such liquidated final damages to less than
the amount above agreed upon, Sublessor shall be entitled to the maximum
amount allowable under such statute or rule of law.
(8) Rights Cumulative, Nonwaiver. No right or remedy herein conferred
upon or reserved to Sublessor is intended to be exclusive of any other right
or remedy, and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity or by statute. The failure of Sublessor to
insist at any time upon the strict performance of any covenant or agreement or
to exercise any option, right, power or remedy contained in this Sublease
shall not be construed as a waiver or relinquishment thereof for the future.
No waiver by Sublessor of any provision of this Sublease shall be deemed to
have been made whether due to the receipt of rent or otherwise, unless
expressed in writing and signed by Sublessor.
(9) Assignment and Subletting. Sublessees acknowledge that provisions
for extension options and assignment and subletting in the Lease are
applicable to the prime Lessor and Sublessor only. Sublessees will not assign
this Sublease or sublet the premises without the prior written consent of
Sublessor which may be granted or withheld in its absolute discretion. A
direct or indirect transfer of ownership and control of a majority of the
voting stock of a corporate Sublessees, by whatever demands, shall be deemed
an assignment of this Sublease for the purposes of this paragraph.
Notwithstanding the foregoing, if Sublessees desire to transfer by
sale, gift, or as a result of death, its interest herein to its lawful issue,
the Sublessor shall not unreasonably withhold consent to such a transfer,
provided, such transferee agrees that it holds such interest subject to the
restrictions and conditions contained in this sublease agreement.
(10) Covenants, Representations and Warranties.
10.1 Sublessees agree to maintain or cause to be maintained the
membership of the store in good standing in Sublessor, in accordance with the
Bylaws of Sublessor, as long as this Sublease remains in effect.
10.2 Sublessees agree that throughout the term of the Sublease and
any extensions or renewals thereof, except as hereinafter provided, Sublessees
will purchase from Sublessor not less than 58 percent of its retail sales of
all goods and merchandise required by it for resale on the premises to the
extent that Sublessor shall now or hereafter be able to supply such goods and
merchandise to the Sublessees, and Sublessor will supply all of Sublessees'
requirements at such prices and on such terms as are reasonably comparable to
those offered by Sublessor to other purchasers from Sublessor carrying on
businesses similar to that of the Sublessees in Portland, Oregon. If, at-any
time, the Sublessees contend that Sublessor is not able to supply particular
goods or merchandise customarily stocked by retail supermarkets in
_____________, Oregon, or that terms offered by
Sublessor are not reasonably comparable to those offered by Sublessor to other
purchasers described above, the Sublessees shall so advise Sublessor in
writing, specifying such contention with particularity. If, within 30 days
after receipt of such notice, Sublessor does not offer to supply goods or
merchandise so specified or does not advise Sublessees that the terms and
conditions offered are reasonably comparable to those offered to such other
purchasers, Sublessees shall be free to secure such specified goods and
merchandise from any source which it desires. If Sublessor asserts that it is
offering reasonably comparable terms, and Sublessees nonetheless purchase from
another source, such purchase shall be a default under this paragraph.
10.3 Sublessees covenant that as long as this Sublease remains in
effect, and for an additional period of six (6) months thereafter, Sublessees
shall not directly or indirectly sell or permit the sale of the store and the
owners of Sublessees shall not directly or indirectly sell controlling
interests in Sublessees (whether in one or a series of related transactions)
without first offering to sell said store or controlling interest, as the case
may be, to Sublessor upon the same terms and conditions as the Sublessees or
their owners, as the case may be, are prepared to accept from a third party.
Prior to such sale by the Sublessees or their owners, the Sublessees shall
first notify Sublessor of the desire to sell the store or controlling interest
in the Sublessees and of all the terms and conditions of such sale and shall
provide to Sublessor all documents, instruments, agreements, offers,
acceptances, appraisals, inventories, equipment lists, leases, financial
statements and such other material and information as Sublessor may reasonably
request to aid in its decision to exercise or decline its right to purchase as
hereinafter provided. Within 30 days following receipt of such notice of
desire to sell and all materials and information reasonably requested by
Sublessor, Sublessor shall advise Sublessees whether Sublessor elects to
purchase or declines to purchase the store or such controlling interest upon
the offered terms and conditions. If Sublessor shall elect to purchase,
Sublessor shall purchase and the Sublessees or their owners shall sell, such
retail grocery business or such controlling interest, as the case may be, all
on the terms set forth in the offer. If Sublessor declines the purchase, the
Sublessees or their owners shall be free to sell the store or controlling
interest, as the case may be, upon (and only upon) the terms and conditions
offered as aforesaid to Sublessor; provided that such sale is consummated
within 120 days following the date Sublessor declined the purchase, and if
such sale is not consummated in accordance with the offered terms and
conditions within said 120-day period, the provisions of this paragraph shall
apply again and no subsequent sale of any portion of the offered store or
controlling interest may be effected without again offering the same to
Sublessor as provided herein. Sublessor may waive its rights under this
section provided such waiver is in writing. The foregoing provisions shall
not apply to transfers of assets or interests by sale, gift or as a result of
death to the lawful issue of Sublessees, or transfers of assets to a
corporation or partnership or transfers of a controlling interest to a trust
as long as such corporation, partnership or trust is controlled by the
transferor; provided such transferee agrees that it holds such assets or
controlling interest subject to the restrictions contained in this paragraph.
10.4 Sublessees represent and warrant that there are no brokers,
finders or other persons entitled to any fee, commission or other compensation
in connection with this Sublease, and agree to hold Sublessor harmless from
any claims for such fees, commissions and/or compensation.
10.5 Sublessees hereby represent and warrant to Sublessor that
the financial statements, appraisals and other documents submitted to
Sublessor in connection herewith or pursuant hereto are and shall be true,
correct, complete and accurate in every respect and said financial statements
fairly and accurately present the assets, liabilities, financial condition and
results of operations reflected herein.
(11) Security Agreement.
11.1 Grant, Collateral and Obligations. Sublessees and Sublessor agree
that this Sublease shall constitute a security agreement within the meaning of
the Oregon Uniform Commercial Code (hereinafter referred to as the "Code")
with respect to:
(a) required cash deposits (as defined in the Bylaws of
Sublessor) presently or hereafter held by or deposited with Sublessor by
Sublessees;
(b) any and all patronage rebates and rebate notes representing
patronage rebates (as defined in the Bylaws of Sublessor) earned or hereafter
earned by reason of patronage of Sublessor by Sublessees;
(c) subject to liens securing purchase money financing therefor
as described in Exhibit "X," all trade, store and other fixtures and all
leasehold improvements and all equipment and other personal property of
Sublessees used or useful in the operation of the store in or on the premises,
whether now owned or hereafter acquired including, without limitation, the
property described in Exhibit "Y," attached hereto, if any; and
(d) all replacements of substitutions for, and additions to the
foregoing, and the proceeds thereof (all of said personal property and the
replacements, substitutions and additions thereto and the proceeds thereof
being sometimes hereinafter collectively referred to as the "Collateral"), and
that a security interest in and to the Collateral is hereby granted to the
Sublessor, and the Collateral and all of the Sublessees' right, title and
interest therein are hereby assigned to the Sublessor, all to secure all
presently existing or hereafter incurred direct, indirect, absolute or
contingent indebtedness, liabilities and other obligations of Sublessees to
Sublessor (referred to as "the Obligations" herein) including, but not limited
to, the payment of all rent and other sums and the performance of all other
obligations of Sublessees under this Sublease, all renewals and extensions
thereof, the price of goods, services and merchandise purchased by Sublessees
from Sublessor from time to time, and all costs of collection, legal expenses
and attorneys' fees paid or incurred by Sublessor in enforcing any rights in
respect to the Obligations or in connection with assembling, collecting,
selling or otherwise dealing with or realizing upon the Collateral.
11.2 Security Agreement Warranties. In addition to and without
limiting the force or effect of any other covenants, representations and
warranties of Sublessees contained in this Sublease, Sublessees hereby
covenant, represent and warrant to and with Sublessor as follows:
(a) Sublessees are the owners of the Collateral free and
clear of liens, security interests and encumbrances of every kind and
description, except liens, security interests and encumbrances securing
indebtedness to Sublessor and liens described on Exhibit "X" hereto to which
Secured Party has consented ("Permitted Liens").
(b) Sublessees will not sell, dispose of, encumber or
permit any other security interest, lien or encumbrance to attach to the
Collateral except the security interest of Sublessor and the Permitted Liens.
(c) All tangible Collateral shall be kept at Sublessees'
place(s) of business located on the premises, and Sublessees shall not permit
the same to be removed therefrom without the prior written consent of
Sublessor.
(d) Sublessees shall keep the tangible Collateral at all
times insured against risks of loss or damage by fire (including so-called
extended coverage), theft and such other casualties as Sublessor may
reasonably require, all in such amounts, under such forms of policies, upon
such terms, for such periods and written by such companies or underwriters as
Sublessor may approve. All such policies of insurance shall name Sublessor as
loss payee thereon as its interest may appear and shall provide for at least
30 days' prior written notice of modification or cancellation to Sublessor.
Sublessees shall furnish Sublessor with certificates of such insurance or
other evidence satisfactory to Sublessor as to compliance with the provisions
of this paragraph. Sublessor may act as attorney-in-fact for Sublessees in
making, adjusting and settling claims under and cancelling such insurance and
endorsing Sublessees' name on any drafts drawn by insurers of the Collateral.
(e) Sublessees will keep the Collateral in good order and
repair, shall not waste or destroy the Collateral or any part thereof, and
shall not use the Collateral in violation of any statute, ordinance or policy
of insurance thereon. Sublessor may examine and inspect the Collateral at any
reasonable time or times, wherever located.
(f) Sublessees will pay promptly when due all taxes and
assessments upon the Collateral or for its use or operation or upon this
Sublease or upon any instruments evidencing the Obligations.
(g) Sublessees will pay promptly when due all indebtedness
secured by any lien or other security interest in the Collateral, whether
superior or junior to the security interest established hereby.
11.3 Additional Remedies. Upon any default hereunder and at any
time thereafter (such default not having previously been cured), Sublessor at
its option may declare all Obligations immediately due and payable and shall
have the remedies of a secured party under the Uniform Commercial Code of
Oregon (the "Code"), including without limitation the right to take immediate
and exclusive possession of the Collateral.
11.4 Financing Statements. Sublessees will at their own cost and
expense, upon demand, furnish to Sublessor such statements and other documents
in form satisfactory to Sublessor and will do all such acts and things as
Sublessor may at any time or from time to time request or as may be necessary
or appropriate to establish and maintain a perfected security interest in the
Collateral.
(12) Attorneys' Fees. In the event of the institution of any suit or
action to terminate this Sublease, or to enforce the terms or provisions
hereto, Sublessees shall and do hereby agree to pay, in addition to the costs
and disbursements provided by statute, reasonable attorneys' fees in such
proceedings or on any appeal from any judgment or decree entered therein.
(13) Notices. Any notice or demand required or permitted to be given
under this Sublease shall be deemed to have been properly given when, and only
when, the same is in writing and has been deposited in the United States Mail,
with postage prepaid, to be forwarded by registered or certified mail and
addressed to the party to be notified at the address appearing below its
signature. Such addresses may be changed from time to time by serving of
notice as above provided.
IN WITNESS OF, the parties have executed the foregoing
Sublease Agreement this day and year first above written.
SUBLESSOR United Grocers, Inc., an Oregon
corporation
By /s/ Alan C. Jones
President
6433 SE Lake Road
PO Box 22187
Portland, OR 97222
SUBLESSEES Wilsonville Thriftway Partnership
By /s/ Robert A. Lamb
/s/ Patsy R. Lamb
/s/ Gale L. Lasko
/s/ Sandra L. Lasko
Address: 8255 S. Wilsonville Road
Wilsonville, Oregon
Individually
/s/ Robert A. Lamb
/s/ Patsey R. Lamb
/s/ Gale L. Lasko
/s/ Sandra L. Lasko
<PAGE>
Exhibit "Y"
All present and hereinafter acquired inventory, equipment, fixtures
and capital stock of United Grocers, Inc.
<PAGE>
EXHIBIT 10.G
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT entered into this 15th day of March, 1994,
by and between UNITED GROCERS, INC., an Oregon corporation, hereinafter
designated as Sublessor, and Al Mancasola Grocery Markets, Inc, a California
Corporation, and John Allen Mancasola and Ronald L. and Sue V. Mancasola,
husband and wife, hereinafter jointly and severally designated as Sublessee;
WITNESSETH
WHEREAS, the Sublessor has entered into a Lease dated March 14,
1994, with United Grocers Inc., and/or its Assigns or Successors, for a
supermarket located at 14001 Lakeridge Circle, Magalia, CA., commencing on the
date set forth in the attached Exhibit "A," a copy of which is hereby
incorporated by reference, as fully as if its terms and conditions were herein
set forth.
WHEREAS, Sublessee desires to sublet said premises for a period of
20 years, commencing November 1, 1993, to and including October 31, 2013, and
Sublessor is willing to so sublet in accordance with the terms and conditions
hereinafter set forth; now, therefore,
IT IS HEREBY AGREED as follows:
(1) Sublessor hereby sublets unto Sublessee those premises
described in said Exhibit "A," for the term of 20 years.
1.1 The Sublessees, so long as they are not in default
hereunder, shall be granted the right to exercise the renewal options
contained in Exhibit "A," as set forth in paragraphs 3 and 7 of said Exhibit,
upon the condition that Sublessees are not in default. It is acknowledged by
Sublessee that such option may require lease guaranty insurance for the
renewal term. Said insurance shall be in form and substance acceptable to
Sublessor and shall designate Sublessor as the insured thereunder.
(2) Sublessee covenants and agrees to pay for the whole of said
term the same rental, together with all affirmative covenants including,
without limitation, those pertaining to basic rent, percentage of gross sales,
taxes, assessments, insurance and all of the covenants and obligations to be
performed by Sublessees, as set forth in said Exhibit "A," and to make such
payments and provide such performance when due by the terms of the lease and
amendments thereto.
(3) Sublessee shall, upon execution hereof, pay any and all
rental, or security deposits, as required pursuant to the terms and conditions
of said Exhibits "A."
(4) Sublessee shall be bound by the same responsibilities,
rights, privileges and duties as Sublessor, as enumerated in Exhibit "A",
except for provisions of paragraph 46, which rights are retained by Sublessor,
and covenants and agrees to fully indemnify and hold Sublessor harmless from
any and all responsibility and/or liability which Sublessor may incur by
virtue of said Exhibit "A," and/or Sublessee's occupancy of the premises.
Furthermore, Sublessees shall be bound by any subsequent amendment, revision,
supplement or addition to the prime lease between Sublessor and the prime
Lessor except any amendment, revision, supplement or addition which would
materially and adversely affect the financial obligations of Sublessee
pursuant to this lease, and to keep the Sublessor indemnified against all
actions, claims and demands whatsoever in respect to said exhibit "A," and
Sublessee's use of the demised premises.
4.1 Assignment and Subletting. Sublessee acknowledges that
provisions for extension options and assignment and subletting in the Lease
are applicable to the prime Lessor and Sublessor only, subject to the
conditions expressed in paragraph 1.1 hereof. Sublessees will not assign this
Sublease or sublet the premises without the prior written consent of Sublessor
which may be granted or withheld in its absolute discretion. A direct or
indirect transfer of ownership and control of a majority of the voting stock
of a corporate Sublessee, by whatever demands, shall be deemed an assignment
of this Sublease for the purposes of this paragraph. Provided however, that
Sublessor agrees to not withhold consent unreasonably if such subletting is
intended for third party concessionaires operating inside of the building as a
supplement to the normal grocery store activity, and no more than a total of
seven (7) percent of the total area of the store shall be sublet.
Notwithstanding the foregoing, if Sublessee's desire to transfer by
sale, gift, or as a result of death, its interest herein to its lawful issue
or immediate family member, the Sublessor shall not unreasonably withhold
consent to such a transfer, provided, such transferee agrees that it holds
such interest subject to the restrictions and conditions contained in this
sublease agreement.
4.2 Covenants, Representations and Warranties.
(a) Membership in United Grocers, Inc. Upon execution and
during the term hereof, Sublessee agrees to maintain or cause to be maintained
the membership of the store in good standing in United Grocers, in accordance
with the Bylaws of United Grocers, as long as this Sublease remains in effect.
(b) Purchases from Sublessor. Sublessee agrees that
throughout the term of the Sublease and any extensions or renewals thereof,
except as hereinafter provided, Sublessee will purchase from Sublessor not
less than fifty-eight percent (58%) of its retail sales of all goods and
merchandise required by it for resale on the premises to the extent that
Sublessor shall now or hereafter be able to supply such goods and merchandise
to the Sublessee, and Sublessor will supply all of Sublessee's requirements at
such prices and on such terms as are reasonably comparable to those offered by
Sublessor to other purchasers from Sublessor carrying on businesses similar to
that of the Sublessees in the Magalia/Chico area of northern California. If,
at any time, the Sublessee contends that Sublessor is not able to supply
particular goods or merchandise customarily stocked by retail supermarkets in
the Magalia/Chico area of northern California, or that the terms offered by
Sublessor are not reasonably comparable to those offered by Sublessor to other
purchasers described above, the Sublessee shall so advise Sublessor in
writing, specifying such contention with particularity. If, within 30 days
after receipt of such notice, Sublessor does not offer to supply goods or
merchandise so specified or does not advise Sublessees that the terms and
conditions offered are reasonably comparable to those offered to such other
purchasers, Sublessee shall be free to secure such specified goods and
merchandise from any source which it desires. If Sublessor demonstrates that
it is offering reasonably comparable terms, and Sublessee nonetheless
purchases from another source, such purchase or purchases shall not be an
exception from the 58% requirement specified above. If the above percentage
requirements are not complied with, it shall constitute a default hereunder.
In the event of a breach of this purchase covenant, Sublessor may terminate
this sublease and, in addition to the remedies hereinafter offered Sublessor,
Sublessee agrees to pay Sublessor, as liquidated damages, and not as a penalty
or forfeiture, a sum computed as follows:
1. The average weekly purchases from the date of the
agreement to the date of the breach shall be determined;
2. The average weekly purchases so determined shall
then be multiplied by the number of weeks from the date of the breach to the
end of the term of the purchase agreement; and
3. The computed sum shall be multiplied by two and
one-quarter percent (2-1/4 %) to determine the liquidated damages due and
owing Sublessor by reason of Sublessee's default. Said sum shall become
immediately due and owing within 15 days from date of written notice of the
liquidated damages.
(c) Sublessee covenants that as long as this Sublease
remains in effect, and for an additional period of six (6) months thereafter,
Sublessee shall not directly or indirectly sell or permit the sale of the
store and the owners of Sublessee shall not directly or indirectly sell
controlling interests in Sublessee (whether in one or a series of related
transactions) without first offering to sell said store or controlling
interest, as the case may be, to Sublessor upon the same terms and conditions
as the Sublessees or their owners, as the case may be, are prepared to accept
from a third party. Prior to such sale by the Sublessees or their owners, the
Sublessees shall first notify Sublessor of the desire to sell the store or
controlling interest in the Sublessees and of all the terms and conditions of
such sale and shall provide to Sublessor all documents, instruments,
agreements, offers, acceptances, appraisals, inventories, equipment lists,
leases, financial statements and such other material and information in
Sublessee's possession as Sublessor may reasonably request to aid in its
decision to exercise or decline its right to purchase as hereinafter provided.
Within 30 days following receipt of such notice of desire to sell and all
materials and information reasonably requested by Sublessor, Sublessor shall
advise Sublessee whether Sublessor elects to purchase or declines to purchase
the store or such controlling interest upon the offered terms and conditions.
If Sublessor shall elect to purchase, Sublessor shall purchase and the
Sublessees or their owners shall sell, such retail grocery business or such
controlling interest, as the case may be, all on the terms set forth in the
offer. If Sublessor declines the purchase, the Sublessees or their owners
shall be free to sell the store or controlling interest, as the case may be,
upon (and only upon) the terms and conditions offered as aforesaid to
Sublessor; provided that such sale is consummated within 120 days following
the date Sublessor declined the purchase, and if such sale is not consummated
in accordance with the offered terms and conditions within said 120-day
period, the provisions of this paragraph shall apply again and no subsequent
sale of any portion of the offered store or controlling interest may be
effected without again offering the same to Sublessor as provided herein.
Sublessor may waive its rights under this section provided such waiver is in
writing. The foregoing provisions shall not apply to transfers of assets or
interests by sale, gift or as a result of death to the lawful issue or
immediate family members of Sublessees, or transfers of assets to a
corporation or partnership or transfers of a controlling interest to a trust
as long as such corporation, partnership or trust is controlled by the
transferor; provided such transferee agrees that it holds such assets or
controlling interest subject to the restrictions contained in this paragraph.
(d) Sublessees represent and warrant that there are no
brokers, finders or other persons entitled to any fee, commission or other
compensation in connection with this Sublease, and agree to hold Sublessor
harmless from any claims for such fees, commissions and/or compensation.
(e) Sublessees hereby represent and warrant to Sublessor
that the financial statements, appraisals and other documents submitted to
Sublessor in connection herewith or pursuant hereto are and shall be true,
correct, complete and accurate in every respect and said financial statements
fairly and accurately present the assets, liabilities, financial condition and
results of operations reflected herein.
(5) Security Agreement.
5.1 Grant, Collateral and Obligations. Sublessees and
Sublessor agree that this Sublease shall constitute a security agreement
within the meaning of the California Uniform Commercial Code (hereinafter
referred to as the "Code") with respect to:
(a) required cash deposits (as defined in the Bylaws
of Sublessor) presently or hereafter held by or deposited with Sublessor by
Sublessees;
(b) any and all patronage rebates and rebate notes
representing patronage rebates (as defined in the Bylaws of Sublessor) earned
or hereafter earned by reason of patronage of Sublessor by Sublessees;
(c) subject to liens securing purchase money
financing therefor as described in Exhibit "X," all trade, store and other
fixtures and all leasehold improvements and all equipment and other personal
property of Sublessee used or useful in the operation of the store in or on
the premises, whether now owned or hereafter acquired including, without
limitation, the property described in Exhibit "Y", attached hereto, if any;
and
(d) all replacements of substitutions for, and
additions to the foregoing, and the proceeds thereof (all of said personal
property and the replacements, substitutions and additions thereto and the
proceeds thereof being sometimes hereinafter collectively referred to as the
"Collateral"), and that a security interest in and to the Collateral is hereby
granted to the Sublessor, and the Collateral and all of the Sublessee's right,
title and interest therein are hereby assigned to the Sublessor, all to secure
all presently existing or hereafter incurred direct, indirect, absolute or
contingent indebtedness, liabilities and other obligations of Sublessee to
Sublessor (referred to as "the Obligations" herein) including, but not limited
to, the payment of all rent and other sums and the performance of all other
obligations of Sublessee under this Sublease, all renewals and extensions
thereof, the price of goods, services and merchandise purchased by Sublessees
from Sublessor from time to time, and all costs of collection, legal expenses
and attorneys' fees paid or incurred by Sublessor in enforcing any rights in
respect to the Obligations or in connection with assembling, collecting,
selling or otherwise dealing with or realizing upon the Collateral.
5.2 Security Agreement Warranties. In addition to and without
limiting the force or effect of any other covenants, representations and
warranties of Sublessee contained in this Sublease, Sublessee hereby covenant,
represent and warrant to and with Sublessor as follows:
(a) Sublessees are the owners of the Collateral free and
clear of liens, security interests and encumbrances of every kind and
description, except liens, security interests and encumbrances securing
indebtedness to Sublessor and liens described on Exhibit "X," hereto to which
Secured Party has consented ("Permitted Liens").
(b) Sublessees will not sell, dispose of, encumber or
permit any other security interest, lien or encumbrance, other than security
interests, liens or encumbrances junior to Sublessor's security interest to
attach to the Collateral except the security interest of Sublessor and the
Permitted Liens.
(c) All tangible Collateral shall be kept at Sublessee's
place(s) of business located on the premises, and Sublessee shall not permit
the same to be removed therefrom without the prior written consent of
Sublessor, except sales in the ordinary course of grocery business.
(d) Sublessee shall keep the tangible Collateral at all
times insured against risks of loss or damage by fire (including so-called
extended coverage), theft and such other casualties as Sublessor may
reasonably require, all in such amounts, under such forms of policies, upon
such terms, for such periods and written by such companies or underwriters as
Sublessor may approve. All such policies of insurance shall name Sublessor as
loss payee thereon as its interest may appear and shall provide for at least
30 days' prior written notice of modification or cancellation to Sublessor.
Sublessee shall furnish Sublessor with certificates of such insurance or other
evidence satisfactory to Sublessor as to compliance with the provisions of
this paragraph. Sublessor may act as attorney-in-fact for Sublessee in
making, adjusting and settling claims under and canceling such insurance and
endorsing Sublessee's name on any drafts drawn by insurers of the Collateral.
(e) Sublessee will keep the Collateral in good order and
repair. shall not waste or destroy the Collateral or any part thereof, and
shall not use the Collateral in violation of any statute, ordinance or policy
of insurance thereon. Sublessor may examine and inspect the Collateral at any
reasonable time or times, wherever located.
(f) Sublessee will pay promptly when due all taxes and
assessments upon the Collateral or for its use or operation or upon this
Sublease or upon any instruments evidencing the Obligations.
(g) Sublessee will pay promptly when due all indebtedness secured
by any lien or other security interest in the Collateral, whether superior or
junior to the security interest established hereby.
5.3 Additional Remedies. Upon any default hereunder and at any
time thereafter (such default not having previously been cured), Sublessor at
its option may declare all Obligations immediately due and payable and shall
have the remedies of a secured party under the Uniform Commercial Code of
California (the "Code"), including without limitation the right to take
immediate and exclusive possession of the Collateral.
5.4 Financing Statements. Sublessees will at their own cost and
expense, upon demand, furnish to Sublessor such financing statements and other
documents in form satisfactory to Sublessor and will do all such acts and
things as Sublessor may at any time or from time to time request or as may be
necessary or appropriate to establish and maintain a perfected security
interest in the Collateral.
5.5 Attorneys' Fees. In the event of the institution of any suit
or action to terminate this Sublease, or to enforce the terms or provisions
hereto, Sublessees shall and do hereby agree to pay, in addition to the costs
and disbursements provided by statute, reasonable attorneys' fees in such
proceedings or on any appeal from any judgment or decree entered therein.
(6) Default. The following shall constitute a default under this
Sublease:
6.1 Any failure by Sublessee to pay, when due, rent or any other
amount due under the Lease or to perform any other obligation of Sublessor
under the Lease or any other default under the Lease which continues for up to
one-half of the cure period as defined in the Lease, provided with respect
thereto in the Lease;
6.2 Any failure by Sublessee to pay when due rent or any other
amount due under this Sublease or to perform when due any other obligation of
Sublessee hereunder;
6.3 If any warranty, representation or statement made or
furnished to Sublessor by or on behalf of the Sublessee is false in any
material respect when made or furnished;
6.4 Any failure by Sublessee to pay when due and/or satisfy any
other present or hereinafter incurred indebtedness or obligation of Sublessee
to Sublessor, including but not limited to those arising from Sublessee's
purchases of goods and services from Sublessor any other loans or leases
Sublessees may have or enter into with Sublessor, and Sublessees' obligations
under the Bylaws of Sublessor and its application for membership in Sublessor;
6.5 If Sublessee vacates or abandon the premises or allow the
premises to remain vacant or unoccupied;
6.6 If Sublessee makes an assignment for the benefit of
creditors, or if, with or without Sublessee's acquiescence, a petition in
bankruptcy is filed against Sublessee, or Sublessee is adjudicated a bankrupt
or insolvent, or a trustee, receiver or liquidator is appointed for all or
part of Sublessee's assets, or a petition or answer is filed by or against
Sublessee seeking or acquiescing in any reorganization, liquidation or similar
relief under any federal, state or local law relating to bankruptcy,
insolvency or other relief for debtors; and
6.7 If Sublessee sells or otherwise dispose of all or any
substantial portion of the assets of Sublessee located at or associated with
the store, other than inventory sold at retail or assets sold in the ordinary
course of the business of the grocery store.
6.8 Provided, that Sublessee shall not be in default pursuant to
paragraph 6.2 or 6.4 unless and until Sublessor has given written notice of
the exact nature of Sublessee's breech and Sublessee thereafter fails to cure
said breach within a ten (10) day period, as long as Sublessee commences to
cure said breech within said ten (10) day period and thereafter diligently
prosecutes said cure to completion. Further provided that if the terms of
default of the main lease are in conflict with this provision, and Sublessee
has not cured under those terms, Sublessor may declare this sublease in
default and exercise such remedies as defined by this Sublease.
(7) Remedies. In the event of any default under this Sublease:
7.1 Sublessor shall have the right, at its election then or at
any time thereafter, upon notice to Sublessee, to terminate this Sublease or
to terminate Sublessee's rights of possession in the premises without
terminating this Sublease;
7.2 Sublessor shall have the immediate right, whether or not the
Sublease shall have been terminated pursuant to paragraph 7.1, to re-enter and
repossess the premises or any part thereof by force, summary proceedings,
ejectment or any other legal or equitable process, all without any liability
on Sublessor's part for such entry, repossession or removal;
7.3 Sublessor may (but shall be under no obligation to), whether
or not this Sublease shall have been terminated pursuant to paragraph 7.1,
resublet the premises, or any part thereof, in the name of Sublessee,
Sublessor or otherwise, without notice to Sublessee, for such term or terms
and for such uses as Sublessor, in its absolute discretion, may determine and
may collect and receive rents payable by reason of such resubletting (without
any liability for any failure to collect such rents);
7.4 Sublessor may (but shall be under no obligation to) procure
any insurance, pay any rentals, taxes or liens, make any repairs, pay any sums
required to be paid, and to do and perform such other acts as may be required
of Sublessee hereunder, and any payments so made shall bear interest at the
rate of 12 percent per annum from the time of such payment until repaid; and
7.5 Sublessor may exercise any and all other rights and remedies
afforded to the prime Lessor upon default under the Lease and any and all
other rights and remedies Sublessor may have as provided herein, pursuant to
the laws of the State of California. In addition to the other remedies
provided above, Sublessor shall be entitled to current damages and final
damages as provided in paragraph (8) below, and, to the extent permitted by
applicable law, to injunctive relief in case of the violation, or attempted or
threatened violation, of any of the provisions of this Sublease, or to a
decree compelling performance of this Sublease.
7.6 No expiration or termination of this Sublease, repossession
of the premises or any part thereof, or resubletting of the premises or any
part thereof, whether pursuant to the above paragraph or by operation of law
or otherwise, shall relieve Sublessees of their liabilities and obligations
under this Sublease, all of which shall survive such expiration, termination,
repossession or resubletting.
(8) Damages.
8.1 Current Damages. In the event of any expiration or
termination of this Sublease or repossession of the premises or any part
thereof by reason of the occurrence of an event of default, Sublessee will pay
to Sublessor the rent and other sums required to be paid by Sublessee for the
period to and including the date of such expiration, termination or
repossession; and, thereafter, until the end of what would have been the term
in the absence of such expiration, termination or repossession, and whether or
not the premises or any part thereof shall have been resublet, Sublessees
shall be liable to Sublessor for, and shall pay to Sublessor, as liquidated
and agreed current damages the rent and other sums which would be payable
under this Sublease by Sublessee in the absence of such expiration,
termination or repossession, less the net proceeds, if any, of any
resubletting effected for the account of Sublessee, after deducting from such
proceeds all of Sublessor's expenses reasonably incurred in connection with
such resubletting (including, without limitation, all repossession costs,
brokerage commissions, legal expenses, attorney's fees, employee expenses,
alteration costs and expenses of preparation for such resubletting).
Sublessee will pay such current damages on the days on which rent would have
been payable under this Sublease in the absence of such expiration,
termination or repossession, and Sublessor shall be entitled to recover the
same from Sublessees on each such day.
8.2 Final Damages. At any time after any such expiration or
termination of this Sublease or repossession of the premises or any part
thereof by reason of the occurrence of an event of default, whether or not
Sublessor shall have collected any current damages pursuant to paragraph 8.1,
Sublessor shall be entitled to recover from Sublessees, and Sublessees will
pay to Sublessor on demand, as and for liquidated and agreed final damages for
Sublessees' default and in lieu of all current damages beyond the date of such
demand (it being agreed that it would be impracticable or extremely difficult
to fix the actual damages), an amount equal to the excess, if any, of (a) the
rent and other sums which would be payable under this Sublease from the date
of such demand (or, if it be earlier, the date to which Sublessee shall have
satisfied in full their obligations under paragraph 8.1 to pay current
damages) for what would be the then unexpired term in the absence of such
expiration, termination or repossession, discounted to present value at an
assumed interest rate of seven percent (7%) per annum, over (b) the then net
rental value of the premises discounted to present value at an assumed
interest rate of seven percent (7%) per annum for the same period. Rental
value shall be established by reference to the terms and conditions upon which
Sublessor resublets the premises if such resubletting is accomplished within a
reasonable period of time after such expiration, termination or repossession,
and otherwise established on the basis of Sublessor's estimates and
assumptions of fact regarding market and other relevant circumstances, which
shall govern unless shown to be erroneous. If any statute or rule of law
shall validly limit the amount of such liquidated final damages to less than
the amount above agreed upon, Sublessor shall be entitled to the maximum
amount allowable under such statute or rule of law.
(9) Rights Cumulative, Nonwaiver. No right or remedy herein
conferred upon or reserved to Sublessor is intended to be exclusive of any
other right or remedy, and each and every right and remedy shall be cumulative
and in addition to any other right or remedy given hereunder or now or
hereafter existing at law or in equity or by statute. The failure of
Sublessor to insist at any time upon the strict performance of any covenant or
agreement or to exercise any option, right, power or remedy contained in this
Sublease shall not be construed as a waiver or relinquishment thereof for the
future. No waiver by Sublessor of any provision of this Sublease shall be
deemed to have been made whether due in the receipt of rent or otherwise,
unless expressed in writing and signed by Sublessor.
(10) Notices. Any notice or demand required or permitted to be
given under this Sublease shall be deemed to have been properly given when,
and only when, the same is in writing and has been deposited in the United
States Mail, with postage prepaid, to be forwarded by registered or certified
mail and addressed to the party to be notified at the address appearing below
its signature. Such addresses may be changed from time to time by serving of
notice as above provided.
(11) Right of Refusal: If, during the term of this sublease, or
any extension hereof, Sublessee or any successor to Sublessee shall receive a
bona fide offer to purchase the business being operated under this sublease,
i.e., goodwill, fixtures and/or equipment and inventory or the property of
which the premises are a part, which offer is acceptable to Sublessee,
Sublessor shall have the right to purchase the business (or the property) upon
the same terms and conditions. Sublessee agrees to immediately, upon receipt
of such offer, to give Sublessor written notice of the terms and conditions
thereof, and the Sublessor shall have the right, for thirty (30) days after
receipt of such notice, to exercise its option to purchase under the identical
terms and conditions of such offer. Sublessor's exercise of its option shall
be given in writing, within said thirty-day period.
IN WITNESS WHEREOF, the parties have executed the foregoing
Sublease Agreement the day and year first above written.
SUBLESSOR: United Grocers, Inc., an Oregon Corporation
6433 SE Lake Road
PO Box 22187
Portland, Oregon 97222
by: /s/ Alan Jones
SUBLESSEE: Al Mancasola Grocery Markets, Inc.
Ron Mansacola, President
5090 Dapple Gray Drive
Redding, CA 96002
by: /s/ Ronald L. Mancasola
/s/ John Allen Mancasola
John Allen Mancasola
/s/ Ronald L. Mancasola
Ronald L. Mancasola
/s/ Sue V. Mancascola
Sue V. Mancasola
<PAGE>
EXHIBIT 10.H1
SUBLEASE AGREEMENT
SILVERTON
THIS SUBLEASE AGREEMENT entered into this ____ day of
_____________, 1994, by and between UNITED GROCERS, INC., an Oregon
corporation, hereinafter designated as Sublessor, and David D. and Marilyn K.
Neal and Matthew L. Marcott and Pamela Marcott Garcia and Marcott Holdings,
Inc., an Oregon Corporation, hereinafter jointly and severally designated as
Sublessee;
W I T N E S S E T H
WHEREAS, the Sublessor has entered into a Lease dated
_____________, 19____, with Pay Less Drug Stores Northwest, Inc., a Maryland
corporation, for a supermarket located in Silverton, Oregon (more particularly
described in exhibit "A" attached to said lease), commencing on the date set
forth in the attached Exhibit "A," a copy of which is hereby incorporated by
reference, as fully as if its terms and conditions were herein set forth.
WHEREAS, Sublessees desire to sublet said premises for a period of
20 years, commencing on date set forth in paragraph 3 of Exhibit "A," and
Sublessor is willing to so sublet in accordance with the terms and conditions
hereinafter set forth; now, therefore,
IT IS HEREBY AGREED as follows:
(1) Sublessor hereby sublets unto Sublessees those premises
described in said Exhibit "A," for the term of 20 years.
1.1 The Sublessees, so long as they are not in default
hereunder and further provided that no event or condition exists that, with
the passage of time or giving of notice would constitute default, shall be
granted the right to exercise the renewal options contained in Exhibit "A," as
set forth in paragraph 5 of said Exhibit.
(2) Sublessees covenant and agree to pay for the whole of said
term the rental hereinafter provided, together with all affirmative covenants
including, without limitation, those pertaining to minimum rent, Common Area
Charges (CAM), percentage of gross sales, taxes, assessments, insurance and
all of the covenants and obligations to be performed by Lessee, as set forth
in said Exhibit "A," and to make such payments and provide such performance
when due by the terms of the lease and amendments thereto.
(3) Sublessees shall, upon execution hereof, pay any and all
rental or security deposits and all other sums except minimum rent, as
required pursuant to the terms and conditions of said Exhibits "A", and shall
pay rent to Sublessor, in accordance with the "Sublease Rent Schedule"
attached hereto. All such rental payments to Sublessor shall be made without
offset, adjustment or deduction of any kind.
(4) Sublessees shall be bound by the same responsibilities,
rights, privileges and duties as Sublessor, as enumerated in Exhibit "A" and
covenants and agrees to fully indemnify and hold Sublessor harmless from any
and all responsibility and/or liability which Sublessor may incur by virtue of
said Exhibit "A," and/or Sublessees' occupancy of the premises. Furthermore,
Sublessees shall be bound by any subsequent amendment, revision, supplement or
addition to the prime lease between Sublessor and the prime Lessor, and to
keep the Sublessor indemnified against all actions, claims and demands
whatsoever in respect to said exhibit "A," and Sublessees use of the demised
premises.
4.1 Assignment and Subletting. Sublessees acknowledge that
provisions for extension options and assignment and subletting in the Lease
are applicable to the prime Lessor and Sublessor only. Sublessees will not
assign this Sublease or sublet the premises without the prior written consent
of Sublessor which may be granted or withheld in its absolute discretion. A
direct or indirect transfer of ownership and control of a majority of the
voting stock of a corporate Sublessees, by whatever demands, shall be deemed
an assignment of this Sublease for the purposes of this paragraph.
4.2 Covenants, Representations and Warranties.
(a) Membership in United Grocers, Inc. Upon execution and
during the term hereof, Sublessees agree to maintain or cause to be maintained
the membership of the store in good standing in United Grocers, in accordance
with the Bylaws of United Grocers, as long as this Sublease remains in effect.
(b) Purchases from Sublessor. Sublessees agree that
throughout the term of the Sublease and any extensions or renewals thereof,
except as hereinafter provided, Sublessees will purchase from Sublessor not
less than fifty-eight percent (58%) of its retail sales of all goods and
merchandise required by it for resale on the premises to the extent that
Sublessor shall now or hereafter be able to supply such goods and merchandise
to the Sublessees, and Sublessor will supply all of Sublessees' requirements
at such prices and on such terms as are reasonably comparable to those offered
by Sublessor to other purchasers from Sublessor carrying on businesses similar
to that of the Sublessees in the Silverton or Salem areas of the state of
Oregon. If, at any time, the Sublessees contend that Sublessor is not able to
supply particular goods or merchandise customarily stocked by retail
supermarkets in the Salem - Silverton area, or that terms offered by Sublessor
are not reasonably comparable to those offered by Sublessor to other
purchasers described above, the Sublessees shall so advise Sublessor in
writing, specifying such contention with particularity. If, within 30 days
after receipt of such notice, Sublessor does not offer to supply goods or
merchandise so specified or does not advise Sublessees that the terms and
conditions offered are reasonably comparable to those offered to such other
purchasers, Sublessees shall be free to secure such specified goods and
merchandise from any source which it desires. If Sublessor demonstrates that
it is offering reasonably comparable terms, and Sublessees nonetheless
purchase from another source, such purchase or purchases shall not be an
exception from the 58% requirement specified above. If the above percentage
requirements are not complied with, it shall constitute a default hereunder.
In the event of a breach of this purchase covenant, Sublessor may terminate
this sublease and, in addition to the remedies hereinafter offered Sublessor,
Sublessee agrees to pay Sublessor, as liquidated damages, and not as a penalty
or forfeiture, a sum computed as follows:
1. The average weekly purchases from the date of the
agreement to the date of the breach shall be determined;
2. the average weekly purchases so determined shall
then be multiplied by the number of weeks from the date of the
breach to the end of the term of the purchase agreement; and
3. The computed sum shall be multiplied by two and
one-quarter percent (2-1/4%) to determine the liquidated damages
due and owing Sublessor by reason of Sublessee's default. Said sum
shall become immediately due and owing within 15 days from date of
written notice of the liquidated damages.
(c) Sublessees covenant that as long as this Sublease
remains in effect, and for an additional period of six (6) months thereafter,
Sublessees shall not directly or indirectly sell or permit the sale of the
store and the owners of Sublessees shall not directly or indirectly sell
controlling interests in Sublessees (whether in one or a series of related
transactions) without first offering to sell said store or controlling
interest, as the case may be, to Sublessor upon the same terms and conditions
as the Sublessees or their owners, as the case may be, are prepared to accept
from a third party. Prior to such sale by the Sublessees or their owners, the
Sublessees shall first notify Sublessor of the desire to sell the store or
controlling interest in the Sublessees and of all the terms and conditions of
such sale and shall provide to Sublessor all documents, instruments,
agreements, offers, acceptances, appraisals, inventories, equipment lists,
leases, financial statements and such other material and information as
Sublessor may reasonably request to aid in its decision to exercise or decline
its right to purchase as hereinafter provided. Within 30 days following
receipt of such notice of desire to sell and all materials and information
reasonably requested by Sublessor, Sublessor shall advise Sublessees whether
Sublessor elects to purchase or declines to purchase the store or such
controlling interest upon the offered terms and conditions. If Sublessor
shall elect to purchase, Sublessor shall purchase and the Sublessees or their
owners shall sell, such retain grocery business or such controlling interest,
as the case may be, all on the terms set forth in the offer. If Sublessor
declines the purchase, the Sublessees or their owners shall be free to sell
the store or controlling interest, as the case may be, upon (and only upon)
the terms and conditions offered as aforesaid to Sublessor; provided that such
sale is consummated within 120 days following the date Sublessor declined the
purchase, and if such sale is not consummated in accordance with the offered
terms and conditions within said 120-day period, the provisions of this
paragraph shall apply again and no subsequent sale of any portion of the
offered store or controlling interest may be effected without again offering
the same to Sublessor as provided herein. Sublessor may waive its rights
under this section provided such waiver is in writing. The foregoing
provisions shall not apply to transfers of assets or interests by sale, gift
or as a result of death to the lawful issue of Sublessees, or transfers of
assets to a corporation or partnership or transfers of a controlling interest
to a trust as long as such corporation, partnership or trust is controlled by
the transferor; provided such transferee agrees that it holds such assets or
controlling interest subject to the restrictions contained in this paragraph.
(d) Sublessees represent and warrant that there are no
brokers, finders or other persons entitled to any fee, commission or other
compensation in connection with this Sublease, and agree to hold Sublessor
harmless from any claims for such fees, commissions and/or compensation.
(e) Sublessees hereby represent and warrant to Sublessor
that the financial statements, appraisals and other documents submitted to
Sublessor in connection herewith or pursuant hereto are and shall be true,
correct, complete and accurate in every respect and said financial statements
fairly and accurately present the assets, liabilities, financial condition and
results of operations reflected herein.
(5) Security Agreement.
5.1 Grant, Collateral and Obligations. Sublessees and
Sublessor agree that this Sublease shall constitute a security agreement
within the meaning of the Oregon Uniform Commercial Code (hereinafter referred
to as the "Code) with respect to:
(a) required cash deposits (as defined in the Bylaws
of Sublessor) presently or hereafter held by or deposited with Sublessor by
Sublessees;
(b) any and all patronage rebates and rebate notes
representing patronage rebates (as defined in the Bylaws of Sublessor) earned
or hereafter earned by reason of patronage of Sublessor by Sublessees;
(c) subject to liens securing purchase money
financing therefor as described in Exhibit "X," all trade, store and other
fixtures and all leasehold improvements and all equipment and other personal
property of Sublessees used or useful in the operation of the store in or on
the premises, whether now owned or hereafter acquired including, without
limitation, the property described in Exhibit "Y", attached hereto, if any;
and
(d) all replacements of substitutions for, and
additions to the foregoing, and the proceeds thereof (all of said personal
property and the replacements, substitutions and additions thereto and the
proceeds thereof being sometimes hereinafter collectively referred to as the
"Collateral"), and that a security interest in and to the Collateral is hereby
granted to the Sublessor, and the Collateral and all of the Sublessees' right,
title and interest therein are hereby assigned to the Sublessor, all to secure
all presently existing or hereafter incurred direct, indirect, absolute or
contingent indebtedness, liabilities and other obligations of Sublessees to
Sublessor (referred to as "the Obligations" herein) including, but not limited
to, the payment of all rent and other sums and the performance of all other
obligations of Sublessees under this Sublease, all renewals and extensions
thereof, the price of goods, services and merchandise purchased by Sublessees
from Sublessor from time to time, and all costs of collection, legal expenses
and attorneys' fees paid or incurred by Sublessor in enforcing any rights in
respect to the Obligations or in connection with assembling, collecting,
selling or otherwise dealing with or realizing upon the Collateral.
5.2 Security Agreement Warranties. In addition to and
without limiting the force or effect of any other covenants, representations
and warranties of Sublessees contained in this Sublease, Sublessees hereby
covenant, represent and warrant to and with Sublessor as follows:
(a) Sublessees are the owners of the Collateral free
and clear of liens, security interests and encumbrances of every kind and
description, except liens, security interests an encumbrances securing
indebtedness to Sublessor and liens described on Exhibit "X," hereto to which
Secured Party has consented ("Permitted Liens").
(b) Sublessees will not sell, dispose of, encumber or
permit any other security interest, lien or encumbrance to attach to the
Collateral except the security interest of Sublessor and the Permitted Liens.
(c) All tangible Collateral shall be kept as
Sublessees' place(s) of business located on the premises, and Sublessees shall
not permit the same to be removed therefrom without the prior written consent
of Sublessor.
(d) Sublessees shall keep the tangible Collateral at
all times insured against risks of loss or damage by fire (including so-called
extended coverage), theft and such other casualties as Sublessor may
reasonably require, all in such amounts, under such forms of policies, upon
such terms, for such periods and written by such companies or underwriters as
Sublessor may approve. All such policies of insurance shall name Sublessor as
loss payee thereon as its interest may appear and shall provide for at least
30 days' prior written notice of modification or cancellation to Sublessor.
Sublessees shall furnish Sublessor with certificates of such insurance or
other evidence satisfactory to Sublessor as to compliance with the provisions
of this paragraph. Sublessor may act as attorney-in-fact for Sublessees in
making, adjusting and settling claims under and canceling such insurance and
endorsing Sublessees' name on any drafts drawn by insurers of the Collateral.
(e) Sublessees will keep the Collateral in good order
and repair, shall not waste or destroy the Collateral or any part thereof, and
shall not use the Collateral in violation of any statute, ordinance or policy
of insurance thereon. Sublessor may examine and inspect the Collateral at any
reasonable time or times, wherever located.
(f) Sublessees will pay promptly when due all taxes
and assessments upon the Collateral or for its use or operation or upon this
Sublease or upon any instruments evidencing the Obligations.
(g) Sublessees will pay promptly when due all
indebtedness secured by any lien or other security interest in the Collateral,
whether superior or junior to the security interest established hereby.
5.3 Additional Remedies. Upon any default hereunder and at
any time thereafter (such default not having previously been cured), Sublessor
at its option may declare all Obligations immediately due and payable and
shall have the remedies of a secured party under the Uniform Commercial Code
of Oregon (the "Code"), including without limitation the right to take
immediate and exclusive possession of the Collateral.
5.4 Financing Statements. Sublessees will at their own
cost and expense, upon demand, furnish to Sublessor such financing statements
and other documents in form satisfactory to Sublessor and will do all such
acts and things as Sublessor may at any time or from time to time request or
as may be necessary or appropriate to establish and maintain a perfected
security interest in the Collateral.
5.5 Attorneys' Fees. In the event of the institution of
any suit or action to terminate this Sublease, or to enforce the terms or
provisions hereto, Sublessees shall and do hereby agree to pay, in addition to
the costs and disbursements provided by statute, reasonably attorneys' fees in
such proceedings or on any appeal from any judgment or decree entered therein.
(6) Default. The following shall constitute a default under this
Sublease:
6.1 Any failure by Sublessees to pay, when due, rent or any
other amount due under the Lease or to perform any other obligation of
Sublessor under the Lease or any other default under the Lease which continues
for up to one-half of the cure period as defined in the lease, provided with
respect thereto in the Lease;
6.2 Any failure by Sublessees to pay when due rent or any
other amount due under this Sublease or to perform when due any other
obligation of Sublessees hereunder;
6.3 If any warranty, representation or statement made or
furnished to Sublessor by or on behalf of the Sublessees is false in any
material respect when made or furnished;
6.4 Any failure by Sublessees to pay when due and/or
satisfy any other present or hereinafter incurred indebtedness or obligation
of Sublessees to Sublessor, including but not limited to those arising from
Sublessees' purchases of goods and services from Sublessor any other loans or
leases Sublessees may have or enter into with Sublessor, and Sublessees'
obligations under the Bylaws of Sublessor and its application for membership
in Sublessor;
6.5 If Sublessees vacate or abandon the premises or allow
the premises to remain vacant or unoccupied;
6.6 If Sublessees make an assignment for the benefit of
creditors, of if, with or without Sublessees' acquiescence, a petition in
bankruptcy is filed against Sublessees, or Sublessees are adjudicated a
bankrupt or insolvent, or a trustee, receiver or liquidator is appointed for
all or part of Sublessees' assets, or a petition or answer is filed by or
against Sublessees seeking or acquiescing in any reorganization, liquidation
or similar relief under any federal, state or local law relating to
bankruptcy, insolvency or other relief for debtors; and
6.7 If Sublessees sell or otherwise dispose of all or any
substantial portion of the assets of Sublessees located at or associated with
the store, other than inventory sold at retail in the ordinary course of
business.
(7) Remedies. In the event of any default under this Sublease:
7.1 Sublessor shall have the right, at its election then or
at any time thereafter, upon notice to Sublessees, to terminate this Sublease
or to terminate Sublessees' rights of possession in the premises without
terminating this Sublease;
7.2 Sublessor shall have the immediate right, whether or
not the Sublease shall have been terminated pursuant to paragraph 7.1, to re-
enter and repossess the premises or any part thereof by force, summary
proceedings, ejectment or any other legal or equitable process, all without
any liability on Sublessor's part for such entry, repossession or removal;
7.3 Sublessor may (but shall be under no obligation to),
whether or not this Sublease shall have been terminated pursuant to paragraph
7.1, resublet the premises, or any part thereof, in the name of Sublessees,
Sublessor or otherwise, without notice to Sublessees, for such term or terms
and for such uses as Sublessor, in its absolute discretion, may determine and
may collect and receive rents payable by reason of such resubletting (without
any liability for any failure to collect such rents);
7.4 Sublessor may (but shall be under no obligation to)
procure any insurance, pay any rentals, taxes or liens, make any repairs, pay
any sums required to be paid, and to do and perform such other acts as may be
required of Sublessees hereunder, and any payments so made shall bear interest
at the rate of 12 percent per annum from the time of such payment until
repaid; and
7.5 Sublessor may exercise any and all other rights and
remedies afforded to the prime Lessor upon default under the Lease and any and
all other rights and remedies Sublessor may have as provided herein, pursuant
to the laws of the State of Oregon. In addition to the other remedies
provided above, Sublessor shall be entitled to current damages and final
damages as provided in paragraph (8) below, and, to the extent permitted by
applicable law, to injunctive relief in case of the violation, or attempted or
threatened violation, of any of the provisions of this Sublease, or to a
decree compelling performance of this Sublease.
7.6 No expiration or termination of this Sublease,
repossession of the premises or any part thereof, or resubletting of the
premises or any part thereof, whether pursuant to the above paragraph or by
operation of law or otherwise, shall relieve Sublessees of their liabilities
and obligations under this Sublease, all of which shall survive such
expiration, termination, repossession or resubletting.
(8) Damages.
8.1 Current Damages. In the event of any expiration or
termination of this Sublease or repossession of the premises or any part
thereof by reason of the occurrence of an event of default, Sublessees will
pay to Sublessor the rent and other sums required to be paid by Sublessees for
the period to and including the date of such expiration, termination or
repossession; and, thereafter, until the end of what would have been the term
in the absence of such expiration, termination or repossession, and whether or
not the premises or any part thereof shall have been resublet, Sublessees
shall be liable to Sublessor for, and shall pay to Sublessor, as liquidated
and agreed current damages the rent and other sums which would be payable
under this Sublease by Sublessees in the absence of such expiration,
termination or repossession, less the net proceeds, if any, of any
resubletting effected for the account of Sublessees, after deducting from such
proceeds all of Sublessor's expenses reasonably incurred in connection with
such resubletting (including, without limitation, all repossession costs,
brokerage commissions, legal expenses, attorney's fees, employee expenses,
alteration costs and expenses of preparation for such resubletting).
Sublessees will pay such current damages on the days on which rent would have
been payable under this Sublease in the absence of such expiration,
termination or repossession, and Sublessor shall be entitled to recover the
same from Sublessees on each such day.
8.2 Final Damages. At any time after any such expiration
or termination of this Sublease or repossession of the premises or any part
thereof by reason of the occurrence of an event of default, whether or not
Sublessor shall have collected any current damages pursuant to paragraph 8.1,
Sublessor shall be entitled to recover from Sublessees, and Sublessees will
pay to Sublessor on demand, as and for liquidated and agreed final damages for
Sublessees' default and in lieu of all current damages beyond the date of such
demand (it being agreed that it would be impracticable or extremely difficult
to fix the actual damages), an amount equal to the excess, if any, of (a) the
rent and other sums which would be payable under this Sublease from the date
of such demand (or, if it be earlier, the date to which Sublessees shall have
satisfied in full their obligations under paragraph 8.1 to pay current
damages) for what would be the then unexpired term in the absence of such
expiration, termination or repossession, discounted to present value at an
assumed interest rate of seven percent (7%) per annum, over (b) the then net
rental value of the premises discounted to present value at an assumed
interest rate of seven percent (7%) per annum for the same period. Rental
value shall be established by reference to the terms and conditions upon which
Sublessor resublets the premises if such resubletting is accomplished within a
reasonable period of time after such expiration, termination or repossession,
and otherwise established on the basis of Sublessor's estimates and
assumptions of fact regarding market and other relevant circumstances, which
shall govern unless shown to be erroneous. If any statute or rule of law
shall validly limit the amount of such liquidated final damages to less than
the amount above agreed upon, Sublessor shall be entitled to the maximum
amount allowable under such statute or rule of law.
(9) Rights Cumulative, Nonwaiver. No right or remedy herein
conferred upon or reserved to Sublessor is intended to be exclusive of any
other right or remedy, and each and every right and remedy shall be cumulative
and in addition to any other right or remedy given hereunder or now or
hereafter existing at law or in equity or by statute. The failure of
Sublessor to insist at any time upon the strict performance of any covenant or
agreement or to exercise any option, right, power or remedy contained in this
Sublease shall not be construed as a waiver or relinquishment thereof for the
future. No waiver by Sublessor of any provision of this Sublease shall be
deemed to have been made whether due in the receipt of rent or otherwise,
unless expressed in writing and signed by Sublessor.
(10) Notices. Any notice or demand required or permitted to be
given under this Sublease shall be deemed to have been properly given when,
and only when, the same is in writing and has been deposited in the United
States Mail, with postage prepaid, to be forwarded by registered or certified
mail and addressed to the party to be notified at the address appearing below
its signature. Such addresses may be changed from time to time by serving of
notice as above provided.
(11) Right of Refusal: If, during the term of this sublease, or
any extension hereof, Sublessee or any successor to Sublessee shall receive a
bona fide offer to purchase the business being operated under this sublease,
i. e., goodwill, fixtures and/or equipment and inventory or the property of
which the premises are a part, which offer is acceptable to Sublessee,
Sublessor shall have the right to purchase the business (or the property) upon
the same terms and conditions. Sublessee agrees to immediately, upon receipt
of such offer, to give Sublessor written notice of the terms and conditions
thereof, and the Sublessor shall have the right, for thirty (30) days after
receipt of such notice, to exercise its option to purchase under the identical
terms and conditions of such offer. Sublessor's exercise of its option shall
be given in writing, within said thirty-day period.
(12) Additional Provisions.
12.1
12.2
<PAGE>
IN WITNESS WHEREOF, the parties have executed the foregoing
Sublease Agreement the day and year first above written.
SUBLESSOR United Grocer, Inc., SUBLESSEES
an Oregon Corporation
6433 SE Lake Road /s/ Daniel D. Neal
PO Box 22187
Portland, Oregon 97222
By: /s/ Alan C. Jones
Marcott Holdings, Inc.,
by: [illegible]
<PAGE>
-RENT SCHEDULE-
SUBLEASE
__________________
SILVERTON
BUILDING SIZE: 35,470 SQ FT
=================================================================
YEAR RENT/MO RENT/YEAR RENT/PSF-YR
_________________________________________________________________
1 - 3 21,914 262,964 7.41
4 - 5 21,711 260,529 7.35
6 - 7 23,339 280,068 7.90
8 - 10 23,121 277,451 7.82
10 - 15 24,855 298,260 8.41
15 - 20 26,719 320,629 9.04
RENTAL AMOUNTS FOR OPTION PERIODS SHALL BE 106% OF RATES
SPECIFIED OR DETERMINED UNDER PROVISIONS OF EXHIBIT "A"
________________________________________________________________
PER CENT RENT
Sublessee shall pay percentage rental in the same amounts and at the same
times as required under Section 4.B. Percentage Rental, of Exhibit A
_________________________________________________________________
<PAGE>
EXHIBIT "X"
1. Met Life Capital
<PAGE>
EXHIBIT "Y"
All present and hereinafter acquired inventory, equipment, fixtures and
capital stock of United Grocers, Inc.
<PAGE>
EXHIBIT 10.H2
A S S I G N M E N T
Of Real Property Sale Contract
ASSIGNMENT made and entered into this 20th day of February, 1985,
by DAVID D. NEAL and MARILYN K. NEAL, hereinafter called the Assignors, to
UNITED GROCERS, INC., an Oregon corporation, with office at 6433 Lake Road,
Milwaukie, Oregon, hereinafter called the Assignee.
WHEREAS, the Assignors entered into an agreement, hereinafter
referred to as a Real Estate Contract of Sale, with MARIO PASTEGA, located at
Tillamook County, State of Oregon (see attached Exhibit A for property
description, which by this reference is made a part hereof), dated November
15, 1980 (see attached Exhibit B), pursuant to which agreement PASTEGA agrees
to pay according to the terms of the agreement of ***ONE HUNDRED FIFTY FIVE
THOUSAND SEVEN HUNDRED AND NO/100 DOLLARS*** ($155,700.00) to the Assignors,
and
WHEREAS, UNITED GROCERS, INC., has established a security interest
in said Real Estate Contract of Sale supported by UCC Filing No. J84384
------
WHEREAS, there is due and owing under said Real Estate Contract of
Sale ----------------------------------------------
WHEREAS, the Assignors have performed the obligations of said
PASTEGA's Real Estate Contract of Sale thereunder, and
WHEREAS, the Assignors are presently indebted to the Assignee in
the sum of ***NINETY THOUSAND AND NO/100 DOLLARS*** ($90,000.00) as evidenced
by an Installment Note dated February 20, 1985, with interest thereon at the
prevailing United Grocers, Inc. loan rate, it is therefore agreed:
1. ASSIGNMENT: To pledge as partial security for the said United
Grocers, Inc., Note and interest thereon, and any notes and obligations
hereafter incurred; the Assignors, DAVID D. NEAL and MARILYN K. NEAL hereby
assign to the Assignee, UNITED GROCERS, INC., its successors and assigns, and
the Assignee, its successors and assigns, shall have the right to the monthly
payments if Assignors become in default under the terms and conditions of the
said Note between UNITED GROCERS, INC., DAVID D. NEAL, and MARILYN K. NEAL,
and SMN COMPANY dba Sunset Thriftway, and in such event UNITED GROCERS, INC.,
shall also reserve all rights to receive such money or any part thereof and
the right to collect and demand with respect to the money due under the Real
Estate Contract of Sale.
2. POWER OF ATTORNEY: The Assignors hereby irrevocably appoint
the Assignee, its successors and assigns, its true and lawful attorney, to
collect and to receive all such moneys.
3. APPLICATION: The Assignors covenant that they have received
the sum of money advanced by the Assignee, as evidenced by an Installment Note
referred to above, in addition to the stipulated monthly payments.
4. WARRANTIES: The Assignors warrants that the balance now due or
hereafter to become due on the Real Estate Contract of Sale is $-------------
and that it has not made any prior assignments of any such moneys.
IN WITNESS WHEREOF, the Assignors have signed and acknowledged this
instrument in triplicate.
ASSIGNORS: ASSIGNEE:
/s/ David D. Neal UNITED GROCERS, INC.
- --------------------------
David D. Neal By /s/ G. P. Fleming
------------------------
G. P. Fleming, Assistant
Secretary
/s/ Marilyn K. Neal
- --------------------------
Marilyn K. Neal
<PAGE>
EXHIBIT "A"
A tract of land located in the Northeast quarter of Section 29 and
the Northwest quarter of Section 28, Township 1 South, Range 9 West,
Willamette Meridian, Tillamook County, Oregon.
Beginning at an iron rod which bears North 66 12'00" East 422.04
feet from the Northeast corner of the John S. Tripp D.L.C.; thence East 322.54
feet to an iron rod; thence South 1 degree 07' West 009.99 feet to an iron rod
on the North line of that tract of land described in Book 247, page 591,
Tillamook County Deed Records, said iron rod being North 89 degrees41' West
9.00 feet from the Northeast Corner of said tract; thence North 89 41' West
271.5 feet to an iron rod at the Northwest corner of that tract described in
Book 233, page 649, Tillamook County Deed Records; thence South 1 degrees07'
West 39.87 feet to an iron rod at the Northeast corner of that tract described
in Book [illegible], page 572, Tillamook County Deed Records; thence following
the North line of said tract North 89 degrees46' West 51.01 feet to an iron
rod; thence North 1 degree 07' East 708.15 feet to the point of beginning.
<PAGE>
CONTRACT OF SALE
THIS CONTRACT OF SALE made and entered into this 15th day of
November, 1980, by and between DAVID D. NEAL and MARILYN K. NEAL, husband and
wife, hereinafter called Seller, and MARIO PASTEGA, hereinafter called
Purchaser.
WITNESSETH:
In consideration of the terms and conditions hereof and the sum of
One Hundred Fifty-five Thousand Seven Hundred Dollars ($155,700.00) as the
agreed purchase price to be paid by the Purchaser to the Seller as herein
provided, Seller agrees to sell to Purchaser and Purchaser agrees to purchase
that certain land and all the improvements thereon situated in Tillamook
County, State of Oregon, described as follows, to-wit:
See attached Exhibit "A"
PURCHASE PRICE AND TERMS:
- ------------------------
The purchase price of said property shall be the sum of One Hundred
Fifty-five Thousand Seven Hundred Dollars ($155,700.00) payable as follows:
a) The sum of Two Thousand Dollars ($2,000.00) which has
previously been paid as earnest money.
b) The sum of Twelve Thousand Dollars ($12,000.00) to be paid on
execution hereof, receipt of which is hereby acknowledged.
c) The remaining balance of One Hundred Forty-one Thousand Seven
Hundred Dollars ($141,700.00) shall be paid in monthly installments of two
Thousand Three Hundred Ninety Dollars ($2390.00) or more, including interest
from November 15, 1980, at the rate of 10-1/2% per annum on the unpaid
balance, the first of such installments to be paid on the 15th day of
December, 1980, and subsequent installments to be paid on or before the 15th
day of each and every month thereafter until the entire purchase price,
including both principal and interest, is paid in full. HOWEVER, in any
event, the full balance must be paid in seven (7) years from the date of this
contract.
PREPAYMENT PRIVILEGES:
- ---------------------
Purchaser shall have the privilege after 12/31/80 of increasing any
payment or prepaying the whole consideration at any time, provided that no
additional payments shall be credited as regular future payments or excuse
Purchaser from making the regular payments provided for in this agreement.
SALE CONTINGENCIES AND ALTERNATIVES:
- -----------------------------------
It is understood that Purchaser intends to construct a beer and
soft drink distributing warehouse and offices on the premises which are the
subject matter of this contract. Under the July 25, 1980 EARNEST MONEY
AGREEMENT between the parties hereto relative to the sale of this property,
certain conditions appearing at pages 3 and 4 were to be met prior to closing;
however, it is understood that authority for zone change (item (G) p. 4.,
Earnest Money Agreement) has not been obtained. If that condition has not
been met within 12 months of the date of this Contract of Sale, Seller hereby
grants to Purchaser the option to purchase the real property described in the
attached Exhibit "B" on the following terms and conditions:
a. The terms and conditions of this CONTRACT OF SALE shall apply
to the purchase of the Exhibit "B" property at the same purchase price and all
payments made hereunder shall be applied against the purchase of the
Exhibit "B" property.
b. Purchaser shall notify Seller of his exercise of option to
purchase the Exhibit "B" property, in writing, no later than 15 days prior to
the 15 day of November, 1981.
Within one year from the date of this Contract Seller shall provide
to Purchaser a survey of the real property purchased. Said real property
shall contain five (5) acres.
Seller agrees that he shall not sell any portion of the surrounding
property now owned by Seller to any other beverage wholesaler.
Seller further agrees not to place in the area marked in blue on
Exhibit A any structure which will obstruct the view of any building placed
upon the Exhibit A property from said Highway 6.
TAXES AND INSURANCE:
- -------------------
Taxes levied against the above described property for the current
tax year shall be prorated between Seller and Purchaser as of November 15,
1980. Purchaser agrees to pay when due all taxes which are hereafter levied
against said property and all public, municipal, and statutory liens which may
hereafter lawfully be imposed upon the premises.
Purchaser agrees to keep the buildings on said premises insured
against loss by fire and other casualties covered by a standard fire insurance
policy with extended coverage in an amount not less than the lesser of the
balance due on this contract or the full insurable value hereunder, whichever
is greater.
Purchaser agrees, if Seller so requests, to furnish Seller with
written proof of the said insurance coverage.
All uninsured losses shall be borne by Purchaser, on or after the
date Purchaser becomes entitled to possession.
Purchaser shall also maintain adequate liability insurance on the
premises.
POSSESSION:
- ----------
Purchaser shall be entitled to possession of said premises as of
November 15, 1980.
IMPROVEMENTS, ALTERATIONS, AND REPAIRS:
- --------------------------------------
Purchaser agrees that all improvements now located or which shall
hereafter be placed on the premises shall remain a part of the real property
and shall not be removed at any time prior to the expiration of this agreement
without the written consent of Seller. Purchaser shall not commit or suffer
any waste of the property, or any improvements thereon, or alterations
thereof, and shall maintain the property, and all improvements thereon, and
all alterations thereof, in good condition and repair.
TITLE INSURANCE:
- ---------------
Seller shall furnish a Purchaser's Title Insurance Policy in the
amount of One Hundred Fifty-five Thousand Seven Hundred Dollars ($155,700.00)
within thirty days from the date hereof insuring Purchaser against loss or
damage sustained by reason of the unmarketability of Seller's title, or liens
or encumbrances thereon, except matters contained in usual printed exceptions
in such title insurance policies, easements, conditions and restrictions of
record, and encumbrances herein specified, if any.
ESCROW INSTRUCTIONS:
- -------------------
As soon as practicable following the execution of this agreement,
Seller shall deliver in escrow to First American Title Insurance Company of
Oregon [illegible] the following:
a) A Warranty Deed to said property free and clear of all
encumbrances described under paragraph TITLE INSURANCE as set forth above and
those placed or permitted thereon by or through Purchaser subsequent to
execution of this Contract.
b) An executed copy of this agreement.
The parties hereto hereby instruct said escrow agent to receive for
Seller's account the balance of the installment payments provided for herein.
Upon full payment of the principal and interest provided for herein, the
escrow agent shall deliver to Purchaser the instruments specified above.
Escrow costs shall be shared equally.
DEFAULT PROVISIONS:
- ------------------
Time is of the essence of this contract. A default shall occur if:
a) Purchaser fails to make any payment at the time required and
Purchaser has received 10 days' written notice of the delinquency;
b) Purchaser fails to perform any other obligation imposed by
this contract and does not correct or commence correction of such failure
within 30 days after receipt of written notice from Seller specifying the
manner in which Purchaser is in default; or
c) Purchaser becomes insolvent, a receiver is appointed to take
possession of all or a substantial part of Purchaser's properties, Purchaser
makes an assignment for the benefit of creditors or files a voluntary petition
in bankruptcy, or Purchaser is the subject of an involuntary petition in
bankruptcy which is not dismissed within 90 days. If Purchaser consists of
more than one person or entity, the occurrence of any of these events as to
any one such person or entity shall constitute a default hereunder;
d) Notice shall be directed to Purchaser to Post Office
Box 1103, Corvallis, OR 97330.
In the event of a default, Seller may take any one or more of the
following steps:
a) Declare the entire balance of the purchase price and interest
immediately due and payable;
b) Foreclose this contract by suit in equity;
c) Specifically enforce the terms of this contract by suit in
equity;
d) Declare this contract null and void as of the date of the
breach and retain as liquidated damagaes the amount of the payments previously
made hereunder. In such event, all of the right, title and interest of
Purchaser to the property shall revert to and be vested in Seller without any
act of re-entry or without any other act by Seller to be performed, and
Purchaser agrees to peaceably surrender the property to Seller. Should
Purchaser fail to so surrender the property, Seller may at his option treat
Purchaser as tenant holding over unlawfully after the expiration of a lease
and Purchaser may be ousted and removed as such.
The remedies provided above shall be nonexclusive and in addition
to any other remedies provided by law.
RECEIVER:
- --------
Seller shall be entitled to the appointment of a receiver as a
matter of right whether or not the apparent value of the property exceeds the
amount of the balance due hereunder, and any receiver appointed may serve
without bond. Employment by Seller shall not disqualify a person from serving
as receiver. Upon taking possession of all or any part of the property the
receiver may:
a) Use, operate, manage, control and conduct business on the
property and make expenditures for all maintenance and improvements as in its
judgment are proper;
b) Collect all rents, revenues, income, issues and profits from
the property and apply such sums to the expenses of use, operation and
management;
c) At Seller's option, complete any construction in progress on
the property, and in that connection pay bills, borrow funds, employ
contractors and make any changes in plans or specifications as Seller deems
appropriate.
If the revenues produced by the property are insufficient to pay
expenses, the receiver may borrow, from Seller or otherwise, such sums as it
deems necessary for the purposes stated in this paragraph, and repayment of
such sums shall be secured by this contract. The amounts borrowed or advanced
shall bear interest at same rate as the balance of the purchase price
hereunder from the date of expenditure until repaid and shall be payable by
Purchaser on demand.
REPRESENTATIONS:
- ---------------
Purchaser certifies that this contract of purchase is accepted and
executed on the basis of his own examination and personal knowledge of the
premises and opinion of the value thereof; that no attempt has been made to
influence his judgment; that no representations as to the condition or repair
of said premises have been made by Seller or by any agent of Seller; that no
agreement or promise to alter, repair, or improve said premises has been made
by Seller or by any agent of Seller and that Purchaser takes said property and
the improvements thereon in the condition existing at the time of this
agreement.
WAIVER:
- ------
Failure by Seller at any time to require performance by Purchaser
of any of the provisions hereof shall in no way affect Seller's rights
hereunder to enforce the same, nor shall any waiver by Seller of any breach
hereof be held to be a waiver of any succeeding breach, or a waiver of this
nonwaiver clause.
ASSIGNMENT:
- ----------
Purchaser shall not assign this agreement, his rights hereunder or
in the property covered hereby without the prior written consent of Seller,
which consent Seller shall not unreasonably withhold.
LIENS:
- -----
Purchaser agrees that he will not suffer or permit any liens to be
filed against the premises, or against any buildings erected thereon, or
improvements made thereon, and will defend, keep harmless and indemnify
Sellers from all damage, costs, charges, liabilities or expenses of any kind
on account of any claims or liens filed against the property which is the
subject of this contract, or its appurtenances.
PREPARATION OF CONTRACT:
- -----------------------
This Contract of Sale, and the Memorandum of Contract and the
Warranty Deed, have been prepared by Fenner, Barnhisel and Morris, Attorneys
at Law, on Purchaser's behalf. Sellers will seek advice from their attorneys
if desired.
SUCCESSOR INTERESTS:
- -------------------
The covenants, conditions, and terms of this agreement shall extend
to and be binding upon and inure to the benefit of the heirs, administrators,
executors and assigns of the parties hereto, provided, however, that nothing
contained in this paragraph shall alter the restrictions hereinabove contained
relating to assignment.
ATTORNEY'S FEES:
- ---------------
In the event that suit or action is instituted by any party hereto
for the enforcement of the terms and provisions of this agreement, it is
agreed that the party prevailing therein shall receive a judgment against the
nonprevailing party for such sum as the Court may deem reasonable as
attorney's fees for prosecution of said action, including any attorney's fees
on appeal.
ENTIRE AGREEMENT:
- ----------------
Except as to the previously referred to Earnest Money Agreement
provisions, this document is the entire, final and complete agreement of the
parties pertaining to the sale and purchase of the property, and supersedes
and replaces all written and oral agreements heretofore made or existing by
and between the parties or their representatives insofar as the property is
concerned.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals the day and year first above written.
/s/ David D. Neal /s/ Mario Pastega
- ------------------------------- -----------------------------
David D. Neal Mario Pastega
/s/ Marilyn K. Neal
- -------------------------------
Marilyn K. Neal
SELLERS PURCHASER
STATE OF OREGON )
) ss
County of Benton )
On this [illegible] day of November, 1980, personally appeared
before me the above named DAVID D. NEAL and MARILYN K. NEAL and acknowledged
the foregoing instrument to be their voluntary act and deed.
/s/ Deborah J. Bentley
--------------------------------
Notary Public for Oregon
My commission expires: [illegible]
<PAGE>
A 5-acre parcel lying the southeast corner of the Schimming tract abutting
Shields Road represented by the area in red crosshatching below:
[REAL ESTATE PLAT]
EXHIBIT "A"<PAGE>
A 5-acre parcel abutting the Wilson River Highway represented by the area in
red crosshatching below:
[REAL ESTATE PLAT]
EXHIBIT "B"
<PAGE>
EXHIBIT 10.J
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT entered into this 4th day of June, 1993, by and
between UNITED GROCERS, INC., an Oregon corporation, hereinafter designated as
Sublessor, and Food Club of California Incorporated, a California Corporation,
Michael S. Werness, and Boyd and Hollie Morris (husband and wife), hereinafter
jointly and severally designated as Sublessee;
W I T N E S S E T H
WHEREAS, the Sublessor has entered into a Lease dated 5 September, 1991,
with Craig W. Dress, Trust Acct #202 and Joy Dress Neitling, Trust Accct.
#303, commencing on the date set forth in the attached Exhibit "A", the "Prime
Lease", which Prime Lease will be in the same format as said Exhibit "A". A
copy of the final Prime Lease will be the final and prevailing Exhibit "A",
being attached hereto and made a part hereof upon its execution, as fully as
if its terms and conditions were herein set forth.
WHEREAS, Sublessee's desire to sublet said premises for a period of 20
years, commencing on date set forth in paragraph 10 of Exhibit "A," and
Sublessor is willing to so sublet in accordance with the terms and conditions
hereinafter set forth; now, therefore,
IT IS HEREBY AGREED as follows:
(1) Sublessor hereby sublets unto Sublessees those premises described
in said Exhibit "A," for the term of 20 years.
1.1 The Sublessees, so long as they are not in default hereunder,
shall be granted the right to exercise the renewal options contained in
Exhibit "A," as set forth in paragraphs 3 and 7 of said Exhibit, upon the
condition that Sublessees are not in default and provide Sublessor with lease
guaranty insurance for the renewal term. Said insurance shall be in form and
substance acceptable to Sublessor and shall designate Sublessor as the insured
thereunder.
(2) Sublessees covenant and agree to pay for the whole of said term the
same rental, together with all affirmative covenants including, without
limitation, those pertaining to basic rent, percentage of gross sales, taxes,
assessments, insurance and all of the covenants and obligations to be
performed by Sublessees, as set forth in said Exhibit "A," and to make such
payments and provide such performance when due by the terms of the lease and
amendments thereto.
(3) Sublessees shall, upon execution hereof, pay any and all rental, or
security deposits, as required pursuant to the terms and conditions of said
Exhibit "A."
(4) Sublessees shall be bound by the same responsibilities, rights,
privileges and duties as Sublessor, as enumerated in Exhibit "A", except for
provisions of paragraph 45, which rights are retained by Sublessor, and
covenants and agrees to fully indemnify and hold Sublessor harmless from any
and all responsibility and/or liability which Sublessor may incur by virtue of
said Exhibit "A," and/or Sublessees' occupancy of the premises. Furthermore,
Sublessees shall be bound by any subsequent amendment, revision, supplement or
addition to the prime lease between Sublessor and the prime Lessor, and to
keep the Sublessor indemnified against all actions, claims and demands
whatsoever in respect to said exhibit "A," and Sublessees use of the demised
premises.
4.1 Assignment and Subletting. Sublessees acknowledge that provisions
for extension options and assignment and subletting in the Lease are
applicable to the prime Lessor and Sublessor only. Sublessees will not assign
this Sublease or sublet the premises without the prior written consent of
Sublessor which may be granted or withheld in its absolute discretion. A
direct or indirect transfer of ownership and control of a majority of the
voting stock of a corporate Sublessees, by whatever demands, shall be deemed
an assignment of this Sublease for the purposes of this paragraph.
Notwithstanding the foregoing, if Sublessee's desire to transfer by sale,
gift, or as a result of death, its interest herein to its lawful issue, the
Sublessor shall not unreasonably withhold consent to such a transfer,
provided, such transferee agrees that it holds such interest subject to the
restrictions and conditions contained in this sublease agreement.
4.2 Covenants, Representations and Warranties.
(a) Membership in United Grocers, Inc. Upon execution and during
the term hereof, Sublessees agree to maintain or cause to be maintained the
membership of the store in good standing in United Grocers, in accordance with
the Bylaws of United Grocers, as long as this Sublease remains in effect.
(b) Purchases from Sublessor. Sublessees agree that throughout
the term of the Sublease and any extensions or renewals thereof, except as
hereinafter provided, Sublessees will purchase from Sublessor not less than
fifty-five percent (55%), based on a quarterly basis, of its retail sales of
all goods and merchandise required by it for resale on the premises to the
extent that Sublessor shall now or hereafter be able to supply such goods and
merchandise to the Sublessees, and Sublessor will supply all of Sublessees'
requirements at such prices and on such terms as are reasonably comparable to
those offered by Sublessor to other purchasers from Sublessor carrying on
businesses similar to that of the Sublessees in Oroville, California. If, at
any time, the Sublessees contend that Sublessor is not able to supply
particular goods or merchandise customarily stocked by retail supermarkets in
the Oroville, California area, or that terms offered by Sublessor are not
reasonably comparable to those offered by Sublessor to other purchasers
described above, the Sublessees shall so advise Sublessor in writing,
specifying such contention with particularity. If, within 30 days after
receipt of such notice, Sublessor does not offer to supply goods or
merchandise so specified or does not advise Sublessees that the terms and
conditions offered are reasonably comparable to those offered to such other
purchasers, Sublessees shall be free to secure such specified goods and
merchandise from any source which it desires. If Sublessor demonstrates that
it is offering reasonably comparable terms, and Sublessees nonetheless
purchase from another source, such purchase or purchases shall not be an
exception from the 55% requirement specified above. If the above percentage
requirements are not complied with, it shall constitute a default hereunder.
In the event of a breach of this purchase covenant, Sublessor may terminate
this sublease and, in addition to the remedies hereinafter offered Sublessor,
Sublessee agrees to pay Sublessor, as liquidated damages, and not as a penalty
or forfeiture, a sum computed as follows:
1. The average weekly purchases from the date of the
agreement to the date of the breach shall be determined;
2. the average weekly purchases so determined shall then
be multiplied by the number of weeks from the date of the breach to the
end of the term of the purchase agreement; and determine the liquidated
damages due and owing Sublessor by reason of Sublessee's default. Said
sum shall become immediately due and owing within 15 days from date of
written notice of the liquidated damages.
(c) Sublessees covenant that as long as this Sublease remains in
effect, and for an additional period of six (6) months thereafter, Sublessees
shall not directly or indirectly sell or permit the sale of the store and the
owners of Sublessees shall not directly or indirectly sell controlling
interests in Sublessees (whether in one or a series of related transactions)
without first offering to sell said store or controlling interest, as the case
may be, to Sublessor upon the same terms and conditions as the Sublessees or
their owners, as the case may be, are prepared to accept from a third party.
Prior to such sale by the Sublessees or their owners, the Sublessees shall
first notify Sublessor of the desire to sell the store or controlling interest
in the Sublessees and of all the terms and conditions of such sale and shall
provide to Sublessor all documents, instruments, agreements, offers,
acceptances, appraisals, inventories, equipment lists, leases, financial
statements and such other material and information as Sublessor may reasonably
request to aid in its decision to exercise or decline its right to purchase as
hereinafter provided. Within 30 days following receipt of such notice of
desire to sell and all materials and information reasonably requested by
Sublessor, Sublessor shall advise Sublessees whether Sublessor elects to
purchase or declines to purchase the store or such controlling interest upon
the offered terms and conditions. If Sublessor shall elect to purchase,
Sublessor shall purchase and the Sublessees or their owners shall sell, such
retail grocery business or such controlling interest, as the case may be, all
on the terms set forth in the offer. If Sublessor declines the purchase, the
Sublessees or their owners shall be free to sell the store or controlling
interest, as the case may be, upon (and only upon) the terms and conditions
offered as aforesaid to Sublessor; provided that such sale is consummated
within 120 days following the date Sublessor declined the purchase, and if
such sale is not consummated in accordance with the offered terms and
conditions within said 120-day period, the provisions of this paragraph shall
apply again and no subsequent sale of any portion of the offered store or
controlling interest may be effected without again offering the same to
Sublessor as provided herein. Sublessor may waive its rights under this
section provided such waiver is in writing. The foregoing provisions shall
not apply to transfers of assets or interests by sale, gift or as a result of
death to the lawful issue of Sublessees, or transfers of assets to a
corporation or partnership or transfers of a controlling interest to a trust
as long as such corporation, partnership or trust is controlled by the
transferor; provided such transferee agrees that it holds such assets or
controlling interest subject to the restrictions contained in this paragraph.
(d) Sublessees represent and warrant that there are no brokers,
finders or other persons entitled to any fee, commission or other compensation
in connection with this Sublease, and agree to hold Sublessor harmless from
any claims for such fees, commissions and/or compensation.
(e) Sublessees hereby represent and warrant to Sublessor that the
financial statements, appraisals and other documents submitted to Sublessor in
connection herewith or pursuant hereto are and shall be true, correct,
complete and accurate in every respect and said financial statements fairly
and accurately present the assets, liabilities, financial condition and
results of operations reflected herein.
(5) Security Agreement.
5.1 Grant, Collateral and Obligations. Sublessees and Sublessor
agree that this Sublease shall constitute a security agreement within the
meaning of the California Uniform Commercial Code (hereinafter referred to as
the "Code") with respect to:
(a) required cash deposits (as defined in the Bylaws of
Sublessor) presently or hereafter held by or deposited with Sublessor by
Sublessees;
(b) any and all patronage rebates and rebate notes
representing patronage rebates (as defined in the Bylaws of Sublessor) earned
or hereafter earned by reason of patronage of Sublessor by Sublessees;
(c) subject to liens securing purchase money financing
therefor as described in Exhibit "X," all trade, store and other fixtures and
all leasehold improvements and all equipment and other personal property of
Sublessees used or useful in the operation of the store in or on the premises,
whether now owned or hereafter acquired including, without limitation, the
property described in Exhibit "Y', attached hereto, if any; and
(d) all replacements of substitutions for, and additions to
the foregoing, and the proceeds thereof (all of said personal property and the
replacements, substitutions and additions thereto and the proceeds thereof
being sometimes hereinafter collectively referred to as the "Collateral"), and
that a security interest in and to the Collateral is hereby granted to the
Sublessor, and the Collateral and all of the Sublessees' right title and
interest therein are hereby assigned to the Sublessor, all to secure all
presently existing or hereafter incurred direct indirect, absolute or
contingent indebtedness, liabilities and other obligations of Sublessees to
Sublessor (referred to as "the Obligations" herein) including, but not limited
to, the payment of all rent and other sums and the performance of all other
obligations of Sublessees under this Sublease, all renewals and extensions
thereof, the price of goods, services and merchandise purchased by Sublessees
from Sublessor from time to time, and all costs of collection, legal expenses
and attorneys' fees paid or incurred by Sublessor in enforcing any rights in
respect to the Obligations or in connection with assembling, collecting,
selling or otherwise dealing with or realizing upon the Collateral.
5.2 Security Agreement Warranties. In addition to and without
limiting the force or effect of any other covenants, representations and
warranties of Sublessees contained in this Sublease, Sublessees hereby
covenant, represent and warrant to and with Sublessor as follows:
(a) Sublessees are the owners of the Collateral free and
clear of liens, security interests and encumbrances of every kind and
description, except liens, security interests and encumbrances securing
indebtedness to Sublessor and liens described on Exhibit "X," hereto to which
Secured Party has consented ("Permitted Liens").
(b) Sublessees will not sell, dispose of, encumber or permit
any other security interest, lien or encumbrance to attach to the Collateral
except the security interest of Sublessor and the Permitted Liens, for the
notes or any note extensions.
(c) Sublessor warrants that Sublessor is the legal Lessee of
the property and that the sublease is allowed pursuant to the terms of
Sublessor's primary lease; and,
(d) Sublessor warrants and agrees to hold Sublessees harmless
as to any and all liabilities that Sublessor may owe to the owner of the
leased premises. Not withstanding the foregoing, in the event the sublessee's
are liable under the master lease, this will not apply.
(e) All tangible Collateral shall be kept at Sublessees'
place(s) of business located on the premises, and Sublessees shall not permit
the same to be removed therefrom without the prior written consent of
Sublessor.
(f) Sublessees shall keep the tangible Collateral at all
times insured against risks of loss or damage by fire (including so-called
extended coverage), theft and such other casualties as Sublessor may
reasonably require, all in such amounts, under such forms of policies, upon
such terms, for such periods and written by such companies or underwriters as
Sublessor may approve. All such policies of insurance shall name Sublessor as
loss payee thereon as its interest may appear and shall provide for at least
30 days' prior written notice of modification or cancellation to Sublessor.
Sublessees shall furnish Sublessor with certificates of such insurance or
other evidence satisfactory to Sublessor as to compliance with the provisions
of this paragraph. Sublessor may act as attorney-in-fact for Sublessees in
making, adjusting, and settling claims under and canceling such insurance and
endorsing Sublessees' name on any drafts drawn by insurers of the Collateral.
(g) Sublessees will keep the Collateral in good order and
repair, shall not waste or destroy the Collateral or any part thereof, and
shall not use the Collateral in violation of any statute, ordinance or policy
of insurance thereon. Sublessor may examine and inspect the Collateral at any
reasonable time or times, wherever located.
(h) Sublessees will pay promptly when due all taxes and
assessments upon the Collateral or for its use or operation or upon this
Sublease or upon any instruments evidencing the Obligations.
(i) Sublessees will pay promptly when due all indebtedness
secured by any lien or other security interest in the Collateral, whether
superior or junior to the security interest established hereby.
5.3 Additional Remedies. Upon any default hereunder and at any
time thereafter (such default not having previously been cured), Sublessor at
its option may declare all Obligations immediately due and payable and shall
have the remedies within 10 days of a secured party under the Uniform
Commercial Code of California (the "Code"), including without limitation the
right to take immediate and exclusive possession of the Collateral.
5.4 Financing Statements. Sublessees will at their own cost and
expense, upon demand, furnish to Sublessor such financing statements and other
documents in form satisfactory to Sublessor and will do all such acts and
things as Sublessor may at any time or from time to time request or as may be
necessary or appropriate to establish and maintain a perfected security
interest in the existing and replacement Collateral.
5.5 Attorneys' Fees. In the event of the institution of any suit
or action to terminate this Sublease, or to enforce the terms or provisions
hereto, the prevailing party hereby agrees to pay, in addition to the costs
and disbursements provided by statute, reasonable attorneys' fees in such
proceedings or on any appeal from any judgment or decree entered therein.
(6) Default. The following shall constitute a default under this
Sublease:
6.1 Any failure by Sublessees to pay, when due, rent or any other
amount due under the Lease or to perform any other obligation of Sublessor
under the Lease or any other default under the Lease which continues for up
to one-half of the cure period as defined in the lease, provided with respect
thereto in the Lease;
6.2 Any failure by Sublessees to pay when due rent or any other
amount due under this Sublease or to perform when due any other obligation of
Sublessees hereunder;
6.3 If any warranty, representation or statement made or
furnished to Sublessor by or on behalf of the Sublessees is false in any
material respect when made or furnished;
6.4 Any failure by Sublessees to pay when due and/or satisfy any
other present or hereinafter incurred indebtedness or obligation of Sublessees
to Sublessor, including but not limited to those arising from Sublessees'
purchases of goods and services from Sublessor any other loans or leases
Sublessees may have or enter into with Sublessor, and Sublessees' obligations
under the Bylaws of Sublessor and its application for membership in Sublessor;
6.5 If Sublessees vacate or abandon the premises or allow the
premises to remain vacant or unoccupied;
6.6 If Sublessees make an assignment for the benefit of
creditors, or if, with or without Sublessees' acquiescence, a petition in
bankruptcy is filed against Sublessees, or Sublessees are adjudicated a
bankrupt or insolvent, or a trustee, receiver or liquidator is appointed for
all or part of Sublessees' assets, or a petition or answer is filed by or
against Sublessees seeking or acquiescing in any reorganization, liquidation
or similar relief under any federal, state or local law relating to
bankruptcy, insolvency or other relief for debtors; and
6.7 If Sublessees sell or otherwise dispose of all or any
substantial portion of the secured assets of Sublessees located at or
associated with the store, other than inventory sold at retail in the ordinary
course of business.
(7) Remedies. In the event of any uncured default under this Sublease:
7.1 Sublessor shall have the right at its election then or at any
time thereafter, upon notice to Sublessees, to terminate this Sublease or to
terminate Sublessees' rights of possession in the premises without
terminating this Sublease;
7.2 Sublessor shall have the immediate right whether or not the
Sublease shall have been terminated pursuant to paragraph 7.1, to re-enter and
repossess the premises or any part thereof by force, summary proceedings,
ejectment or any other legal or equitable process, all without any liability
on Sublessor's part for such entry, repossession or removal;
7.3 Sublessor may (but shall be under no obligation to), whether
or not this Sublease shall have been terminated pursuant to paragraph 7. 1,
resublet the premises, or any part thereof, in the name of Sublessees,
Sublessor or otherwise, without notice to Sublessees, for such term or terms
and for such uses as Sublessor, in its absolute discretion, may determine and
may collect and receive rents payable by reason of such resubletting (without
any liability for any failure to collect such rents);
7.4 Sublessor may (but shall be under no obligation to) procure
any insurance, pay any rentals, taxes or liens, make any repairs, pay any sums
required to be paid, and to do and perform such other acts as may be required
of Sublessees hereunder, and any payments so made shall bear interest at the
rate of 12 percent per annum from the time of such payment until repaid; and
7.5 Sublessor may exercise any and all other rights and remedies
afforded to the prime Lessor upon default under the Lease and any and all
other rights and remedies Sublessor may have as provided herein, pursuant to
the laws of the state of California. In addition to the other remedies
provided above, Sublessor shall be entitled to current damages and final
damages as provided in paragraph (8) below, and, to the extent permitted by
applicable law, to injunctive relief in case of the violation, or attempted or
threatened violation, of any of the provisions of this Sublease, or to a
decree compelling performance of this Sublease.
7.6 No expiration or termination of this Sublease, repossession
of the premises or any part thereof, or resubletting of the premises or any
part thereof, whether pursuant to the above paragraph or by operation of law
or otherwise, shall relieve Sublessees of their liabilities and obligations
under this Sublease, all of which shall survive such expiration, termination,
repossession or resubletting.
(8) Damages.
8.1 Current Damages. In the event of any expiration or
termination of this Sublease or repossession of the premises or any part
thereof by reason of the occurrence of an event of default Sublessees will pay
to Sublessor the rent and other sums required to be paid by Sublessees for the
period to and including the date of such expiration, termination or
repossession; and, thereafter, until the end of what would have been the term
in the absence of such expiration, termination or repossession, and whether or
not the premises or any part thereof shall have been resublet, Sublessees
shall be liable to Sublessor for, and shall pay to Sublessor, as liquidated
and agreed current damages the rent and other sums which would be payable
under this Sublease by Sublessees in the absence of such expiration,
termination or repossession, less the net proceeds, if any, of any
resubletting effected for the account of Sublessees, after deducting from such
proceeds all of Sublessor's expenses reasonably incurred in connection with
such resubletting (including, without limitation, all repossession costs,
brokerage commissions, legal expenses, attorney's fees, employee expenses,
alteration costs and expenses of preparation for such resubletting).
Sublessees will pay such current damages on the days on which rent would have
been payable under this Sublease in the absence of such expiration,
termination or repossession, and Sublessor shall be entitled to recover the
same from Sublessees on each such day.
8.2 Final Damages. At any time after any such expiration or
termination of this Sublease or repossession of the premises or any part
thereof by reason of the occurrence of an event of default, whether or not
Sublessor shall have collected any current damages pursuant to paragraph 8.1,
Sublessor shall be entitled to recover from Sublessees, and Sublessees will
pay to Sublessor on demand, as and for liquidated and agreed final damages for
Sublessees' default and in lieu of all current damages beyond the date of such
demand (it being agreed that it would be impracticable or extremely difficult
to fix the actual damages), an amount equal to the excess, if any, of (a) the
rent and other sums which would be payable under this Sublease from the date
of such demand (or, if it be earlier, the date to which Sublessees shall have
satisfied in full their obligations under paragraph 8.1 to pay current
damages) for what would be the then unexpired term in the absence of such
expiration, termination or repossession, discounted to present value at an
assumed interest rate of seven percent (7%) per annum, over (b) the then net
rental value of the premises discounted to present value at an assumed
interest rate of seven percent (7%) per annum for the same period. Rental
value shall be established by reference to the terms and conditions upon which
Sublessor resublets the premises if such resubletting is accomplished within a
reasonable period of time after such expiration, termination or repossession,
and otherwise established on the basis of Sublessor's estimates and
assumptions of fact regarding market and other relevant circumstances, which
shall govern unless shown to be erroneous. If any statute or rule of law
shall validly limit the amount of such liquidated final damages to less than
the amount above agreed upon, Sublessor shall be entitled to the maximum
amount allowable under such statute or rule of law.
(9) Rights Cumulative. Nonwaiver. No right or remedy herein conferred
upon or reserved to Sublessor is intended to be exclusive of any other right
or remedy, and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity or by statute. The failure of Sublessor to
insist at any time upon the strict performance of any covenant or agreement or
to exercise any option, right power or remedy contained in this Sublease shall
not be construed as a waiver or relinquishment thereof for the future. No
waiver by Sublessor of any provision of this Sublease shall be deemed to have
been made whether due in the receipt of rent or otherwise, unless expressed in
writing and signed by Sublessor.
(10) Notices. Any notice or demand required or permitted to be given
under this Sublease shall be deemed to have been properly given when, and only
when, the same is in writing and has been deposited in the United States Mail,
with postage prepaid, to be forwarded by registered or certified mail and
addressed to the party to be notified at the address appearing below its
signature. Such addresses may be changed from time to time by serving of
notice as above provided.
(11) Right of Refusal: If, during the term of this sublease, or any
extension hereof, Sublessee or any successor to Sublessee shall receive a bona
fide offer to purchase the business being operated under this sublease, or the
property of which the premises are a part, which offer is acceptable to
Sublessee, Sublessor shall have the right to purchase the business (or the
property) upon the same terms and conditions. Sublessee agrees, immediately
upon receipt of such offer, to give Sublessor written notice of the terms and
conditions thereof, and the Sublessor shall have the right for thirty (30)
days after receipt of such notice, to exercise its option to purchase under
the identical terms and conditions of such offer. Sublessor's exercise of its
option shall be given in writing, within said thirty-day period.
(12) Additional Provisions.
None
<PAGE>
IN WITNESS WHEREOF, the parties have executed the foregoing Sublease
Agreement the day and year first above written.
SUBLESSOR:
United Grocers, Inc., an Oregon Corporation
6433 SE Lake Road
PO Box 22187
Portland, Oregon 97222
by: /s/ G.P. Fleming
Title: Assistant Secretary
SUBLESSEES:
/s/ Michael S. Werness /s/ Boyd B. Morris II
Michael S. Werness Boyd Morris
Food Club of California,
Incorporated /s/ Hollie Morris
Hollie Morris
by: /s/ Michael S. Werness
<PAGE>
Exhibit 10.K1
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT is entered into this 1st day of February, 1994,
by and between UNITED RESOURCES, INC., an Oregon corporation ("Sublessor") and
R.A.F. LIMITED LIABILITY COMPANY, an Oregon limited liability company
("Sublessee").
RECITALS:
A. Sublessor has entered into a Sublease for a term commencing October
15, 1991, and expiring August 1, 2011, with United Grocers, Inc. ("Lessor"),
for a supermarket located in the Heritage Plaza, Albany, Oregon, a copy of
which is attached hereto, marked as Exhibit "A," and by this reference
incorporated herein, as fully as if its terms and conditions were herein set
forth.
B. Sublessee desires to sublet the premises commencing on February 2,
1994, and expiring August 1, 2011, and Sublessor is willing to sublease the
premises in accordance with the terms and conditions contained herein.
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. Sublease Terms and Options. Sublessor hereby sublets unto Sublessee
those premises described in Exhibit "A," for the term remaining as described
therein.
1.1 Provided the Sublessee has performed all of its obligations to
be performed under this Sublease and is not in default thereunder, and further
provided the Sublessee (R.A.F.) has extended its duration by amending its
operating agreement to extend its duration beyond August 1, 2011, to a date
through the renewal term, and provided the Sublessor has exercised its option
to extend its Sublease, then in that event, the Sublessee may exercise the
renewal option contained in Exhibit A. The rental rate during such renewal
term shall be in an amount equal to that determined under the master lease.
In the event Sublessor exercises it option to renew, it shall
give Sublessee written notice of said exercise, within five days from the date
of exercise.
2. Rental. Sublessee covenants and agrees to pay the rental for the
whole of the term, and to perform all affirmative covenants including, without
limitation, those pertaining to taxes, assessments, insurance, and all of the
covenants and obligations to be performed by Sublessor as Lessee, as set forth
in Exhibit "A," and to make such payments and provide such performance when
due by the terms of the Lease and any amendments thereto. Basic rental will
be paid in accordance with the Schedule attached hereto, marked as Schedule
"A-1," and by this reference incorporated herein. To the extent the basic
rent in Schedule "A-1" is less than the basic rental in the prime Lease,
Sublessor agrees to indemnify and hold Sublessee harmless from the obligation
to pay the same.
3. Deposits. Sublessee shall, upon execution hereof, pay any and all
rentals, or security deposits, as required pursuant to the terms and
conditions of Exhibit "A," prorated as of February 2, 1994.
4. Indemnity and Hold Harmless. Sublessee shall be bound by the same
responsibilities, rights, privileges and duties as Sublessor, as enumerated in
Exhibit "A" except as otherwise provided herein, and covenants and agrees to
fully indemnify and hold Sublessor harmless from any and all responsibility
and/or liability which Sublessor may incur by virtue of Exhibit "A," and/or
Sublessee's occupancy of the premises. Furthermore, Sublessee shall be bound
by any subsequent amendment, revision, supplement, or addition to the prime
Lease between Sublessor and the prime Lessor with Sublessee's prior written
consent, and to keep the Sublessor indemnified against all actions, claims and
demands whatsoever in respect to said Exhibit "A," and Sublessee's use of the
demised premises.
5. Default. The following shall constitute a default under this
Sublease:
5.1 Any failure by Sublessee to pay the rent when due, or any
failure by Sublessee to perform any other obligation contained in this
Sublease, or to pay any other amount due under the Lease or to perform any
other obligation of Sublessor under the Lease when due which would constitute
a default under the Lease and which continues for the cure period provided
with respect thereto in the Lease;
5.2 If any warranty, representation or statement made or furnished
to Sublessor by or on behalf of the Sublessee is false in any material respect
when made or furnished;
5.3 If Sublessee makes an assignment for the benefit of its
creditors, or Sublessee is adjudicated a bankrupt or insolvent, or a trustee,
receiver or liquidator is appointed for all or part of Sublessee's assets, or
a petition or answer is filed by or against Sublessee seeking or acquiescing
in any reorganization, liquidation or similar relief under any federal, state
or local law relating to bankruptcy, insolvency or other relief for debtors.
6. Remedies. In the event of any default under this Sublease:
6.1 Sublessor may exercise any and all rights and remedies
afforded to the prime Lessor upon default under the Lease, and any and all
other rights and remedies Sublessor may have pursuant to this Sublease and the
laws of the state of Oregon.
6.2 If a default occurs, this Sublease may be terminated at the
option of the Sublessor by written notice to the Sublessee. The notice may be
given before, after or within the grace period for a default.
6.3 If the Sublease is terminated for any reason, Sublessee's
liability to Sublessor for damages shall survive such termination and
Sublessor may re-enter, take possession of the premises, and remove any
persons or property by legal action or by self-help with the use of reasonable
force.
6.4 Following re-entry or abandonment, Sublessor may:
(a) make any suitable alterations or refurbish the premises,
or both, or change the character or use of the premises, but Sublessor shall
not be required to relet for any use or purpose (other than that specified in
the prime Lease) which the Sublessor may reasonably consider injurious to the
premises, or to any tenant which Sublessor may reasonably consider
objectionable;
(b) relet all or part of the premises, alone or in
conjunction with other properties, for a term longer or shorter than the term
of this Sublease, upon any reasonable terms and conditions, including the
granting of some rent-free occupancy or other rent concession.
6.5 Sublessor may (but shall be under no obligation to) procure
any insurance, pay any rentals, taxes or liens, make any repairs, pay any sums
required to be paid, and to do and perform such other acts as may be required
of Sublessee hereunder, and any payments so made shall bear interest at the
rate of ten percent (10%) per annum from the time of such payment until
repaid.
6.6 No expiration or termination of this Sublease, repossession of
the premises or any part thereof, or resubletting of the premises or any part
thereof, whether pursuant to the terms of this Sublease or any operation of
law or otherwise, shall relieve Sublessee of its liabilities and obligations
under this Sublease, all of which shall survive such expiration, termination,
repossession or subletting.
7. Damages. Whether or not an election is made to terminate the
Sublease, Sublessor shall be entitled to recover immediately without waiting
until the due date of any future rent, or until the date is fixed for
expiration of the Sublease term, the same amount of damages as set forth in
the prime Lease as though the Sublessor were the prime Lessor and the
Sublessee were the prime Lessee.
8. Rights Cumulative; Nonwaiver. No right or remedy herein conferred
upon or reserved to Sublessor is intended to be exclusive of any other right
or remedy, and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity or by statute. The failure of Sublessor to
insist at any time upon the strict performance of any covenant or agreement or
to exercise any option, right, power or remedy contained in this Sublease
shall not be construed as a waiver or relinquishment thereof for the future.
No waiver by Sublessor of any provision of this Sublease shall be deemed to
have been made whether due to the receipt of rent or otherwise, unless
expressed in writing and signed by Sublessor.
9. Assignment and Subletting. Sublessee acknowledges that except as
provided herein, the provisions for extension, options and assignment and
subletting in the prime Lease are applicable to the prime Lessor and Sublessor
only. Sublessee will not assign this Sublease or sublet the premises without
the prior written consent of Sublessor which will not be unreasonably
withheld. A direct or indirect transfer of ownership and control of a
majority of the voting stock of Sublessee, by whatever means, shall be deemed
an assignment of this Sublease for the purpose of this paragraph.
10. Covenants, Representations and Warranties.
10.1 Sublessee agrees that as long as this Sublease remains in
effect, should Sublessee ever desire to sell the store operated on the
premises, except for a sale unto Wright's Foodliner, Inc., it shall give
Sublessor the first opportunity to purchase the same at its fair market value;
provided, however, if Sublessor does not elect to purchase the store for its
fair market value as agreeable to Sublessee within 60 days after receipt of
written notice of Sublessee's intent to sell, Sublessee may thereafter sell
the store to anyone upon such terms and conditions as are acceptable to
Sublessee. The foregoing provisions do not apply to transfers of assets or
interests by sale, gift or as a result of death to the lawful issue of the
owners of Sublessee, or transfers of assets to a corporation or partnership,
or transfers of a controlling interest to a trust, as long as such
corporation, partnership or trust is controlled by the transferor and such
transferee agrees that it holds such assets or controlling interest subject to
the restrictions named in this section.
10.2 Sublessee agrees that throughout the term of this Sublease
and any extensions or renewals thereof, except as hereinafter provided, to
purchase from United Grocers, Inc., not less than 45 percent of its retail
sales of all goods and merchandise required by it for resale on the premises
to the extent that United Grocers, Inc., shall now or hereafter be able to
supply such goods and merchandise to Sublessee, and United Grocers, Inc. will
supply all of Sublessee's requirements at such prices and on such terms as are
reasonably comparable to those offered by United Grocers, Inc. to other
purchasers from United Grocers, Inc., carrying on businesses similar to that
of the Sublessee in Linn County, Oregon. If, at any time, Sublessee contends
that United Grocers, Inc., is not able to supply particular goods or
merchandise customarily stocked by retail supermarkets in Linn County, Oregon,
or that terms offered by United Grocers, Inc., are not reasonably comparable
to those offered by United Grocers, Inc., to other such purchasers, the
Sublessee shall so advise United Grocers, Inc., in writing, specifying such
contention with particularity. If, within 30 days after the receipt of such
notice, United Grocers, Inc., does not offer to supply goods or merchandise so
specified or does not advise Sublessee that the terms and conditions offered
are reasonably comparable to those offered to such other purchasers, Sublessee
shall be free to secure such specified goods and merchandise from any other
source it desires. If United Grocers, Inc., asserts that it is offering
reasonably comparable terms and prices and Sublessee nonetheless purchases
from another source, such purchase shall be a default under this section.
10.3 Sublessee represents and warrants that there are no brokers,
finders or other persons entitled to any fee, commission or other compensation
in connection with this Sublease, and agrees to hold Sublessor harmless from
any claims for such fees, commissions and/or compensation.
10.4 Sublessee hereby represents and warrants to Sublessor that
the financial statements, appraisals and other documents submitted to
Sublessor in connection herewith or pursuant hereto are and shall be true,
correct, complete and accurate in every respect and said financial statements
fairly and accurately present the assets, liabilities, financial condition and
results of operations reflected herein.
10.5 Sublessor represents and warrants that it has performed all
of the obligations which the Lessee is required to perform under the terms of
the Lease to which this Sublease pertains, as of the date of this Sublease,
and that the Lease is in full force and effect and not in default in any
respect. Further, Sublessor represents that there is nothing as a result of
which the passage of time or the giving of notice would constitute a default
for actions which have already occurred prior to the date of this Sublease.
11. Attorney's Fees. In the event of the institution of any suit or
action to terminate this Sublease, or to enforce the terms or provisions
hereto, the prevailing party shall recover and the losing party hereby agrees
to pay, in addition to the costs and disbursements provided by statute,
reasonable attorney's fees in such proceedings or on any appeal from any
judgment or decree entered herein.
12. Notices. Any notice or demand required or permitted to be given
under this Sublease shall be deemed to have been properly given when, and only
when, the same is in writing and either personally delivered or by mail if it
has been deposited in the United States mail, with postage prepaid, to be
forwarded by registered or certified mail and addressed to the party to be
notified at the address appearing below its signature. Such addresses may be
changed from time to time by notice as above provided.
IN WITNESS WHEREOF, the parties have executed the foregoing Sublease the
day and year first herein written.
Sublessor: United Resources, Inc.
By /s/ George P. Fleming
Title: President
Sublessee: R.A.F. Limited Liability Company
By /s/ [illegible]
Title: Controller
UNITED GROCERS, INC. (LESSEE)
CONSENTS TO THE ASSIGNMENT AND
CONSENT TO MODIFICATION IN THE
PERCENTAGE OF PURCHASE REQUIRE-
MENTS FROM 58% TO 45%.
United Grocers, Inc.
By /s/ Alan C. Jones
Title: President
<PAGE>
EXHIBIT 10.K2
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT entered into this _______ day of October,
1990, by and between UNITED GROCERS, INC., an Oregon corporation, hereinafter
designated as Sublessor, and WRIGHT'S FOODLINER, INC., an Oregon corporation,
hereinafter designated as Sublessee;
RECITALS:
A. Sublessor has entered into a Lease for a 10-year term commencing
February 1, 1988, with Commercial Development Co., an Oregon corporation, for
a supermarket located at 1405 Pacific Highway, Cottage Grove, Oregon, a copy
of which is marked Exhibit "A" attached hereto and by this reference
incorporated herein, as fully as if its terms and conditions were herein set
forth.
B. Sublessee has been and desires to continue to sublet the premises
for a period of 10 years, which commenced on the date set forth in paragraph 2
of Exhibit "A", and Sublessor has been and is willing to continue to so sublet
in accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. Sublease Terms and Options. Sublessor hereby sublets unto
Sublessee those premises described in Exhibit "A", for the 10 year term
described therein.
1.1 So long as it is not in default hereunder, the Sublessee may
exercise the renewal options contained in Exhibit "A" as set forth in
paragraphs 3 and 7 of said Exhibit.
2. Rental. Sublessee covenants and agrees to pay for the whole of
said term the same rental, together with all affirmative covenants including,
without limitation, those pertaining to basic rent, percentage of gross sales,
taxes, assessments, insurance and all of the covenants and obligations to be
performed by Sublessee, as set forth in said Exhibit "A", and to make such
payments and provide such performance when due by the terms of the lease and
amendments thereto.
3. Deposits. Sublessee shall, upon execution hereof, pay any and all
rentals, or security deposits, as required pursuant to the terms and
conditions of said Exhibit "A".
4. Indemnity and Hold Harmless. Sublessee shall be bound by the same
responsibilities, rights, privileges and duties as Sublessor, as enumerated in
Exhibit "A", and covenants and agrees to fully indemnify and hold Sublessor
harmless from any and all responsibility and/or liability which Sublessor may
incur by virtue of said Exhibit "A", and/or Sublessee's occupancy of the
premises. Furthermore, Sublessee shall be bound by any subsequent amendment,
revision, supplement or addition to the prime lease between Sublessor and the
prime Lessor, and to keep the Sublessor indemnified against all actions,
claims and demands whatsoever in respect to said Exhibit "A", and Sublessee's
use of the demised premises.
5. Default. The following shall constitute a default under this
Sublease.
5.1 Any failure by Sublessee to pay the rent when due or to pay
any other amount due under the Lease or to perform any other obligation of
Sublessor under the Lease when due which would constitute a default under the
Lease and which continues for the cure period provided with respect thereto in
the Lease;
5.2 If any warranty, representation or statement made or
furnished to Sublessor by or on behalf of the Sublessee is false in any
material respect when made or furnished;
5.3 If Sublessee makes an assignment for the benefit of its
creditors, or Sublessee is adjudicated a bankrupt or insolvent, or a trustee,
receiver or liquidator is appointed for all or part of Sublessee's assets, or
a petition or answer is filed by or against Sublessee seeking or acquiescing
in any reorganization, liquidation or similar relief under any federal, state
or local law relating to bankruptcy, insolvency or other relief for debtors.
6. Remedies. In the event of any default under this Sublease:
6.1 Sublessor may exercise any and all rights and remedies
afforded to the prime lessor upon default under the lease, and any and all
other rights and remedies Sublessor may have pursuant to the laws of the State
of Oregon.
6.2 If a default occurs, this Sublease may be terminated at the
option of the Sublessor by written notice to the Sublessee. The notice may be
given before, after, or within the grace period for a default.
6.3 If the Sublease is terminated for any reason, Sublessee's
liability to Sublessor for damages shall survive such termination, and
Sublessor may re-enter, take possession of the premises, and remove any
persons or property by legal action or by self-help with the use of reasonable
force.
6.4 Following re-entry or abandonment, Sublessor may:
(a) make any suitable alterations or refurbish the
premises, or both, or change the character or use of the premises, but
Sublessor shall not be required to relet for any use or purpose (other than
that specified in the prime Lease) which the Sublessor may reasonably consider
injurious to the premises, or to any tenant which Sublessor may reasonably
consider objectionable;
(b) relet all or part of the premises, alone or in
conjunction with other properties, or a term longer or shorter than the term
of this Sublease, upon any reasonable terms and conditions, including the
granting of some rent-free occupancy or other rent concession.
6.5 Sublessor may (but shall be under no obligation to) procure
any insurance, pay any rentals, taxes or liens, make any repairs, pay any sums
required to be paid, and to do and perform such other acts as may be required
of Sublessee hereunder, and any payments so made shall bear interest at the
rate of 12 percent per annum from the time of such payment until repaid.
6.6 No expiration or termination of this Sublease, repossession
of the premises or any part thereof, or resubletting of the premises or any
part thereof, whether pursuant to the terms of this Sublease or any operation
of law or otherwise, shall relieve Sublessee of its liabilities and
obligations under this Sublease, all of which shall survive such expiration,
termination, repossession or resubletting.
7. Damages. Whether or not an election is made to terminate the
Sublease, Sublessor shall be entitled to recover immediately without waiting
until the due date of any future rent, or until the date is fixed for
expiration of the Sublease term, the same amount of damages as set forth in
the prime Lease as though the Sublessor were the prime lessor and the
Sublessee were the prime lessee.
8. Rights Cumulative, Nonwaiver. No right or remedy herein conferred
upon or reserved to Sublessor is intended to be exclusive of any other right
or remedy, and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity or by statute. The failure of Sublessor to
insist at any time upon the strict performance of any covenant or agreement or
to exercise any option, right, power or remedy contained in this Sublease
shall not be construed as a waiver or relinquishment thereof for the future.
No waiver by Sublessor of any provision of this Sublease shall be deemed to
have been made whether due to the receipt of rent or otherwise, unless
expressed in writing and signed by Sublessor.
9. Assignment and Subletting. Sublessee acknowledges that except as
provided herein, the provisions for extension, options and assignment and
subletting in the prime Lease are applicable to the prime Lessor and Sublessor
only. Sublessee will not assign this Sublease or sublet the premises without
the prior written consent of Sublessor which will not be unreasonable
withheld. A direct or indirect transfer of ownership and control of a
majority of the voting stock of Sublessee, by whatever means, shall be deemed
an assignment of this Sublease for the purpose of this paragraph.
10. Covenants, Representations and Warranties.
10.1 Sublessee agrees that as long as this Sublease remains in
effect, should Sublessee ever desire to sell the store operated on the
premises, it shall give Sublessor the first opportunity to purchase the same
at its fair market value; provided, however, if Sublessor does not elect to
purchase the store for its fair market value as agreeable to Sublessee within
sixty (60) days after receipt of written notice of Sublessee's intent to sell,
Sublessee may thereafter sell the store to anyone upon such terms and
conditions as are acceptable to Sublessee. The foregoing provisions do not
apply to transfers of assets or interests by sale, gift or as a result of
death to the lawful issue of the owners of Sublessee or transfers of assets to
a corporation or partnership or transfers of a controlling interest to a
trust, as long as such corporation, partnership or trust is controlled by the
transferor and such transferee agrees that it holds such assets or controlling
interest subject to the restrictions named in this section.
10.2 Sublessee agrees that throughout the term of this Sublease
and any extensions or renewals thereof, except as hereinafter provided, to
purchase from Sublessor not less than 25% of its retail sales of all goods and
merchandise required by it for resale on the premises to the extent that
Sublessor shall now or hereafter be able to supply such goods and merchandise
to Sublessee, and Sublessor will supply all of Sublessee's requirements at
such prices and on such terms as are reasonably comparable to those offered by
Sublessor to other purchasers from Sublessor, carrying on businesses similar
to that of the Sublessee in Lane County, Oregon. If, at any time, Sublessee
contends that Sublessor is not able to supply particular goods or merchandise
customarily stocked by retail supermarkets in Lane Country, Oregon, or that
terms offered by Sublessor are not reasonably comparable to those offered by
Sublessor to other such purchasers, the Sublessee shall so advise Sublessor in
writing, specifying such contention with particularity. If, within 30 days
after the receipt of such notice, Sublessor does not offer to supply goods or
merchandise so specified or does not offer to supply goods or merchandise so
specified or does not advise Sublessee that the terms and conditions offered
are reasonably comparable to those offered to such other purchasers, Sublessee
shall be free to secure such specified goods and merchandise from any other
source which it desires. If Sublessor asserts that it is offering reasonably
comparable terms and prices and Sublessee nonetheless purchases from another
source, such purchase shall be a default under this Section.
10.3 Sublessee represents and warrants that there are no brokers,
finders or other persons entitled to any fee, commission or other compensation
in connection with this Sublease, and agrees to hold Sublessor harmless from
any claims for such fees, commissions and/or compensation.
10.4 Sublease hereby represents and warrants to Sublessor that the
financial statements, appraisals and other documents submitted to Sublessor in
connection herewith or pursuant hereto are and shall be true, correct,
complete and accurate in every respect and said financial statements fairly
and accurately present the assets, liabilities, financial condition and
results of operations reflected herein.
11. Attorney's Fees. In the event of the institution of any suit or
action to terminate this Sublease, or to enforce the terms or provisions
hereto, the prevailing party shall recover and the losing party hereby agrees
to pay, in addition to the cost and disbursements provided by statute,
reasonable attorney's fees in such proceedings or on any appeal from any
judgment or decree entered herein.
12. Notices. Any notice or demand required or permitted to be given
under this Sublease shall be deemed to have been properly given when, and only
when, the same is in writing and either personally delivered or by mail if it
has been deposited in the United States Mail, with postage prepaid, to be
forwarded by registered or certified mail and addressed to the party to be
notified at the address appearing below its signature. Such addresses may be
changed from time to time by notice as above provided.
IN WITNESS WHEREOF, the parties have executed the foregoing Sublease
Agreement the day and year first above written, but retroactively effective as
of February 1, 1989.
SUBLESSOR: United Grocers, Inc.
an Oregon corporation
By /s/ Alan C. Jones
6433 S.E. Lake Road
P. O. Box 22187
Portland, OR 97222
SUBLESSEE: Wright's Foodliner, Inc.
an Oregon corporation
By /s/ Richard L. Wright
Richard L. Wright, President
4223 Main Street
Springfield, OR 97477
The undersigned, who together own all of the issued and outstanding common
stock of the Sublease, guarantee performance of all provisions of this
Sublease by the Sublessee.
/s/ Richard L. Wright /s/ Marsha A. Wright
Richard L. Wright, Marsha A. Wright, individually
individually, Grantor Grantor
<PAGE>
EXHIBIT 10.K3
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT is entered into this 27th day of October, 1991,
by and between UNITED GROCERS, INC., an Oregon corporation (Sublessor) and
WRIGHT'S FOODLINER, INC., an Oregon corporation (Sublessee).
RECITALS:
A. Sublessor has entered into a Lease for a 20-year term commencing 7-
15, 1987, with KIVCO, an Oregon partnership, for a supermarket located in the
Delta Oaks Shopping Center, City of Eugene, County of Lane, State of Oregon, a
copy of which is marked Exhibit A attached hereto and by this reference
incorporated herein, as fully as if its terms and conditions were herein set
forth.
B. On July 17, 1987, KIVCO assigned its interest in the lease referred
to in Recital A to D.M. Stevenson Ranch, a Washington limited partnership.
C. Sublessee desires to sublet the premises commencing on October 28,
1991, and Sublessor is willing to sublease the premises in accordance with the
terms and conditions contained herein.
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. Sublease Terms and Options. Sublessor hereby sublets unto Sublessee
those premises described in Exhibit A, for the term remaining as described
therein.
1.1 So long as it is not in default hereunder, the Sublessee may
exercise the renewal options contained in Exhibit A as set forth in paragraphs
3 and 7 of said Exhibit.
2. Rental. Sublessee covenants and agrees to pay the same rental for
the whole of the term, together with all affirmative covenants including,
without limitation, those pertaining to basic rent, percentage of gross sales,
taxes, assessments, insurance and all of the covenants and obligations to be
performed by Sublessor as lessee, as set forth in Exhibit A, and to make such
payments and provide such performance when due by the terms of the lease and
any amendments thereto.
3. Deposits. Sublessee shall, upon execution hereof, pay any and all
rentals, or security deposits, as required pursuant to the terms and
conditions of Exhibit A, prorated as of October 28, 1991.
4. Indemnity and Hold Harmless. Except as provided in paragraph 5,
Sublessee shall be bound by the same responsibilities, rights, privileges and
duties as Sublessor, as enumerated in Exhibit A, and covenants and agrees to
fully indemnify and hold Sublessor harmless from any and all responsibility
and/or liability which Sublessor may incur by virtue of Exhibit A, and/or
Sublessee's occupancy of the premises. Furthermore, Sublessee shall be bound
by any subsequent amendment, revision, supplement, or addition to the prime
lease between Sublessor and the prime Lessor, and to keep the Sublessor
indemnified against all actions, claims and demands whatsoever in respect to
said Exhibit A, and Sublessee's use of the demised premises.
5. Roof Repair and Replacement. In consideration for the payment by
the prime Lessor of $26,400, Sublessor agreed to accept the responsibility for
all repairs and replacement of the roofing for the premises during the lease
term and any extensions thereof.
5.1 If Sublessor pays the sum of $26,400 plus interest to
Sublessee within forty-five (45) days after this Sublease Agreement is
executed, Sublessee will be fully responsible for and pay for any and all
repairs and replacement to the roofing of the demised premises during the term
of the sublease or any extensions thereof. Interest will be calculated at the
average 6-month certificate of deposit rate at the U.S. National Bank on
$26,400 for the period commencing on the date Sublessor received the $26,400
until the money is transferred to Sublessee.
5.2 If Sublessor does not pay the sum of $26,400 plus interest to
Sublessee within 45 days after this Sublease Agreement is executed, Sublessor
shall remain fully responsible for any and all roof repairs and replacements
for the premises during the sublease term and any extensions thereof.
6. Default. The following shall constitute a default under this
Sublease.
6.1 Any failure by Sublessee to pay the rent when due, or any
failure by Sublessee to perform any other obligation contained in this
Sublease, or to pay any other amount due under the Lease or to perform any
other obligation of Sublessor under the Lease when due which would constitute
a default under the Lease and which continues for the cure period provided
with respect thereto in the Lease;
6.2 If any warranty, representation or statement made or furnished
to Sublessor by or on behalf of the Sublessee is false in any material respect
when made or furnished;
6.3 If Sublessee makes an assignment for the benefit of its
creditors, or Sublessee is adjudicated a bankrupt or insolvent, or a trustee,
receiver or liquidator is appointed for all or part of Sublessee's assets, or
a petition or answer is filed by or against Sublessee seeking or acquiescing
in any reorganization, liquidation or similar relief under any federal, state
or local law relating to bankruptcy, insolvency or other relief for debtors.
7. Remedies. In the event of any default under this Sublease:
7.1 Sublessor may exercise any and all rights and remedies
afforded to the prime lessor upon default under the lease, and any and all
other rights and remedies Sublessor may have pursuant to the laws of the State
of Oregon.
7.2 If a default occurs, this Sublease may be terminated at the
option of the Sublessor by written notice to the Sublessee. The notice may be
given before, after or within the grace period for a default.
7.3 If the Sublease is terminated for any reason, Sublessee's
liability to Sublessor for damages shall survive such termination and
Sublessor may re-enter, take possession of the premises, and remove any
persons or property by legal action or by self-help with the use of reasonable
force.
7.4 Following re-entry or abandonment, Sublessor may:
(a) make any suitable alterations or refurbish the premises,
or both, or change the character or use of the premises, but Sublessor shall
not be required to relet for any use or purpose (other than that specified in
the prime Lease) which the Sublessor may reasonably consider injurious to the
premises, or to any tenant which Sublessor may reasonably consider
objectionable;
(b) relet all or part of the premises, alone or in
conjunction with other properties, for a term longer or shorter than the term
of this Sublease, upon any reasonable terms and conditions, including the
granting of some rent-free occupancy or other rent concession.
7.5 Sublessor may (but shall be under no obligation to) procure
any insurance, pay any rentals, taxes or liens, make any repairs, pay any sums
required to be paid, and to do and perform such other acts as may be required
of Sublessee hereunder, and any payments so made shall bear interest at the
rate of 12 per-cent (12%) per annum from the time of such payment until
repaid.
7.6 No expiration or termination of this Sublease, repossession of
the premises or any part thereof, or resubletting of the premises or any part
thereof, whether pursuant to the terms of this Sublease or any operation of
law or otherwise, shall relieve Sublessee of its liabilities and obligations
under this Sublease, all of which shall survive such expiration, termination,
repossession or subletting.
8. Damages. Whether or not an election is made to terminate the
Sublease, Sublessor shall be entitled to recover immediately without waiting
until the due date of any future rent, or until the date is fixed for
expiration of the Sublease term, the same amount of damages as set forth in
the prime Lease as though the Sublessor were the prime lessor and the
Sublessee were the prime lessee.
9. Rights Cumulative; Nonwaiver. No right or remedy herein conferred
upon or reserved to Sublessor is intended to be exclusive of any other right
or remedy, and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity or by statute. The failure of Sublessor to
insist at any time upon the strict performance of any covenant or agreement or
to exercise any option, right, power or remedy contained in this Sublease
shall not be construed as a waiver or relinquishment thereof for the future.
No waiver by Sublessor of any provision of this Sublease shall be deemed to
have been made whether due to the receipt of rent or otherwise, unless
expressed in writing and signed by Sublessor.
10. Assignment and Subletting. Sublessee acknowledges that except as
provided herein, the provisions for extension, options and assignment and
subletting in the prime Lease are applicable to the prime Lessor and Sublessor
only. Sublessee will not assign this Sublease or sublet the premises without
the prior written consent of Sublessor which will not be unreasonably
withheld. A direct or indirect transfer of ownership and control of a
majority of the voting stock of Sublessee, by whatever means, shall be deemed
an assignment of this Sublease for the purpose of this paragraph.
11. Covenants, Representations and Warranties.
11.1 Sublessee agrees that as long as this Sublease remains in
effect, should Sublessee ever desire to sell the store operated on the
premises, it shall give Sublessor the first opportunity to purchase the same
at its fair market value; provided, however, if Sublessor does not elect to
purchase the store for its fair market value as agreeable to Sublessee within
sixty (60) days after receipt of written notice of Sublessee's intent to sell,
Sublessee may thereafter sell the store to anyone upon such terms and
conditions as are acceptable to Sublessee. The foregoing provisions do not
apply to transfers of assets or interests by sale, gift or as a result of
death to the lawful issue of the owners of Sublessee, or transfers of assets
to a corporation or partnership, or transfers of a controlling interest to a
trust, as long as such corporation, partnership or trust is controlled by the
transferor and such transferee agrees that it holds such assets or controlling
interest subject to the restrictions named in this section.
11.2 Sublessee agrees that throughout the term of this Sublease
and any extensions or renewals thereof, except as hereinafter provided, to
purchase from Sublessor not less than 25% of its retail sales of all goods and
merchandise required by it for resale on the premises to the extent that
Sublessor shall now or hereafter be able to supply such goods and merchandise
to Sublessee, and Sublessor will supply all of Sublessee's requirements at
such prices and on such terms as are reasonably comparable to those offered by
Sublessor to other purchasers from Sublessor, carrying on businesses similar
to that of the Sublessee in Lane County, Oregon. If, at any time, Sublessee
contends that Sublessor is not able to supply particular goods or merchandise
customarily stocked by retail supermarkets in Lane County, Oregon, or that
terms offered by Sublessor are not reasonably comparable to those offered by
Sublessor to other such purchasers, the Sublessee shall so advise Sublessor in
writing, specifying such contention with particularity. If, within 30 days
after the receipt of such notice, Sublessor does not offer to supply goods or
merchandise so specified or does not advise Sublessee that the terms and
conditions offered are reasonably comparable to those offered to such other
purchasers, Sublessee shall be free to secure such specified goods and
merchandise from any other source it desires. If Sublessor asserts that it is
offering reasonably comparable terms and prices and Sublessee nonetheless
purchases from another source, such purchase shall be a default under this
section.
11.3 Sublessee represents and warrants that there are no brokers,
finders or other persons entitled to any fee, commission or other compensation
in connection with this Sublease, and agrees to hold Sublessor harmless from
any claims for such fees, commissions and/or compensation.
11.4 Sublessee hereby represents and warrants to Sublessor that
the financial statements, appraisals and other documents submitted to
Sublessor in connection herewith or pursuant hereto are and shall be true,
correct, complete and accurate in every respect and said financial statements
fairly and accurately present the assets, liabilities, financial condition and
results of operations reflected herein.
11.5 Sublessor represents and warrants that it has performed all
of the obligations which the Lessee is required to perform under the terms of
the lease to which this sublease pertains, as of the date of this sublease,
and that the lease is in full force and effect and not in default in any
respects. Further, Sublessor represents that there is nothing as a result of
which the passage of time or the giving of notice would constitute a default
for actions which have already occurred prior to the date of this sublease.
12. Attorney's Fees. In the event of the institution of any suit or
action to terminate this Sublease, or to enforce the terms or provisions
hereto, the prevailing party shall recover and the losing party hereby agrees
to pay, in addition to the costs and disbursements provided by statute,
reasonable attorney's fees in such proceedings or on any appeal from any
judgment or decree entered herein.
13. Notices. Any notice or demand required or permitted to be given
under this Sublease shall be deemed to have been properly given when, and only
when, the same is in writing and either personally delivered or by mail if it
has been deposited in the United States mail, with postage prepaid, to be
forwarded by registered or certified mail and addressed to the party to be
notified at the address appearing below its signature. Such addresses may be
changed from time to time by notice as above provided.
IN WITNESS WHEREOF, the parties have executed the foregoing Sublease
Agreement the day and year first above written.
SUBLESSOR: SUBLESSEE:
United Grocers, Inc., Wright's Foodliner, Inc.
an Oregon corporation an Oregon corporation
By /s/ George P. Fleming By: /s/ Richard L. Wright
Asst. Secretary
George Fleming Richard L. Wright, President
6433 S.E. Lake Road 1156 Hwy 99 North
P. O. Box 22187 Eugene, Oregon 97402
Portland, Oregon 97222
<PAGE>
EXHIBIT 10.K4
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT is entered into this 30th day of June, 1993, by
and between UNITED GROCERS, INC., an Oregon corporation ("Sublessor") and
WRIGHT'S FOODLINER, INC., an Oregon corporation ("Sublessee").
RECITALS:
A. Sublessor has entered into a Lease for a ten (10) year term
commencing April 1, 1989, with Portland Fixture Limited Partnership and
Commercial Development Co., as tenants in common ("Lessor"), for a supermarket
located in the Lighthouse Square
Shopping Center, Lincoln City, Oregon, a copy of which is attached hereto,
marked as Exhibit "A," and by this reference incorporated herein, as fully as
if its terms and conditions were herein set forth.
B. On December 27, 1991, Lessor assigned its interest in the Lease
referred to in Recital A to The Steven and Margo Wiesberg Family Trust Under
Declaration of Trust dated November 12, 1991, The Jason Family 1986 Inter
Vivos Family Trust, Marvin J. Gross and Judith Gross, husband and wife, as
individuals, and Mario Jason and Madaline Jason, husband and wife, dba
Lighthouse Square Shopping Center.
C. Sublessee desires to sublet the premises commencing on June 30, 1993,
and Sublessor is willing to sublease the premises in accordance with the terms
and conditions contained herein.
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. Sublease Terms and Options. Sublessor hereby sublets unto Sublessee
those premises described in Exhibit "A," for the term remaining as described
therein.
1.1 So long as it is not in default hereunder, the Sublessee may
exercise the renewal options contained in Exhibit "A," as set forth in
paragraphs 3 and 7 of said Exhibit.
2. Rental. Sublessee covenants and agrees to pay the rental for the
whole of the term, and to perform all affirmative covenants including, without
limitation, those pertaining to taxes, assessments, insurance, and all of the
covenants and obligations to be performed by Sublessor as Lessee, as set forth
in Exhibit "A," and to make such payments and provide such performance when
due by the terms of the Lease and any amendments thereto. Basic rental will
be paid in accordance with the Schedule attached hereto, marked as Schedule
"A-1," and by this reference incorporated herein. To the extent the basic
rent in Schedule "A-1" is less than the basic rental in the prime Lease,
Sublessor agrees to indemnify and hold Sublessee harmless from the obligation
to pay the same.
3. Deposits. Sublessee shall, upon execution hereof, pay any and all
rentals, or security deposits, as required pursuant to the terms and
conditions of Exhibit "A," prorated as of June 30, 1993.
4. Indemnity and Hold Harmless. Sublessee shall be bound by the same
responsibilities, rights, privileges and duties as Sublessor, as enumerated in
Exhibit "A" except as otherwise provided herein, and covenants and agrees to
fully indemnify and hold Sublessor harmless from any and all responsibility
and/or liability which Sublessor may incur by virtue of Exhibit "A," and/or
Sublessee's occupancy of the premises. Furthermore, Sublessee shall be bound
by any subsequent amendment, revision, supplement, or addition to the prime
Lease between Sublessor and the prime Lessor with Sublessee's prior written
consent, and to keep the Sublessor indemnified against all actions, claims and
demands whatsoever in respect to said Exhibit "A," and Sublessee's use of the
demised premises.
5. Default. The following shall constitute a default under this
Sublease:
5.1 Any failure by Sublessee to pay the rent when due, or any
failure by Sublessee to perform any other obligation contained in this
Sublease, or to pay any other amount due under the Lease or to perform any
other obligation of Sublessor under the Lease when due which would constitute
a default under the Lease and which continues for the cure period provided
with respect thereto in the Lease;
5.2 If any warranty, representation or statement made or furnished
to Sublessor by or on behalf of the Sublessee is false in any material respect
when made or furnished;
5.3 If Sublessee makes an assignment for the benefit of its
creditors, or Sublessee is adjudicated a bankrupt or insolvent, or a trustee,
receiver or liquidator is appointed for all or part of Sublessee's assets, or
a petition or answer is filed by or against Sublessee seeking or acquiescing
in any reorganization, liquidation or similar relief under any federal, state
or local law relating to bankruptcy, insolvency or other relief for debtors.
6. Remedies. In the event of any default under this Sublease:
6.1 Sublessor may exercise any and all rights and remedies
afforded to the prime Lessor upon default under the Lease, and any and all
other rights and remedies Sublessor may have pursuant to the laws of the state
of Oregon.
6.2 If a default occurs, this Sublease may be terminated at the
option of the Sublessor by written notice to the Sublessee. The notice may be
given before, after or within the grace period for a default.
6.3 If the Sublease is terminated for any reason, Sublessee's
liability to Sublessor for damages shall survive such termination and
Sublessor may re-enter, take possession of the premises, and remove any
persons or property by legal action or by self-help with the use of reasonable
force.
6.4 Following re-entry or abandonment, Sublessor may:
(a) make any suitable alterations or refurbish the premises,
or both, or change the character or use of the premises, but Sublessor shall
not be required to relet for any use or purpose (other than that specified in
the prime Lease) which the Sublessor may reasonably consider injurious to the
premises, or to any tenant which Sublessor may reasonably consider
objectionable;
(b) relet all or part of the premises, alone or in
conjunction with other properties, for a term longer or shorter than the term
of this Sublease, upon any reasonable terms and conditions, including the
granting of some rent-free occupancy or other rent concession.
6.5 Sublessor may (but shall be under no obligation to) procure
any insurance, pay any rentals, taxes or liens, make any repairs, pay any sums
required to be paid, and to do and perform such other acts as may be required
of Sublessee hereunder, and any payments so made shall bear interest at the
rate of ten percent (10%) per annum from the time of such payment until
repaid.
6.6 No expiration or termination of this Sublease, repossession of
the premises or any part thereof, or resubletting of the premises or any part
thereof, whether pursuant to the terms of this Sublease or any operation of
law or otherwise, shall relieve Sublessee of its liabilities and obligations
under this Sublease, all of which shall survive such expiration, termination,
repossession or subletting.
7. Damages. Whether or not an election is made to terminate the
Sublease, Sublessor shall be entitled to recover immediately without waiting
until the due date of any future rent, or until the date is fixed for
expiration of the Sublease term, the same amount of damages as set forth in
the prime Lease as though the Sublessor were the prime Lessor and the
Sublessee were the prime Lessee.
8. Rights Cumulative; Nonwaiver. No right or remedy herein conferred
upon or reserved to Sublessor is intended to be exclusive of any other right
or remedy, and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity or by statute. The failure of Sublessor to
insist at any time upon the strict performance of any covenant or agreement or
to exercise any option, right, power or remedy contained in this Sublease
shall not be construed as a waiver or relinquishment thereof for the future.
No waiver by Sublessor of any provision of this Sublease shall be deemed to
have been made whether due to the receipt of rent or otherwise, unless
expressed in writing and signed by Sublessor.
9. Assignment and Subletting. Sublessee acknowledges that except as
provided herein, the provisions for extension, options and assignment and
subletting in the prime Lease are applicable to the prime Lessor and Sublessor
only. Sublessee will not assign this Sublease or sublet the premises without
the prior written consent of Sublessor which will not be unreasonably
withheld. A direct or indirect transfer of ownership and control of a
majority of the voting stock of Sublessee, by whatever means, shall be deemed
an assignment of this Sublease for the purpose of this paragraph.
10. Covenants, Representations and Warranties.
10.1 Sublessee agrees that as long as this Sublease remains in
effect, should Sublessee ever desire to sell the store operated on the
premises, it shall give Sublessor the first opportunity to purchase the same
at its fair market value; provided, however, if Sublessor does not elect to
purchase the store for its fair market value as agreeable to Sublessee within
60 days after receipt of written notice of Sublessee's intent to sell,
Sublessee may thereafter sell the store to anyone upon such terms and
conditions as are acceptable to Sublessee. The foregoing provisions do not
apply to transfers of assets or interests by sale, gift or as a result of
death to the lawful issue of the owners of Sublessee, or transfers of assets
to a corporation or partnership, or transfers of a controlling interest to a
trust, as long as such corporation, partnership or trust is controlled by the
transferor and such transferee agrees that it holds such assets or controlling
interest subject to the restrictions named in this section.
10.2 Sublessee agrees that throughout the term of this Sublease
and any extensions or renewals thereof, except as hereinafter provided, to
purchase from Sublessor not less than 25 percent of its retail sales of all
goods and merchandise required by it for resale on the premises to the extent
that Sublessor shall now or hereafter be able to supply such goods and
merchandise to Sublessee, and Sublessor will supply all of Sublessee's
requirements at such prices and on such terms as are reasonably comparable to
those offered by Sublessor to other purchasers from Sublessor, carrying on
businesses similar to that of the Sublessee in Lincoln County, Oregon. If, at
any time, Sublessee contends that Sublessor is not able to supply particular
goods or merchandise customarily stocked by retail supermarkets in Lincoln
County, Oregon, or that terms offered by Sublessor are not reasonably
comparable to those offered by Sublessor to other such purchasers, the
Sublessee shall so advise Sublessor in writing, specifying such contention
with particularity. If, within 30 days after the receipt of such notice,
Sublessor does not offer to supply goods or merchandise so specified or does
not advise Sublessee that the terms and conditions offered are reasonably
comparable to those offered to such other purchasers, Sublessee shall be free
to secure such specified goods and merchandise from any other source it
desires. If Sublessor asserts that it is offering reasonably comparable terms
and prices and Sublessee nonetheless purchases from another source, such
purchase shall be a default under this section.
10.3 Sublessee represents and warrants that there are no brokers,
finders or other persons entitled to any fee, commission or other compensation
in connection with this Sublease, and agrees to hold Sublessor harmless from
any claims for such fees, commissions and/or compensation.
10.4 Sublessee hereby represents and warrants to Sublessor that
the financial statements, appraisals and other documents submitted to
Sublessor in connection herewith or pursuant hereto are and shall be true,
correct, complete and accurate in every respect and said financial statements
fairly and accurately present the assets, liabilities, financial condition and
results of operations reflected herein.
10.5 Sublessor represents and warrants that it has performed all
of the obligations which the Lessee is required to perform under the terms of
the Lease to which this Sublease pertains, as of the date of this Sublease,
and that the Lease is in full force and effect and not in default in any
respect. Further, Sublessor represents that there is nothing as a result of
which the passage of time or the giving of notice would constitute a default
for actions which have already occurred prior to the date of this Sublease.
11. Attorney's Fees. In the event of the institution of any suit or
action to terminate this Sublease, or to enforce the terms or provisions
hereto, the prevailing party shall recover and the losing party hereby agrees
to pay, in addition to the costs and disbursements provided by statute,
reasonable attorney's fees in such proceedings or on any appeal from any
judgment or decree entered herein.
12. Notices. Any notice or demand required or permitted to be given
under this Sublease shall be deemed to have been properly given when, and only
when, the same is in writing and either personally delivered or by mail if it
has been deposited in the United States mail, with postage prepaid, to be
forwarded by registered or certified mail and addressed to the party to be
notified at the address appearing below its signature. Such addresses may be
changed from time to time by notice as above provided.
13. Conditions Subsequent. Notwithstanding anything to the contrary
provided above, the parties hereto acknowledge and agree that irrespective of
the closing of this transaction, until March 31, 1999, it is subject to the
right of Buyer, at its option, upon 45 days' prior written notice, to
surrender the premises to Sublessor and upon such surrender, Sublessee shall
be released from any further liability under the Sublease arising subsequent
to the surrender.
IN WITNESS WHEREOF, the parties have executed the foregoing Sublease the
day and year first herein written.
Sublessor: United Grocers, Inc.
By /s/ G.P. Fleming
Title: Assistant Secretary
Sublessee: Wright's Foodliner, Inc.
By /s/ Richard L. Wright
Title: President
<PAGE>
Exhibit 4.F4
Execution Copy
LOAN PURCHASE AND SERVICING AGREEMENT
(Holdback Program)
dated as of
September 28, 1995
between
UNITED RESOURCES, INC.
as Seller and Servicer
and
NATIONAL CONSUMER COOPERATIVE BANK
as Buyer
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Defined Terms. . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 General Principles Applicable to Definitions . . . . . .13
SECTION 1.03 Accounting Terms . . . . . . . . . . . . . . . . . . . .14
ARTICLE II
THE COMMITMENT
SECTION 2.01 Agreement to Purchase and Sell Loans. . . . . . . . . .15
SECTION 2.01A Incremental Purchase. . . . . . . . . . . . . . . . . .18
SECTION 2.02 Agreement to Accept Renewal Notes . . . . . . . . . . .19
ARTICLE III
CLOSING PROCEDURE; CONDITIONS TO PURCHASE
SECTION 3.01 Payment . . . . . . . . . . . . . . . . . . . . . . . .20
SECTION 3.02 Acceptance - Renewal Loans. . . . . . . . . . . . . . .20
SECTION 3.03 Effective Date. . . . . . . . . . . . . . . . . . . . .21
SECTION 3.04 Buyer's Conditions Precedent to Acceptance. . . . . ...21
SECTION 3.05 Additional Delivery Requirements for Initial
Closing Date. . . . . . . . . . . . . . . . . . . . . .24
SECTION 3.06 Seller's Conditions Precedent to Sale . . . . . . . . .26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Seller's Corporate Representations and
Warranties. . . . . . . . . . . . . . . . . . . . . . .27
SECTION 4.02 Seller's Closing Date Representations and
Warranties with respect to Loans. . . . . . . . . . . .30
SECTION 4.03 Seller's Renewal Date Representations and
Warranties. . . . . . . . . . . . . . . . . . . . . . .34
SECTION 4.04 Buyer's Representations and Warranties. . . . . . . . .35
SECTION 4.05 Repurchase Upon Breach of Certain
Representations and Warranties. . . . . . . . . . . . .36
<PAGE>
Page
ARTICLE V
SERVICING AND COLLECTION
SECTION 5.01 Servicing; Delegation of Authority to Buyer and
Servicer. . . . . . . . . . . . . . . . . . . . . . . . .37
SECTION 5.02 Maintenance of System; Collection and Maintenance
of Information. . . . . . . . . . . . . . . . . . . . . .38
SECTION 5.03 Maintenance of Lien Priority. . . . . . . . . . . . . . .38
SECTION 5.04 Obligor Inquiries; Credit and Collection Policies . . . .38
SECTION 5.05 Obligor Defaults. . . . . . . . . . . . . . . . . . . . .39
SECTION 5.06 Servicer Reports; Annual Compliance Report. . . . . . . .40
SECTION 5.07 Lockboxes . . . . . . . . . . . . . . . . . . . . . . . .41
SECTION 5.08 Payment of Guaranty Fees and Servicing Fees . . . . . . .41
SECTION 5.09 Applicable Rate . . . . . . . . . . . . . . . . . . . . .42
SECTION 5.10 Computation and Payment of Servicing Fees;
Servicer's Expenses . . . . . . . . . . . . . . . . . . .43
SECTION 5.11 Access to Certain Documentation and Certain
Information Regarding the Loans . . . . . . . . . . . . .43
SECTION 5.12 Concerning Renewal Notes. . . . . . . . . . . . . . . . .43
SECTION 5.13 Servicer Representations and Warranties . . . . . . . . .43
SECTION 5.14 Servicer's Resignation. . . . . . . . . . . . . . . . . .44
ARTICLE VI
SELLER'S AND SERVICER'S COVENANTS
SECTION 6.01 Covenants . . . . . . . . . . . . . . . . . . . . . . . .46
SECTION 6.02 Special Covenant of Seller. . . . . . . . . . . . . . . .51
ARTICLE VII
SELLER OBLIGATIONS AND REPURCHASE OPTIONS
SECTION 7.01 Purchase of Interest Rate Protection. . . . . . . . . . .52
SECTION 7.02 Optional Repurchase of Defaulted Loans and after
Obligor Default . . . . . . . . . . . . . . . . . . . . .52
SECTION 7.03 Minimal Balances. . . . . . . . . . . . . . . . . . . . .52
SECTION 7.04 Optional Repurchase of Special Loans. . . . . . . . . . .53
ARTICLE VIII
SERVICER DEFAULT
SECTION 8.01 Servicer Defaults . . . . . . . . . . . . . . . . . . . .54
SECTION 8.02 Buyer to Act; Appointment of Successor. . . . . . . . . .55
SECTION 8.03 Effects of Servicing Transfer . . . . . . . . . . . . . .56
Page
ARTICLE IX
TERMINATION EVENTS
SECTION 9.01 Termination Events. . . . . . . . . . . . . . . . . . . .57
SECTION 9.02 Consequences of Termination Event . . . . . . . . . . . .58
SECTION 9.03 Remedies of a Secured Party . . . . . . . . . . . . . . .59
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Further Assurances. . . . . . . . . . . . . . . . . . . .60
SECTION 10.02 Indemnities . . . . . . . . . . . . . . . . . . . . . . .60
SECTION 10.03 No Waiver: Remedies Cumulative . . . . . . . . . . . . .61
SECTION 10.04 Governing Law . . . . . . . . . . . . . . . . . . . . . .61
SECTION 10.05 Consent to Jurisdiction: Waiver of Immunities. . . . . .61
SECTION 10.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . .61
SECTION 10.07 Assignment. . . . . . . . . . . . . . . . . . . . . . . .61
SECTION 10.08 Capital Markets Funding . . . . . . . . . . . . . . . . .62
SECTION 10.09 Severability. . . . . . . . . . . . . . . . . . . . . . .62
SECTION 10.10 Attorney's Fees . . . . . . . . . . . . . . . . . . . . .62
SECTION 10.11 Setoff. . . . . . . . . . . . . . . . . . . . . . . . . .62
SECTION 10.12 Limitation on Third Party Beneficiaries . . . . . . . . .62
SECTION 10.13 Term of Agreement . . . . . . . . . . . . . . . . . . . .63
SECTION 10.14 Entire Agreement; Amendment . . . . . . . . . . . . . . .63
SECTION 10.15 Headings. . . . . . . . . . . . . . . . . . . . . . . . .63
SECTION 10.16 Counterparts. . . . . . . . . . . . . . . . . . . . . . .63
Exhibit A - Lockbox Bank, Address and Account
Exhibit B - [Reserved]
Exhibit C - Notice of Assignment
Exhibit D - Form of Renewal Note
Exhibit E - Form of Notice of Incremental Purchase
Exhibit F - Recent Dates for Lien Searches
Exhibit G - Corporate and "Doing Business" Names of Seller
and Guarantor
Exhibit H - Information Regarding Litigation, Etc.
Exhibit I - Forms of Note and Related Documents
Exhibit J - Credit and Collection Policy
Exhibit K - Form of Officer's Certificate of Seller
(Incremental Purchase)
Exhibit L - Form of Officer's Certificate of Guarantor
(Incremental Purchase)
Exhibit M - Form of Officer's Certificate of Servicer
(Incremental Purchase)
<PAGE>
LOAN PURCHASE AND SERVICING AGREEMENT
This LOAN PURCHASE AND SERVICING AGREEMENT (Holdback Program) is
executed as of September 28, 1995 between UNITED RESOURCES, INC., an Oregon
corporation, as Seller (in such capacity, the "Seller") and as Servicer (in
such capacity, the "Servicer") and NATIONAL CONSUMER COOPERATIVE BANK, a
financial institution organized under the laws of the United States (the
"Buyer").
NOW, THEREFORE, for full and fair consideration, the parties
hereto agree that this Loan Purchase and Servicing Agreement shall read as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Defined Terms. The following terms, as used
herein, have the following meanings:
"Affiliate" shall mean, with respect to a Person, any other Person
(or group of related Persons) which (i) directly or indirectly controls, is
controlled by or is under common control with, such Person, or (ii) directly
or indirectly owns more than 5% of such Person's voting stock, or (iii) is a
director or officer of such Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Aggregate Exposure" shall mean, for any Obligor Group, an amount,
without duplication, equal to the sum of (i) the aggregate Principal Balance
of all Loans with respect to which any member of such Obligor Group is an
Obligor or Loan Guarantor and (ii) the aggregate outstanding principal amount
of all promissory notes and evidences of indebtedness which are owed or
guaranteed by any member of the related Obligor Group to or for the benefit of
the Buyer or which give the Buyer exposure to the credit of any member of the
related Obligor Group.
"Applicable Rate" shall mean, for each Loan, during each Interest
Accrual Period, a per annum rate of 140 basis points in excess of LIBOR
determined on the related LIBOR Determination Date, each calculated on the
basis of actual days elapsed and a 360-day year.
"Available Funds" shall mean Collections, Principal Prepayments,
Payaheads, Net Liquidation Proceeds, Insurance Proceeds, Guaranty Payments,
Repurchase Proceeds and Advances.
"Bank Act" shall mean the National Consumer Cooperative Bank Act,
12 U.S.C. Sections 3001-3051, and any regulations and policies adopted
thereunder.
"Business Day" shall mean any day other than Saturday, Sunday and
a day on which banks in Washington, D.C. are authorized to close.
"Buyer" or "NCB" shall mean National Consumer Cooperative Bank, a
financial institution organized under the laws of the United States, and its
Successors and assigns.
"Cash Interest Expense" shall mean, for any period, gross interest
expense for such period determined in accordance with U.S. GAAP.
"Closing Date" shall mean the date of each Incremental Purchase.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean all or any portion of the collateral,
whether real or personal, tangible or intangible, or otherwise, pledged by any
Obligor or Loan Guarantor to secure repayment of its Loan and the related Note
(other than Seller's capital stock and patronage dividends).
"Collections" shall mean any and all amounts received from or on
behalf of the Obligors in respect of Loans and related Notes or Related
Documents during any applicable Due Period regardless of how received and
including, without limitation, receipt of Monthly Payments and payments from
guarantors.
"Consolidated Net Worth" shall mean, with respect to any Person,
as of any date of determination, the consolidated balance sheet "net worth" of
such Person determined in accordance with U.S. GAAP.
"Consolidated Net Tangible Assets" shall have the meaning given in
clause (j) of Article IV of the Guaranty Agreement.
"Consolidated Tangible Net Worth" means, with respect to any
Person, at any date, Consolidated Net Worth less (i) all assets which should
be classified as intangible assets (such as good will, patents, trademarks,
copyrights, franchises and covenants not to compete) and (ii) to the extent
not already deducted from total assets, all reserves including those for
deferred income taxes, depreciation, obsolescence or amortization of
properties and (iii) all capital stock or other investments in any direct or
indirect subsidiary other than in (x) any offshore investment subsidiary, or
(y) a subsidiary having all or substantially all of its operations in the
United States.
"Controlled Group" means, with respect to any Person, all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which (1) together with such Person are
treated as a single employer under Section 414(b) or 414(c) of the Code or (2)
solely for purposes of potential liability under Section 302(c)(11) of ERISA
and Section 412(c)(11) of the Code and the lien created under Section 302(f)
of ERISA and Section 412(n) of the Code, described in Section 414(m) or (n) of
the Code, includes such Person as a member.
"CPLTD" shall mean, with respect to any Person, as of any date,
that portion of such Person's long-term Debt (that is, Debt with a term of
greater than one year) which matures and is due and payable within one year.
"Credit and Collection Policy" means, with respect to Seller and
Servicer, the credit, collection, enforcement and other policies and practices
of the Seller or Servicer, as the case may be, relating to Loans, related
Notes and Related Documents existing on the Initial Closing Date and as set
forth in Exhibit J hereto, as the same may be modified from time to time with
the consent of the Buyer, which consent will not be unreasonably withheld.
"Cut-Off Date" shall mean the first (1st) day of the month in
which each Incremental Purchase occurs.
"Debt" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments
or agreements (including obligations of the parties under this Agreement or
the Guaranty Agreement), (iii) all obligations of such Person to pay the
deferred purchase price of property or services other than trade receivables
and open accounts arising in the ordinary course, (iv) all obligations of such
Person as lessee which are capitalized in accordance with generally accepted
accounting principles, (v) all Debt secured by a lien on any asset owned of
such Person, whether or not such Debt is otherwise an obligation of such
Person which Debt, if Non-Recourse to such Person, shall be deemed to be in an
amount equal to the lesser of the principal amount of such obligations or the
aggregate fair market value of such assets, and (vi) all Guaranteed Debt
(including, in the case of the Guarantor, the Guarantor's obligations under
the Guaranty Agreement).
"Defaulted Loan" shall mean, as of any date, a Loan with respect
to which any of the following has occurred: (a) there has occurred an Obligor
Default with respect to such Loan and such Obligor Default has been continuing
for a period of 10 days, or (b) the Obligor under such Loan has sought
protection under the United States Bankruptcy Code or is the subject of an
involuntary bankruptcy.
"Due Date" shall mean the day of the month on which the Monthly
Payment is due from the Obligor on a Loan.
"Due Period" shall mean, with respect to any Payment Date, the
calendar month preceding the month in which such Payment Date occurs.
"EBITDA" means, for any Person, for any period, the consolidated
net income (or net loss) of such Person for such period as determined in
accordance with U.S. GAAP, plus (a) the sum of (i) depreciation expense, (ii)
amortization expense, (iii) Cash Interest Expense plus the amount of amortized
debt discount deducted in determining Cash Interest Expense and fees, (iv)
total income tax expense, and (v) extraordinary or unusual losses (and other
after-tax losses on sales of assets outside of the ordinary course of business
and not otherwise included in U.S. GAAP extraordinary or unusual losses), less
(b) the sum of (i) extraordinary or unusual gains (and other after tax gains
on sales of assets outside of the ordinary course of business and not
otherwise included in U.S. GAAP extraordinary or unusual gains) of the Person
for such period and (ii) the net income (or loss) of any Person that is
accounted for by the equity method of accounting, except to the extent of the
amount of dividends or distributions paid to such Person.
"Eligible Loan" shall mean a Loan as to which each applicable
representation and warranty in Section 4.02 is true and accurate on the
applicable Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Existing Guaranty" shall mean the "Guaranty" provided by the
Guarantor in accordance with Article VII of the Existing Loan Purchase
Agreement.
"Existing Loan Purchase Agreement" shall mean the Loan Purchase
and Servicing Agreement dated as of May 13, 1994 and amended as of July 15,
1994 and as of September 28, 1995, by and among United Resources, Inc., as
seller and servicer, United Grocers, Inc., as guarantor, and NCB, as buyer, as
the same may be amended from time to time.
"Funded Debt" means Debt which matures by its terms more than one
year from the date it was originally incurred, or is unconditionally renewable
or extendible at the option of the debtor to a date more than one year from
such date, or which arises under a revolving credit or similar agreement which
obligates the lender or lenders to extend credit over a period of more than
one year from such date.
"Government Approval" means an approval, permit, license,
authorization, certificate or consent of any Governmental Authority.
"Governmental Authority" means the government of the United States
or any State or any foreign country or any political subdivision of any
thereof or any branch, department, agency, instrumentality, court, tribunal or
regulatory authority which constitutes a part or exercises any sovereign power
of any of the foregoing.
"Guaranteed Debt" shall mean, as applied to any debt, for any
Person (i) a guarantee by such Person (other than by endorsement for
collection in the ordinary course of business), direct or indirect, in any
manner, of any part or all of such debt or (ii) a similar agreement, direct or
indirect, contingent or otherwise, providing for the payment or performance
(or payment of damages in the event of non-performance) of such Person of any
part or all of such debt. The amount of any Guaranteed Debt of such Person
shall be deemed to be the maximum amount of the debt guaranteed for which the
guarantor could be held liable under such Guaranteed Debt.
"Guarantor" shall mean United Grocers, Inc., an Oregon
corporation, or its successors or assigns.
"Guarantor Default" shall have the meaning set forth in
Section 5.01 of the Guaranty Agreement.
"Guaranty" shall mean the first loss guaranty of Liquidation
Losses provided by Guarantor in accordance with the Guaranty Agreement.
"Guaranty Agreement" means the Guaranty Agreement (Holdback
Program) dated as of September 28, 1995, by and between Buyer and Guarantor,
as the same may be amended and supplemented from time to time.
"Guaranty Amount" shall have the meaning given in the Guaranty
Agreement.
"Guaranty Fee" shall have the meaning given in Section 2.02 of the
Guaranty Agreement.
"Guaranty Payments" shall mean the amounts paid by Guarantor to
the Buyer pursuant to the Guaranty or the Repurchase Guaranty as applicable.
"Incremental Purchase" shall have the meaning ascribed to such
term in Section 2.01A hereof.
"Initial Closing Date" shall mean September 28, 1995.
"Insurance Proceeds" shall mean proceeds paid by any insurer
pursuant to any insurance policy covering a Loan or Collateral, including but
not limited to title, hazard, life, health and/or accident insurance policies.
"Interest Accrual Period" shall mean, with respect to each Payment
Date, the period commencing on the first day of the month preceding such
Payment Date and ending on the last day of the month preceding such Payment
Date, except that, with respect to the first Payment Date, the initial
Interest Accrual Period shall commence on the Initial Closing Date.
"LIBOR" shall mean, for any Interest Accrual Period, the
reserve-adjusted London interbank rate for one-month EuroDollar deposits
determined by the Buyer for each Interest Accrual Period in accordance with
the provisions of Section 5.09.
"LIBOR Determination Date" shall mean the second Business Day
prior to the commencement of each Interest Accrual Period.
"Liquidated Loan" shall mean any Defaulted Loan as to which the
Servicer has determined that all amounts which it reasonably and in good faith
expects to recover have been recovered from or on account of such Loan;
provided, however, that a Defaulted Loan which has not been determined to have
become a Liquidated Loan within six months after becoming a Defaulted Loan
shall be deemed a Liquidated Loan on the sixth month anniversary date of such
Loan becoming a Defaulted Loan. A Loan deemed a Liquidated Loan shall be due
and payable on the date on which such Loan so deemed.
"Liquidation Losses" shall mean, with respect to any Liquidated
Loan, on any date of determination, the amount by which (A) the sum of (i) the
Principal Balance of such Loan, (ii) accrued and unpaid interest thereon at
the Applicable Rate and (iii) unreimbursed reasonable fees and expenses
incurred by NCB or the Servicer in servicing the liquidation of Defaulted
Loan, exceeds (B) the Net Liquidation Proceeds and Insurance Proceeds thereon,
if any.
"Liquidation Proceeds" shall mean, cash, other than Insurance
Proceeds, and any other amounts received in connection with the liquidation of
Defaulted Loans and related Collateral, whether through trustee's sale,
foreclosure sale or otherwise.
"Loan" shall mean each loan originated by Seller in the ordinary
course of its business and sold and transferred (in its entirety or through a
participation interest therein) to the Buyer pursuant to this Agreement,
together with the rights and obligations of a holder thereof, payments thereon
and proceeds therefrom, the Loans subject to this Agreement being identified
on the Loan Schedules. "Loan" shall also include any Renewal Loan accepted by
the Buyer under this Agreement.
"Loan File" means the documents pertaining to a Loan, including
the related Note and Related Documents delivered to the Buyer or its agent in
accordance with Section 2.01 of this Agreement in connection with the sale of
the Loan by Seller and the Renewal Note and Related Documents delivered to the
Buyer pursuant to Section 2.02 of this Agreement.
"Loan Guarantor" shall mean any Person who (i) guarantees an
Obligor's payment and/or other obligations under any Loan, (ii) co-signs, or
is a co-maker on, the related Note, or (iii) otherwise supports, either in a
primary or secondary position, an Obligor's obligations with respect to a
Loan, the related Note or other Related Documents.
"Loan Interest Rate" shall mean, with respect to any date of
determination, the then applicable annual rate of interest borne by a Loan,
pursuant to its terms, which, as of the applicable Closing Date, is shown on
the Loan Schedule.
"Loan Schedule" shall mean, the schedule of Loans delivered to the
Buyer at the time of each Incremental Purchase, such schedule identifying each
Loan to be purchased in such Incremental Purchase by the name and address of
the Obligor (and, if different from such address, the location of the grocery
store to which such Loan relates) and the following information with respect
to each such Loan: (i) the Principal Balance as of the close of business on
the applicable Closing Date, (ii) if a participation interest in such Loan is
being purchased hereunder, the percentage participation interest being
purchased, (iii) the account number on Seller's records, (iv) the original
principal amount of the Loan, (v) the date the Loan was made and original
number of months to maturity and the remaining number of months to maturity as
of the applicable Cut-Off Date, (vi) the Loan Interest Rate as of the
applicable Cut-Off Date and whether fixed or variable, (vii) when the first
Monthly Payment was due, (viii) the Monthly Payment as of the applicable
Cut-Off Date, (ix) the remaining number of months in the amortization period
as of the applicable Cut-Off Date, (x) if the Loan has a variable Loan
Interest Rate, the margin which is added to the Prime Rate or LIBOR, as
applicable, to determine the Loan Interest Rate, and the maximum and minimum
Loan Interest Rates, if applicable, the Loan Interest Rate adjustment
frequency and the Loan payment adjustment frequency, (xi) amortization method
and period, (xii) the Aggregate Exposure which relates to such Loan, (xiii)
whether such Loan has Renewal Loan provisions, and (xiv) whether such Loan is
secured by real estate Collateral.
"Lockbox Account" shall mean a demand deposit account identified
on Exhibit A to this Agreement maintained with a Permitted Lockbox Bank
pursuant to the Lockbox Agreement for the purpose of depositing payments made
by the Obligors or such other account as the Servicer and the Buyer may agree
upon from time to time.
"Lockbox Agreement" shall mean the agreement relating to lockbox
services in connection with a Permitted Lockbox and related Lockbox Account,
which have been executed and delivered by the Buyer and Servicer to a
Permitted Lockbox Bank.
"MAI" shall mean Member of the American Institute of Real Estate
Appraisers.
"Minimum Documentation" means, with respect to a Loan secured by
real estate Collateral, (i) a certification of Seller as to the assessed value
of the related mortgaged property (which certification shall be based on a tax
assessment dated no later than 9 months before the Closing Date on which such
Loan first purchased by the Buyer), (ii) a completed environmental
questionnaire in the form prescribed by the Seller and acceptable to Buyer,
and (iii) copies of any title search or report prepared by an attorney or
title company relating to the mortgaged property.
"Maximum Purchase Amount" shall mean $14,000,000, unless otherwise
increased or reduced by the parties hereto.
"Monthly Interest Amount" shall have the meaning given in
Section 5.08.
"Monthly Payment" shall mean the monthly payment of principal
and/or interest required to be made by an Obligor on the related Loan pursuant
to the terms of the related Note.
"Multiemployer Plan" shall mean, for any Person, a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA which is or was at any time
during the current year or the immediately preceding five years contributed to
by such Person or any member of a Controlled Group on behalf of its employees
and which is covered by Title V of ERISA.
"Net Liquidation Proceeds" shall mean Liquidation Proceeds net of
(i) any reimbursements to the Servicer made therefrom pursuant to Section 5.10
and (ii) amounts required to be released to the related Obligor pursuant to
applicable law.
"Non-Recourse Debt" means Debt or that portion of Debt of any
Person or a Subsidiary of such Person as to which (a) the holders of such Debt
agree that they will look solely to the property securing such Debt for
payment on or in respect of such Debt and (b) no default with respect to such
Debt would permit (after notice or passage of time or both) according to the
terms thereof, any holder of any Debt for money borrowed by such Person or a
Subsidiary of such Person to declare a default on such Debt or cause the
payment thereof to be accelerated or payable prior to stated maturity.
"Note" shall mean any promissory note evidencing the indebtedness
of an Obligor under a Loan, and shall include a Renewal Note accepted by the
Buyer under this Agreement.
"Notice of Assignment" shall mean a Notice of Assignment executed
by Seller in substantially the form of the annexed Exhibit C.
"Obligor" shall mean the Person or Persons primarily obligated to
repay the Loan and the indebtedness evidenced by the related Note including,
without limitation, all Persons executing such Note (regardless of whether
they have also executed all subsequent extension agreements relating to such
Note).
"Obligor Default" shall mean (a) the failure by a Obligor to pay
when due (whether a Monthly Payment, at maturity, upon required prepayment,
acceleration, demand or otherwise) the Loan and the indebtedness evidenced by
related Note or any Related Document, or any interest or premium thereon which
failure continues after the applicable grace period, if any, specified in such
Note or Related Document relating to such Loan; or (b) the failure by an
Obligor to perform any term or covenant on its part to be performed under any
Loan, related Note or Related Document which failure continues after the
applicable grace period, if any, specified in the Note or Related Document, if
the effect of such failure to perform is to accelerate or to permit the
acceleration of the maturity of the indebtedness evidenced by such Note or
Related Document; or (c) the occurrence of an event or condition whereby the
indebtedness related to the Loan of any Obligor shall be declared to be due
and payable or required to be prepaid (other than by regularly scheduled
required prepayment) prior to the stated maturity thereof.
"Obligor Group" shall include an Obligor and any of its Affiliates
and Subsidiaries.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Payaheads" shall mean, with respect to a Due Period, any amounts
received on a Loan in excess of the Monthly Payment due on the Due Date
relating to such Due Period which does not constitute either a Principal
Prepayment or payment with respect to an overdue amount. Payaheads are
payments of principal for purposes of this Agreement.
"Payment Date" shall mean the twentieth (20th) day of each
calendar month unless such day is not a Business Day, in which event, "Payment
Date" shall mean the next succeeding Business Day. The initial Payment Date
shall occur on the twentieth (20th) day of the month following the Initial
Closing Date.
"Pension Plan" means an "employee pension benefit plan" (as such
term is defined in ERISA) from time to time maintained by the Seller or a
member of the Controlled Group.
"Periodic Payment" shall have the meaning given in Section 5.08.
"Permitted Lockbox" shall mean a post office box or other mailing
location identified on Exhibit A to this Agreement maintained by a Permitted
Lockbox Bank pursuant to the Lockbox Agreement for the purpose of receiving
payments made by the Obligors for subsequent deposit into a related Lockbox
Account, or such other post office box or mailing location as the Buyer and
the Servicer may agree upon from time to time.
"Permitted Lockbox Bank" shall mean a bank identified on Exhibit A
to this Agreement or such other bank as the Servicer and the Buyer may agree
upon from time to time.
"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government
or political subdivision or any agency or instrumentality thereof.
"Plan" shall mean, for any Person, at any time, an employee
pension benefit plan, other than a Multiemployer Plan, which is covered by
Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by such Person or any
member of a Controlled Group for employees of such Person or any member of
such Controlled Group or (ii) maintained pursuant to collective bargaining
agreement or other arrangement under which more than one employer makes
contributions and to which such Person or any member of a Controlled Group is
then making or accruing an obligation to make contributions or has within the
preceding five (5) plan years made contributions.
"Primary Collateral" shall mean that portion of the Collateral in
which Seller had, prior to the sale and assignment hereunder, first priority
perfected security interests; provided that real estate Collateral shall not
be considered Primary Collateral unless the related Loan has Minimum
Documentation.
"Prime Rate" shall mean the "Prime Rate" from time to time
published in the "Money Rates" section of the Wall Street Journal; provided,
however, that if such rate is not published in the Wall Street Journal, the
Prime Rate shall be a substantially comparable index selected by the Seller
and approved by the Buyer.
"Principal Balance" shall mean, with respect to any Loan, at any
date of determination, (i) the principal balance of the Loan (or if a
participation interest in such Loan is being purchased hereunder, the product
of (a) the percentage applicable participation interest specified with respect
to such Loan in the applicable Loan Schedule times (b) the principal balance
of the Loan) outstanding as of the applicable Cut-Off Date, after application
of the principal payments received on or before such date, minus (ii) the sum
of (a) the principal portion of the Monthly Payments received during each Due
Period ending prior to the most recent Payment Date, which were distributed
pursuant to Section 5.03 on any previous Payment Date, and (b) all Principal
Prepayments, Payaheads, Insurance Proceeds, Net Liquidation Proceeds, Guaranty
Payments, payments under the Existing Guaranty and Repurchase Proceeds to the
extent applied by the Servicer as recoveries of principal in accordance with
the provisions hereof, which were distributed pursuant to Section 5.03 on any
previous Payment Date.
"Principal Prepayment" shall mean any payment or other recovery of
principal on a Loan equal to the Principal Balance thereof, received in
advance of the final scheduled Due Date which is intended to satisfy a Loan in
full. Principal Prepayment shall also include, with respect to a Loan that
has provisions for renewal, all or any portion of the Principal Balance of the
related Note that is greater than the Renewal Balance, if any.
"Prior Note" shall have the meaning given in the definition of
"Renewal Note".
"Property" shall mean the Loans, the related Notes, Related
Documents, Collateral pledged to secure the Loans, and other rights, title and
interest of the Seller conveyed and sold pursuant to Section 2.01(a) or
conveyed and accepted by Buyer pursuant to Section 3.02 hereof.
"Purchase Price" shall have the meaning given in Section 3.01.
"Rating Agency" shall mean Standard & Poor's, Moody's Investors
Service, Inc., or any Successor of either, or any other nationally-recognized
rating agency.
"Related Documents" shall mean with respect to each Loan and
related Note, a loan agreement, a security agreement, a mortgage, an
assignment of lease and all other documents, instruments or assignments
(including amendments or modifications thereof) executed by the Obligor or
other Person on obligor's behalf in respect of such Loan and related Note,
including, without limitation, general or limited guaranties.
"Renewal Balance" shall mean for each Renewal Note, the Principal
Balance evidenced thereby on its Renewal Date.
"Renewal Date" shall have the meaning given in the definition of
"Renewal Note."
"Renewal Loan" shall mean a loan evidenced by a Renewal Note.
"Renewal Note" shall mean a Note accepted by Buyer (i) which is
substantially in the form of the annexed Exhibit D (ii) which is executed by
all of the Obligors and Loan Guarantors of a note related to a Loan previously
sold to Buyer ("Prior Note") which Prior Note was to be paid in full on the
date the Renewal Note first becomes effective ("Renewal Date"); (iii) which
evidences an obligation to repay a principal amount equal to or less than the
principal amount required to be paid by the Obligor under the Prior Note on
the Renewal Date; (iv) which provides for monthly principal payments in
amounts not less than the monthly principal payments required pursuant to the
terms of the Prior Note; (v) which provides that on and after the first
Renewal Date after the purchase by the Buyer hereunder, the related Loan will
fully amortize over the remaining term to maturity; and (vi) which remains
subject to and secured by all of the Related Documents applicable to the Prior
Note (as the same may be amended and restated by the terms of the Renewal
Note).
"Repurchase Amount" shall mean the amount set forth as such in
Section 2.01(e).
"Repurchase Guaranty" shall mean the guaranty of Seller's
repurchase obligation provided by the Guarantor pursuant to the Guaranty
Agreement.
"Repurchased Loans" shall mean all Loans purchased by or on behalf
of the Seller, whether through a payment of Repurchase Proceeds by the Seller
pursuant to Sections 2.01(e), 2.02(c), 3.02, 4.05, 7.03 and 9.02, or through a
payment by the Guarantor on its Repurchase Guaranty pursuant to the Guaranty
Agreement.
"Repurchase Proceeds" shall mean the amounts received from Seller
with respect to a Repurchased Loan.
"Responsible Officer" shall mean when used with respect to the
Buyer, Servicer, Guarantor or Seller, the chairman of the Board of Directors,
any vice chairman of the Board of Directors, the chairman of the executive
committee, any vice chairman of the executive committee, the president, any
vice president (whether or not designated by numbers or words added before or
after the title "vice president"), the secretary, the treasurer, any assistant
treasurer, or any other officer or assistant officer of the Buyer, the
Servicer, Guarantor or Seller customarily performing functions similar to
those performed by the Persons who at the time shall be such officers,
respectively.
"Seller" shall mean United Resources, Inc., an Oregon corporation,
and its Successors and assigns.
"Servicer" means United Resources, Inc., an Oregon Corporation, or
its Successors or assigns.
"Servicer Default" shall mean any act or occurrence described as a
Servicer Default under Section 8.01 hereof.
"Servicing Fee" shall have the meaning given in Section 5.10
hereof.
"Servicing Officer" shall mean any officer of the Servicer, or any
agent of the Servicer involved in, or responsible for, the administration or
servicing of the Loan whose name appears on a list of servicing officers
furnished to the Buyer by the Servicer in a certificate pursuant to
Section 2.01(d), as such list may be from time to time amended.
"Subordinated Debt" means, with respect to any Person, Debt of
such Person which by its terms provides that no payments or distributions may
be made thereon or in respect thereto at any time when a default has occurred
and is continuing under any document providing for repayment of Debt of such
Person for borrowed money (other than such Subordinated Debt) or for the
payment by such Person of the purchase price of tangible property.
"Subsidiary" shall mean, with respect to any Person, any
corporation or other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"Successor" means, for any corporation or banking association, any
successor by merger or consolidation, or by acquisition of substantially all
of the assets of the predecessor.
"Successor Servicer" shall have the meaning specified in
Section 8.01 of this Agreement.
"Termination Date" shall mean the first date on which (i) all
Loans shall have been paid in full or, (ii) all Loans shall have been
repurchased by or on behalf of Seller pursuant to Section 2.01(e), 2.02(c),
3.02, 4.05, 7.02, 7.03 or 9.02 hereof or pursuant to the Guaranty Agreement.
"Termination Event" shall have the meaning given in Section 9.01.
"Unfunded Vested Liability" shall mean, with respect to any Person
and any Plan, at any time, the amount (if any) by which (a) the present value
of all vested nonforfeitable benefits under such Plan exceeds (b) the fair
market value of all Plan assets allocable to such benefits, all determined as
of the then most recent evaluation date for such Plan, but only to the extent
that such excess represents a potential liability of such Person or any member
of the Controlled Group to the PBGC of the Plan under Title IV of ERISA.
"U.S. GAAP" has the meaning specified in Section 1.03.
SECTION 1.02 General Principles Applicable to Definitions.
Definitions given in Section 1.01 shall be equally applicable to both singular
and plural forms of the terms therein defined and references herein to "he" or
"it" shall be applicable to Persons whether masculine, feminine or neuter.
References herein to any document including, without limitation, this
Agreement, a Loan, a Note and a Related Document shall be deemed a reference
to such document as it now exists, and as, from time to time hereafter, the
same may be amended.
SECTION 1.03 Accounting Terms. Except as otherwise provided
herein, accounting terms not specifically defined shall be construed, and all
accounting procedures shall be performed, in accordance with generally
accepted United States accounting principles ("U.S. GAAP") consistently
applied.
[End of Article I]
<PAGE>
ARTICLE II
THE COMMITMENT
SECTION 2.01 Agreement to Purchase and Sell Loans. (a) At the
time of each Incremental Purchase pursuant to Section 2.01A hereof, Seller
does hereby assign, sell, set-over, transfer and otherwise convey to the
Buyer, without recourse (but subject to Seller's covenants, representations,
warranties and indemnities specifically provided herein), all of Seller's
right, title and interest in, to and under (i) each Loan purchased on the date
of such Incremental Purchase and any and all moneys of whatsoever nature
payable pursuant to each such Loan after the applicable Cut-Off Date,
including payments on the related Note, all Insurance Proceeds, any Net
Liquidation Proceeds, other Collections, and any other amounts payable in
connection with the termination of such Loan, (ii) all rights, powers, and
remedies of Seller under or in connection with each such Loan, whether arising
under the terms of such Loan, by statute, at law or in equity, or otherwise
arising out of any default by the Obligor under such Loan, including all
rights to exercise any election or option or to make any decision or
determination or to give or receive any notice, consent, approval or waiver
thereunder, (iii) all security interests and lien rights of Seller in each
item of Collateral pledged to secure any such Loan, all additions,
alterations, accessions or modifications thereto or replacement of any part
thereof, and all intangibles and other rights associated with the Collateral,
(iv) all rights of Seller under each Related Document, in each case as the
same may be modified, amended, supplemented or restated from time to time, (v)
all documents of title, books and records concerning the foregoing property
(including all computer programs, tapes, disks and related items containing
any such information), and (vi) all proceeds, products, rents or profits of
the foregoing of any nature whatsoever, including all Insurance Proceeds and
Net Liquidation Proceeds (with each Renewal Loan, related Renewal Note and
Related Documents conveyed by Seller and accepted by Buyer pursuant to
Section 3.02 hereof, collectively, the "Property"). The foregoing transfer,
sale, assignment and conveyance does not constitute and is not intended to
result in the creation, or an assumption by the Buyer, of any obligation of
Seller or any other Person in connection with any Loan, the related Note,
Related Documents or Collateral or under any agreement or instrument relating
thereto, including any obligation to any Obligor.
(b) In connection with each transfer, sale and assignment of
Loans, the Buyer hereby directs Seller to deliver to the Buyer as of the date
of each Incremental Purchase the Loan Files with respect to the Loans
transferred and sold on the date of each such Incremental Purchase, which
shall include, but not be limited to, the following:
(i) the original Notes, endorsed by Seller as follows:
"Pay to the order of National Consumer Cooperative Bank, without recourse" and
signed by a Responsible Officer of Seller, with all prior and intervening
endorsements showing a complete chain of endorsement from the originator to
Seller, if Seller was not the originator, together with all originals or
copies of Renewal Notes in Seller's possession;
(ii) executed original counterparts of the Related
Documents, together with executed originals of all modifications or amendments
thereof;
(iii) irrevocable power of attorney of Seller to the Buyer
to execute, deliver, file, record or otherwise deal with the Collateral for
the Loans in accordance with this Agreement. The power of attorney will be
delegated by the Buyer to the Servicer and will permit the Buyer (or Servicer
on its behalf) to prepare, execute and file of record UCC financing statements
and other notices;
(iv) documents evidencing or related to any insurance
policies;
(v) With respect to Loans secured by mortgages on real
property, Buyer shall have received (A) either: (i) the original mortgage,
with evidence of recording thereon, (ii) a copy of the mortgage certified as a
true copy by a Responsible Officer of Seller where the original has been
transmitted for recording until such time as the original is returned by the
public recording officer or duly licensed title or escrow officer or (iii) a
copy of the mortgage certified by the public recording office in those
instances where the original recorded mortgage has been lost; (B) either: (i)
the original assignment of mortgage from Seller endorsed as follows:
"National Consumer Cooperative Bank," with evidence of recording thereon
(provided, however, that where permitted under the laws of the jurisdiction
wherein the mortgaged property is located, the assignment of mortgage may be
effected by one or more blanket assignments for Loans secured by mortgaged
properties located in the same county), or (ii) a copy of such assignment of
mortgage certified as a true copy by a Responsible Officer of Seller where the
original has been transmitted for recording (provided, however, that where the
original assignment or mortgage is not being delivered to the Buyer, each such
Responsible Officer may complete one or more blanket certificates attaching
copies of one or more assignments of mortgage relating to the mortgages
originated by Seller); and (C) either: (i) originals of all intervening
assignments, if any, showing a complete chain of title from the originator to
Seller, including warehousing assignments, with evidence of recording thereon
if such assignments were recorded, (ii) copies of any assignments certified as
true copies by a Responsible Officer of Seller where the originals have been
submitted for recording until such time as the originals are returned by the
public recording officer, or (iii) copies of any assignments certified by the
public recording office in any instances where the original recorded
assignments have been lost; and (D) all available documentation relating to
appraisals and environmental surveys;
(vi) copies of all UCC-1 financing statements (or UCC-3
amendments to financing statements) identifying each Loan, related Collateral
and Related Documents and naming the Buyer as secured party and Seller as
debtor, to be filed in Oregon, Washington and California.
(c) In addition, concurrently with or prior to each Incremental
Purchase, Seller agrees to cause any UCC-1 financing statements, UCC-3
assignments or other instruments necessary to perfect the ownership or
security interests granted and assigned by Seller to the Buyer in the Loans
and other Property transferred and sold on the date of each such Incremental
Purchase (other than UCC-1 financing statements naming the Obligors under the
Loans as debtors) to be filed or recorded in all such appropriate places as
are required to protect the Buyer's interest in such Loans and such other
Property, and to deliver a file-stamped copy of such financing statements or
other evidence of such filings to the Buyer. Seller and Buyer agree that with
respect to each Loan, Related Document and item of Primary Collateral, Seller
will make all filings and take all such other actions necessary to perfect
Buyer's first priority security interest therein, and, with respect to each
item of Collateral which is not Primary Collateral, Seller will make all
filings and take all such other actions necessary to perfect Buyer's security
interest therein to the same level of priority enjoyed by the Seller at the
time of the Incremental Purchase of the related Loan.
(d) It is the intention of the parties to this Agreement that
each conveyance of Seller's right, title and interest in and to the Property
pursuant to this Agreement shall constitute a purchase and sale and not a
loan. If, notwithstanding the foregoing, the conveyance of the Property to
the Buyer hereunder is characterized by any third party as a pledge, the
parties intend that Seller shall be deemed hereunder to have granted to the
Buyer a first priority perfected security interest in all of Seller's right,
title and interest in, to and under the Loans, the Notes, the related
Collateral and Related Documents, and all monies due or to become due with
respect thereto after the applicable Cut-Off Date, and that this Agreement
shall constitute a security agreement under applicable law.
(e) If the Buyer determines that any documents or documents
constituting a part of a Loan File are missing or defective (that is,
mutilated, damaged, defaced, incomplete, improperly dated, clearly forged or
otherwise physically altered) with respect to any Loan in any respect which
materially and adversely affects the interests of the Buyer, then the Buyer
shall promptly notify Seller, whereupon Seller shall have a period of 30 days,
within which to correct or cure any such defect. If any such material defect
has not been corrected or cured in all material respects as described below,
notwithstanding any other provision of this Agreement, Seller will repurchase
the related Loan from the Buyer at a price equal to the sum (without
duplication) of (i) the difference between (A) the Purchase Price then paid
for such Loan and (B) the aggregate of the principal portion of the Monthly
Payments then received and retained by Buyer (after taking into account any
payment of principal made by the related Obligor on such day), (ii) an amount
equal to the interest accrued at the applicable Loan Interest Rate on such
Repurchased Loan through the last day of the Due Period during which such
repurchase occurs, to the extent such amount was not previously received
during such Due Period from the Obligor as a Monthly Payment (the "Repurchase
Amount"). The Repurchase Amount shall be paid by Seller to the Buyer in
immediately available funds by the last day of the Due Period during which
such repurchase obligation arises and, upon receipt by the Buyer of such
deposit, the Buyer shall release or cause to be released to Seller the related
Loan Files and shall execute and deliver or cause to be executed and delivered
such instruments of transfer or assignment of such Loan, the security interest
in the related Property, in each case without recourse, representation or
warranty, as Seller shall reasonably request (as shall be prepared by and at
the expense of Seller). It is understood and agreed that the obligation of
Seller to repurchase any Loan as to which a material defect in a constituent
document exists and to make the related payments as described in this
Section 2.01(e) shall, together with the indemnification rights contained in
Section 10.02 and the right of Buyer to be reimbursed for reasonable fees and
expenses incurred in effecting this repurchase, constitute the sole remedies
against Seller with respect to such defective Loan available to the Buyer.
SECTION 2.01A Incremental Purchase. (a) Subject to the terms
and conditions hereof, including Sections 3.04 and 3.05 hereof, the Seller may
at any time prior to December 31, 1995 (or such later date as is approved by
Buyer) sell to the Buyer and the Buyer shall purchase from the Seller certain
identified Loans and Property related thereto (each, an "Incremental
Purchase"); provided, however, that no Incremental Purchase shall be for a
principal amount of less than $2,000,000 (other than the final Incremental
Purchase which may be in such lesser amount as agreed to by Buyer or such
other lesser amount as is approved by Buyer) and provided further, that the
Buyer shall not be obligated to make an Incremental Purchase (or any portion
thereof) to the extent such Purchase (or any portion thereof), together with
all previous Incremental Purchases, would exceed the Maximum Purchase Amount.
(b) The Seller shall provide the Buyer with written notice of
its intention to request an Incremental Purchase in the form of Exhibit E
hereto no later than ten (10) Business Days before each Incremental Purchase
and shall provide the Buyer with at least five (5) Business Days to review the
Loan Files relating to each Incremental Purchase. Upon satisfaction of all
terms and conditions contained herein, Buyer shall pay to the Seller the
Purchase Price of each Incremental Purchase on the applicable Closing Date.
SECTION 2.02 Agreement to Accept Renewal Notes. (a) Subject
to the terms and conditions of this Agreement, including delivery of the
Renewal Notes and satisfaction of the other delivery and filing requirements
set forth in Section 2.01 hereof no later than five (5) Business Days before
the applicable Renewal Date, and upon at least 30 days' written notice from
Seller, the Buyer agrees to accept on any Renewal Date such Renewal Loans as
Seller shall have caused Obligors of the related Prior Notes to execute and
deliver.
(b) The parties to this Agreement intend that the conveyance of
each Renewal Loan and related Property by Seller and acceptance thereof by
Buyer shall constitute a purchase and sale and not a loan.
(c) If any document or documents constituting part of a Loan
File relating to a Renewal Loan are missing or defective as described in
section 2.01(e) hereof, the Buyer shall have the same rights against Seller as
provided in such Section 2.01(e).
[End of Article II]
<PAGE>
ARTICLE III
CLOSING PROCEDURE; CONDITIONS TO PURCHASE
SECTION 3.01 Payment. The "Purchase Price" for each Loan
shall be paid as follows: (i) the Buyer shall pay to the Seller on the
applicable Closing Date, 75% of the Principal Balance of such Loan and (ii) on
each Payment Date following such Closing Date, the Buyer shall pay to the
Seller 25% of the sum of (a) the principal portion of the Monthly Payment
actually received from or on behalf of the related Obligor during the related
Due Period, (b) any Principal Prepayment and Payahead actually received during
the related Due Period and (c) Insurance Proceeds, Net Liquidation Proceeds,
Guaranty Payment with respect to the related Due Period, but only to the
extent the Buyer has received an amount equal to the total Purchase Price paid
on such Loan on or before such Payment Date together with interest accrued
thereon at the Applicable Rate to such Payment Date; provided, however, that
the Buyer shall not be obligated to pay any Purchase Price on the Closing Date
if the applicable conditions specified in Section 3.04 hereof have not been
satisfied and shall not be obligated to make any further payments to the
Purchase Price on and after (1) the occurrence of a Termination Event, a
Servicer Default or a Guarantor Default or an event which with the passage of
time would become a Termination Event, Servicer Default or Guarantor Default
or (2) the date on which the Guaranty Amount has been reduced to zero.
Notwithstanding the foregoing, the Buyer shall make further payments to the
Purchase Price of Loans on and after the occurrence of any of the events
specified in the preceding sentence at such time as the aggregate unpaid
Purchase Price of the Loans exceeds the aggregate Principal Balance of the
Loans (including Liquidated Loans as to which there remain unpaid Liquidation
Losses). Such further payments to the Purchase Price shall be made to the
extent of such excess on the Monthly Payment Dates from the amounts described
in clause (ii) of the first sentence of this Section 3.01.
SECTION 3.02 Acceptance - Renewal Loans. For each Loan with
provisions for renewal on a Renewal Date, no later than thirty (30) days
before the Renewal Date for such Loan, Seller shall provide Buyer with a
notice that (i) identifies the Loan and related Note by original dated date,
face amount, Loan Interest Rate, and name of Obligor, (ii) identifies the
Renewal Date of such Loan, and (iii) states whether all or any part of the
Principal Balance of such Loan will be renewed on the Renewal Date, and if the
Loan is to be renewed, the anticipated Renewal Balance. No later than five
(5) Business Days before the Renewal Date for any Loan to be renewed, the
Seller shall deliver to the Buyer the Renewal Note and other documents
required by Section 2.01 hereof. On the applicable Renewal Date for any Loan
which is to be renewed, Buyer shall, subject to satisfaction of the delivery
requirements of Section 2.02 and the conditions set out in Section 3.04,
accept a Renewal Note from Seller (in lieu of receiving the Renewal Balance)
as payment in full of a portion of the Outstanding Balance of the Prior Note
equal to the Renewal Balance. In the event that Seller has caused a Renewal
Note to be executed but the conditions precedent to acceptance thereof set out
in Section 3.04 have not been satisfied or waived by the Renewal Date, Seller
shall on such Renewal Date repurchase such Renewal Loan on the same terms as
stated in Section 2.01(e).
SECTION 3.03 Effective Date. Each sale made pursuant to
Sections 2.01 and 2.01A shall be effective, and all right, title and interest
in the Loans and the related Property so sold shall pass to the Buyer at such
time as Buyer shall pay the Purchase Price in respect thereof.
SECTION 3.04 Buyer's Conditions Precedent to Acceptance. The
obligation of Buyer to pay the applicable portion of the Purchase Price on
each Closing Date and to accept the Renewal Loans and Notes on any applicable
Renewal Date is subject to the fulfillment on such Closing Date or Renewal
Date, as the case may be, of each of the following conditions (relating only
to the Loans purchased or renewed on each such Date):
(a) Buyer shall have received the original Notes or Renewal
Notes, as the case may be, and such Notes shall have been duly endorsed by
Seller without recourse or warranty except as provided herein, and of the
Related Documents;
(b) Buyer shall have received the original executed counterpart
of the loan agreement, security agreement and other Related Documents with
respect to each Loan (or, to the extent more than one original counterpart
exists, all original executed counterparts of such agreements and Related
Documents that are in the possession of the Seller or any of its Affiliates),
and each such Document shall be in a form reasonably satisfactory to Buyer;
(c) The Buyer shall have received a duly executed Notice of
Assignment in the form annexed hereto as Exhibit C addressed to each Obligor
of a Note related to a Loan;
(d) With respect to Loans secured by mortgages on real property,
Buyer shall have received (A) either: (i) the original mortgage, with
evidence of recording thereon, (ii) a copy of the mortgage certified as a true
copy by a Responsible Officer of Seller where the original has been
transmitted for recording until such time as the original is returned by the
public recording officer or duly licensed title or escrow officer or (iii) a
copy of the mortgage certified by the public recording office in those
instances where the original recorded mortgage has been lost; (B) either: (i)
the original assignment of mortgage from Seller endorsed as follows:
"National Consumer Cooperative Bank," with evidence of recording thereon
(provided, however, that where permitted under the laws of the jurisdiction
wherein the mortgaged property is located, the assignment of mortgage may be
effected by one or more blanket assignments for Loans secured by mortgaged
properties located in the same county), or (ii) a copy of such assignment of
mortgage certified as a true copy by a Responsible Officer of Seller where the
original has been transmitted for recording (provided, however, that where the
original assignment or mortgage is not being delivered to the Buyer, each such
Responsible Officer may complete one or more blanket certificates attaching
copies of one or more assignments of mortgage relating to the mortgages
originated by Seller); and (C) either: (i) originals of all intervening
assignments, if any, showing a complete chain of title from the originator to
Seller, including warehousing assignments, with evidence of recording thereon
if such assignments were recorded, (ii) copies of any assignments certified as
true copies by a Responsible Officer of Seller where the originals have been
submitted for recording until such time as the originals are returned by the
public recording officer, or (iii) copies of any assignments certified by the
public recording office in any instances where the original recorded
assignments have been lost; and (D) all available documentation relating to
appraisals and environmental surveys;
(e) Seller has, or on the applicable Closing Date will have, (1)
a first priority perfected security interest in each item of Primary
Collateral, free from any lien, security interest, encumbrance or other right,
title or interest of any Person, and (2) a perfected security interest in each
other item of Collateral, subject to the prior liens, security interests and
encumbrances existing on, and identified to and approved by the Buyer on the
applicable Closing Date. Seller shall, on the applicable Closing Date,
transfer its security interest in the Primary Collateral and such other
Collateral as is governed by the Uniform Commercial Code or required by the
Buyer, Collateral subject to the rights of the holder of title in and to such
Collateral and of the Obligors in such Collateral under the Loans, related
Notes and Related Documents (and in the case of Collateral which is not
Primary Collateral, holders of prior liens), and the Seller, as agent for the
Buyer, shall defend Buyer's security interest in and to the Collateral related
to any Loan against all claims and demands of all Persons at any time claiming
the same or any interest therein adverse to that of obligors or Buyer;
(f) On each applicable Closing Date, at least 80% (determined on
the basis of aggregate Principal Balance) of the Loans purchased on such
Closing Date must be secured by Collateral which is (i) inventory and or
furniture, fixtures and equipment and (ii) Primary Collateral;
(g) On each applicable Closing Date, at least 80% (determined on
the basis of aggregate Principal Balance) of the Loans purchased on such
Closing Date must have a twenty-one month payment history and such history
must have been provided to the Buyer in a form acceptable to the Buyer;
(h) The Buyer shall have received an amendment to the Uniform
Commercial Code financing statement filed pursuant to Section 3.05(a), such
amendment on Form UCC-3 and amending the schedule of Loans to include the
Loans purchased on the applicable Closing Date;
(i) The Buyer shall have received Uniform Commercial Code
financing statements on Form UCC-3 executed by Seller as "Assignor" evidencing
the assignment to the Buyer by Seller of all security interests in personal
property, arising in favor of Seller under the Related Documents, on the
Collateral relating to the Loans (other than security interests in Seller's
capital stock and patronage dividends) in form and content sufficient for
filing with the applicable location for central filing in the state where the
related form UCC-1 is filed;
(j) The Buyer shall have received Assignments of Deeds of Trust
executed by Seller as "Assignor" evidencing the assignment to Buyer by Seller
of all security interests in real property arising in favor of Seller under
the Related Documents in form and content sufficient for filing in the real
property recording districts in which such real property is located;
(k) The Buyer shall have received evidence reasonably
satisfactory to Buyer that the security interests arising in favor of Seller
under the Related Documents and the Collateral therein described (other than
Seller's capital stock and patronage dividends) have been duly perfected by
the filing of all such Uniform Commercial Code financing statements and the
taking of all such other or additional acts as may be necessary to create a
valid and perfected lien enforceable against all third parties in all
jurisdictions to secure each Obligor's respective obligations to the Seller
under the Loans, related Notes and Related Documents and evidence reasonably
satisfactory to Buyer, which shall consist of the filing of amendments to
financing statements in appropriate jurisdictions necessary to evidence United
Grocers, Inc.'s and any other person's subordinate security interests in the
Loans, related Collateral and Related Documents, lien searches of "recent"
date and "sufficient" detail (as "recent" and "sufficient" are defined for
each purchased Loan in Exhibit F hereof) in appropriate jurisdictions and, in
the case of real estate Collateral, title policies and lien and title searches
by attorneys of title companies, that such lien is a perfected lien of first
priority in respect of the Primary Collateral and enforceable, in the case of
all other Collateral, against third parties whose interests are subordinate to
the interest of the Seller sold and assigned to Buyer hereunder;
(l) The Buyer shall have received evidence reasonably
satisfactory to Buyer that the security interests arising in its favor under
this Agreement in the Loans, related Notes, related Collateral (other than
Collateral which is not governed by the Uniform Commercial Code of the
applicable jurisdictions, unless Buyer, in its sole discretion, requires
otherwise), the Related Documents and the proceeds thereof has been duly
perfected by the filing of all such Uniform Commercial Code financing
statements and the taking of all such other or additional acts as may be
necessary to create a valid and perfected lien of first priority enforceable
against all third parties (other than (i) prior lien holders in the case of
Collateral which is not Primary Collateral and (ii) is Collateral which is not
governed by the Uniform Commercial Code) in all jurisdictions to secure all of
Seller's obligations to Buyer;
(m) No Termination Event, and no event which with the giving of
notice or passage of time or both would constitute a Termination Event shall
have occurred and be continuing, and a Responsible Officer of Seller shall
have so certified to Buyer in writing;
(n) Each representation and warranty of the Seller set forth in
Section 4.01, 4.02 or 4.03 shall be true and correct in all material respects,
and a duly Responsible Officer of Seller shall have so certified to Buyer in
writing in substantially the form of Exhibit K hereto;
(o) Each representation and warranty of Guarantor set forth in
Article 3.01 of the Guaranty Agreement hereof shall be true and correct in all
material respects, and a duly Responsible Officer of Guarantor shall have so
certified to Buyer in writing in substantially the form of Exhibit L hereto;
(p) Each representation and warranty of Servicer set forth in
Section 5.13 shall be true and correct in all material respects, and a duly
Responsible Officer of Servicer shall have so certified to Buyer in writing in
substantially the form of Exhibit M hereto;
(q) Buyer shall have received the Loan Schedule relating to the
Loans purchased on the applicable Closing Date required by this Agreement and
it shall be in a form reasonably acceptable to Buyer;
(r) Seller shall have paid all fees and expenses, including the
Buyer's out-of-pocket expenses and the fees of Buyer's counsel, incurred in
selling the Loans pursuant to this Agreement;
(s) Buyer shall have received an opinion of counsel for Seller
dated the applicable Closing Date in a form reasonably acceptable to Buyer;
(t) The Guaranty Amount shall not have been reduced to zero.
SECTION 3.05 Additional Delivery Requirements for Initial
Closing Date. The obligation of the Buyer to perform any of its obligations
under this Agreement shall be further subject to satisfaction of each of the
following delivery requirements on the Initial Closing Date (or on the date
specified below) to the reasonable satisfaction of Buyer:
(a) The Buyer shall have received a Uniform Commercial Code
financing statement on Form UCC-1 naming Buyer as "Secured Party" and executed
by Seller as "Debtor" covering the Loans sold on the Initial Closing Date,
related Notes, related Collateral, the Related Documents and the proceeds
thereof, in form and content sufficient for filing in the appropriate offices
in the States of Oregon, Washington and California;
(b) Buyer shall have received an opinion of counsel for Seller
dated such date and in a form reasonably acceptable to Buyer;
(c) Buyer shall have received an opinion of counsel for Servicer
dated such date and in a form reasonably acceptable to Buyer;
(d) Buyer shall have received an opinion of Counsel for
Guarantor dated such date and in a form reasonably acceptable to Buyer;
(e) Buyer shall have received in form and substance reasonably
satisfactory to it a certified copy of a resolution adopted by the Board of
Directors of Seller, authorizing the execution, delivery and performance of
this Agreement and the Assignments and the endorsement and sale of the Notes
hereunder, together with evidence of the authority and specimen signatures of
the persons who have signed this Agreement and who will endorse the Notes on
behalf of the Seller and such other evidence of corporate authority as Buyer
may reasonably require;
(f) Buyer shall have received in form and substance reasonably
satisfactory to it, a certified copy of a resolution adopted by the Board of
Directors of Guarantor, authorizing the execution, delivery and performance of
this Agreement;
(g) Buyer shall have received in form and substance satisfactory
to it, a certified copy of a resolution adopted by the Board of Directors of
Servicer, authorizing the execution, delivery and performance of this
Agreement;
(h) Buyer shall have received an origination fee from Seller of
$133,000;
(i) Buyer shall have received officers' certificates from
Seller, Servicer and Guarantor in forms reasonably acceptable to Buyer;
(j) Buyer shall have received an executed counterpart of a
certain Subordination Agreement in which United Grocers, Inc. agrees to
subordinate its interest in the Collateral (other than patronage and stock)
securing the Loans to the interest of the Seller therein;
(k) Buyer shall have received Exhibit G containing information
relating to the corporate and "doing business" names of the Seller and
Guarantor in the States of Oregon, Washington and California;
(l) Buyer shall have received the Guaranty Agreement duly
executed by the Guarantor;
(m) Buyer shall have received a duly executed counterpart of
that certain "Second Amendment to Loan Purchase and Servicing Agreement dated
as of May 13, 1994" dated September 28, 1995, together with opinions of
counsel to United Resources and United Grocers to the effect that such Second
Amendment is the legal, valid and binding obligation of United Resources and
United Grocers, enforceable against both such parties in accordance with its
terms.
SECTION 3.06 Seller's Conditions Precedent to Sale. The
obligation of Seller to sell Loans on each Closing Date shall be subject to
the fulfillment of each of the following conditions on such Closing Date to
the reasonable satisfaction of Seller:
(a) Seller shall have received the Purchase Price as provided in
Section 3.01; and
(b) Each representation and warranty of the Buyer set forth in
Section 4.04 shall be true and correct in all material respects, and a duly
authorized officer of Buyer shall have so certified to Seller in writing.
[End of Article III]
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Seller's Corporate Representations and
Warranties. Seller represents and warrants to Buyer as of each Closing Date
and as of any Renewal Date as follows:
(a) Seller is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Oregon, is doing business
only under the corporate and "doing business as" names listed in Exhibit G
hereto, and is qualified to do business in each other jurisdiction where the
conduct of its business or the ownership of its properties requires such
qualification, and has full corporate power, authority and legal right to
carry on its business as presently conducted, to own and operate its
properties and assets, to execute, deliver and perform this Agreement and to
sell the Loans and related Property.
(b) The execution, delivery and performance by the Seller of
this Agreement and any assignment, the endorsement the Notes and the sale of
any Loans, related Notes and Related Documents and the security interest in
the related Collateral hereunder have been duly authorized by all necessary
corporate action of Seller, do not require any shareholder approval or the
approval or consent of any trustee or the holders of any Debt of Seller,
except such as have been obtained (certified copies thereof having been
delivered to Buyer), do not contravene any law, regulation, rule or order
binding on it or its Articles of Incorporation or Bylaws and do not contravene
the provisions of or constitute a default under any indenture, mortgage,
contract or other agreement or instrument to which Seller is a party or by
which Seller or any of the Loans, related Notes or Related Documents may be
bound or affected.
(c) No Government Approval or filing or registration with any
Governmental Authority is required for the making and performance by Seller of
this Agreement or any assignment or the endorsement of the Notes or in
connection with the sale of the Loans and related Property contemplated
hereby, except such as have been heretofore obtained and are in full force and
effect (certified copies thereof having been delivered to Buyer).
(d) This Agreement has been duly executed and delivered by
Seller and constitutes, and any assignment and any endorsement of a Note when
duly executed and delivered will constitute, the legal, valid and binding
obligation of the Seller enforceable against Seller in accordance with its
terms.
(e) Except as described in Exhibit H hereto, there are no
actions, proceedings, investigations, or claims against or affecting Seller
now pending before any court, arbitrator or other Governmental Authority (nor
to the knowledge of Seller has any thereof been threatened nor does any basis
exist therefor) which if determined adversely to the Seller would be likely to
have a material adverse effect on the financial condition or operations of
Seller or on Seller's ability to perform its obligations under this Agreement,
or under an endorsement of any Note. With respect to the litigation described
in Exhibit H hereto, a determination in such litigation that is materially
adverse to the Seller or Guarantor would not have a material adverse effect on
the financial condition or operations of Seller or on Seller's ability to
perform its obligations under this Agreement, or under any assignment or
endorsement of any Note.
(f) The consolidated balance sheet of the Seller and its
Affiliates and Subsidiaries at October 1, 1994, and the related statements of
income and retained earnings of Seller and its Affiliates and Subsidiaries for
the fiscal year then ended, copies of which have been furnished to Buyer,
fairly present the financial condition of Seller and its Affiliates and
Subsidiaries as at such date and the results of operations of Seller and its
Affiliates and Subsidiaries for the fiscal year then ended, all in accordance
with U.S. GAAP consistently applied. Since that date, there has been no
material adverse change in the financial condition or operations of Seller or
any of its Subsidiaries or Affiliates.
(g) Seller has good and marketable title to each of the
properties and assets reflected in its balance sheet referred to in
Section 4.01(f) except such as have been since sold or otherwise disposed of
in the ordinary course of business.
(h) Neither Seller nor any of its Subsidiaries or Affiliates is
in material breach of or default under any agreement or agreements to which it
is a party or which are binding on it or any of its assets and which provide
for the payment of monies, the delivery of goods or the provision of services
in amounts or with values in the aggregate in excess of One Million Dollars
($1,000,000).
(i) The present value of all benefits vested under all Pension
Plans did not, as of the most recent valuation date of such Pension Plans,
exceed the value of the assets of the Pension Plans allocable to such vested
benefits by an amount which would represent a potential material liability of
Seller and its consolidated subsidiaries or affect materially the ability of
the Seller to perform this Agreement; no Plan or trust created thereunder, or
any trustee or administrator thereof, has engaged in a "prohibited
transaction" (as such term is defined in Section 406 or Section 2003(a) of
ERISA) which could subject such Plan or any other Plan, any trust created
thereunder, or any trustee or administrator thereof, or any party dealing with
any Plan or any such trust to the tax or penalty on prohibited transactions
imposed by Section 502 or Section 2003(a) of ERISA; no Pension Plan or trust
created thereunder has been terminated, and there have been no "reportable
events" (as that term is defined in Section 4043 of ERISA) since the effective
date of ERISA; no Pension Plan or trust created thereunder has incurred any
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA) whether or not waived, since the effective date of ERISA; and the
required allocations and contributions to Pension Plans will not violate
Section 415 of the Code.
(j) Uniform Commercial Code financing statements have been duly
filed in all places where filing is necessary and all other or additional acts
have been taken as are necessary to perfect the Buyer's interests arising
hereunder and under the assignments in and to the Loans and related Property
and the lien created hereby constitutes a valid and perfected lien of first
priority in and to all of the Loans and related Property (other than in
Collateral which is not Primary Collateral or not governed by the Uniform
Commercial Code, in which case the Buyer has only such interest as the Seller
had and disclosed to the Buyer on the applicable Closing Date and other than
Seller's security interest in its capital stock and patronage dividends) and
is enforceable against all third parties (other than third parties whose
interests in Collateral which is not Primary Collateral are prior to Seller's
interests therein on the applicable Closing Date) in all jurisdictions as
security for all obligations of the Seller to the Buyer under this Agreement.
(k) Seller has good and marketable title to the Loans and
related Notes designated for sale to the Buyer hereunder, the Related
Documents and the proceeds thereof, free and clear of all liens and
encumbrances and Seller has not transferred in any manner whatever to any
Person (other than Buyer) and has not created or permitted any lien, pledge,
charge, security interest, ownership interest, participation interest or any
other interest of any nature whatever (other than in favor of the Buyer) in
respect of the Loans, the related Notes, the Related Documents or the proceeds
thereof.
(l) Seller's chief executive offices and the offices where such
Seller keeps records concerning the Loans and related Property are located at
6433 S.E. Lake Road, Portland, Oregon or such other location to which such
offices are moved pursuant to Section 6.01(m) hereof.
(m) This Agreement, the financial statements referred to in
Section 4.01(f) and all other instruments, documents, certificates and
statements furnished to the Buyer by the Seller, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements contained herein or therein not
misleading.
(n) Seller is "eligible" to borrow from NCB under the provisions
of the Bank Act.
SECTION 4.02 Seller's Closing Date Representations and
Warranties with respect to Loans. Seller represents and warrants to Buyer as
of each Closing Date with respect to Loans transferred and sold on such
Closing Date as follows:
(a) The information with respect to each Loan set forth in the
applicable Loan Schedule, together with any documentation supporting such
information, is true and correct;
(b) With respect to each Loan, there exists only one original
Note. Such original Note and all of the other original or certified
documentation set forth in Sections 2.01 and 3.03 (including all material
documents related thereto) has been or will be delivered to the Buyer on the
applicable Closing Date;
(c) Each Loan was originated in the United States and Monthly
Payments on such Loan are payable on the first day of each month in U.S.
Dollars by an Obligor domiciled in the United States;
(d) Each Note will have a Loan Interest Rate that is either (i)
a variable rate based on the Prime Rate or LIBOR, adjusted at least annually,
or (ii) a fixed rate that has been approved by NCB in its sole discretion, and
each Note having a variable Loan Interest Rate will have a minimum Loan
Interest Rate (A) in the case of a variable rate based on the Prime Rate, the
Prime Rate minus 100 basis points and (B) in the case of a variable rate based
on LIBOR, LIBOR plus 175 basis points;
(e) Immediately prior to the transfer and assignment herein
contemplated, the applicable Seller held good and indefeasible title to, and
was the sole owner of, each Loan conveyed by Seller, subject to no liens,
charges, mortgages, encumbrances or rights of others or other liens which will
be released simultaneously with such transfer and assignment; and immediately
upon the transfer and assignment herein contemplated, the Buyer will hold good
and indefeasible title, to, and be the sole owner of, each Loan subject to no
liens, charges, mortgages, encumbrances or rights of others;
(f) No Obligor has been delinquent (after giving effect to any
grace period) in payments on its Loan, any other loan made by the Seller or
Buyer to such Obligor, or any open account at any time in the three months
preceding the applicable Closing Date;
(g) No Obligor has been delinquent in payments on its Loan, any
other loan made by Seller or Buyer to such Obligor, or any open account for a
period in excess of 45 days at any time during the year (or if originated less
than one year earlier, since the date of origination) preceding the applicable
Closing Date;
(h) The Loan is not subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of the related Note, Related Document or any
related Collateral, or the exercise of any right thereunder, render either the
related Note, Related Document or any related Collateral unenforceable in
whole or in part, or subject to any right of rescission, set-off, counterclaim
or defense, including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;
(i) Each Loan at the time it was made complied and, as of the
applicable Closing Date, complied in all material respects with applicable
state and federal laws and regulations, including, without limitation, usury,
equal credit opportunity, disclosure and recording laws;
(j) At least one of the Obligors with respect to each Loan (i)
is a member in good standing of United Grocers, Inc. and (ii) to the best of
Seller's knowledge, shall have provided to Seller complete and accurate
information relating to Obligor's financial condition and shall have suffered
no material adverse changes in its financial condition or otherwise since the
date the Loan was originated;
(k) Each Loan has a remaining term to maturity of no greater
than 10 years from the applicable Closing Date;
(l) The Note related to each Loan provides that the principal be
amortized monthly over the term of such Note with an amortization period of no
greater than 10 years and with either level monthly payments of principal and
interest or principal plus interest, provided that, in the case of a Loan with
(i) an amortization period longer than its term to maturity (but in no event
longer than a 10-year amortization period) and (ii) renewal provisions, a
balloon payment at maturity or on the Renewal Date, as applicable, is
permissible;
(m) Each Loan, related Note, related Collateral and Related
Documents pursuant to which Collateral is pledged to a Seller is the legal,
valid and binding obligation of the Obligor thereof and is enforceable in
accordance with its terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity
or at law), none of which will prevent the ultimate realization of the
security provided by the Collateral or Related Document, and all parties to
each Loan had full legal capacity to execute all Related Documents and convey
the property therein purported to be conveyed;
(n) The terms of the Loan, related Note and each Related
Document pursuant to which Collateral was pledged have not been impaired,
altered or modified in any respect, except by written instrument which has
been recorded, if necessary, to protect the interest of the Buyer and which
has been delivered to the Buyer;
(o) The proceeds of the Loan have been fully disbursed, and
there is no obligation on the part of the Seller to make future advances
thereunder. Any and all requirements as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses incurred in
making or closing or recording the Loans were paid;
(p) The Obligor with respect to each Loan and each other member
of its Obligor Group has a positive net worth as accounted for under U.S.
GAAP, consistently applied, and has no present intention to seek relief under
the federal bankruptcy laws;
(q) There is no default, breach, violation or event of
acceleration existing under the Loan, related Note or Related Document and no
event which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or event
of acceleration, and the Seller has not waived any such default, breach,
violation or event of acceleration;
(r) Each Loan requires each of the Obligor and Loan Guarantor
thereunder at its own costs and expense to maintain the Collateral pledged to
secure the related Loan in good repair, condition and working order, and to
the best knowledge of the Seller, each Obligor and Loan Guarantor under a Loan
is currently in compliance with this requirement;
(s) Seller has, or on the applicable Closing Date will have, (1)
a first priority perfected security interest in each item of Primary
Collateral, free from any lien, security interest, encumbrance or other right,
title or interest of any Person, and (2) a perfected security interest in each
other item of Collateral, subject to the prior liens, security interests and
encumbrances existing on, and identified to and approved by the Buyer on the
applicable Closing Date. Seller shall, on the applicable Closing Date,
transfer its security interest in the Primary Collateral and such other
Collateral as is governed by the Uniform Commercial Code or required by the
Buyer subject however to the rights of the holder of title in and to such
Collateral and of the Obligors in such Collateral pledged under the Related
Documents (and, in the case of Collateral which is not Primary Collateral,
holders of prior liens), and Seller, as agent for the Buyer, shall defend the
Buyer's security interest in and to Collateral against all claims and demands
of all Persons at any time claiming the same or any interest therein adverse
to that of the Obligors or the Buyer.
(t) Either (i) the Obligor and Loan Guarantor has, under the
terms of each Loan, consented to a sale and assignment of the Loan, the
related Note and Related Documents and the sale or grant of a security
interest in and to the Loan and the Collateral relating thereto, or (ii) none
of the Loan, the related Note or any Related Documents requires the consent of
approval of notice to the Obligor or Loan Guarantor with respect to the
assignment and transfer by Seller of Seller's right, title and interest in and
to the Loan, the related Note, any Related Document and Collateral;
(u) The Notes and Related Documents delivered to Buyer on the
applicable Closing Date are true, correct, and complete original counterparts
of all instruments and documents evidencing or in any way relating to the Loan
and related indebtedness referred to therein; except as approved by the Buyer,
such Notes and Related Documents are in substantially the form of the
documents attached hereto as Exhibit I; except as included with the
instruments and documents so delivered, such Notes and such Related Documents
have not been amended; and each such Note and Related Document to which
Obligor or Loan Guarantor is a party bears the original signature of such
Obligor and Loan Guarantor;
(v) Uniform Commercial Code financing statements have been duly
filed in all places where filing is necessary, and all other or additional
acts have been taken as are necessary to perfect Seller's security interests
arising pursuant to the Related Documents in the Primary Collateral and such
other Collateral as is governed by the Uniform Commercial Code or is required
by Buyer and such security interests constitute a valid and perfected lien in
and to all of the Collateral of first priority (subject to no prior or equal
liens or interests) in the case of all Primary Collateral and of the same
level of priority as that enjoyed by the Seller on the applicable Closing Date
in the case of all other Collateral as is governed by the Uniform Commercial
Code or required by Buyer, and will be enforceable against all third parties
in all jurisdictions as security for the respective obligations of Obligors to
Seller under their respective Notes and Related Documents;
(w) Seller has heretofore caused all copies of the Loans,
related Notes and Related Documents in its possession to be separately
identified and distinguished from Seller's other loans, and on the applicable
Closing Date, the Seller will cause each copy of each Note, related Collateral
and Related Document in its possession to be identified with an appropriate
legend clearly disclosing the fact that such Loan, the related Notes, Related
Documents and the Seller's security interest in the related Collateral have
been sold and assigned to the Buyer and the Buyer is the owner thereof, and
any original copies of any Note, related Collateral or Related Document coming
into the possession of the Seller will be delivered to the Buyer;
(x) With respect to any Loan secured by a mortgage on real
property, each mortgage is a valid and subsisting lien of record on the
mortgaged property subject only to a first mortgage lien on such mortgaged
property previously disclosed to Buyer and subject in all cases to such
exceptions that are generally acceptable to prudent and experienced lenders in
connection with their regular commercial lending activities, and such other
exceptions to which similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect the
benefits of the security intended to be provided by such mortgage;
(y) With respect to each Loan secured by a mortgage on real
property, each original mortgage was recorded, and all subsequent assignments
of the original mortgage have been recorded in the appropriate jurisdictions
wherein such recordation is necessary to perfect the lien thereof as against
creditors of Seller; and
(z) The Aggregate Exposure listed with respect to each Loan and
related Obligor Group in the applicable Loan Schedule is true and correct and
is in no case greater than $4,000,000;
SECTION 4.3 Seller's Renewal Date Representations and Warranties.
Seller represents and warrants to Buyer as of each Renewal Date on which the
Seller has designated any Renewal Note for acceptance as follows:
(a) As of the applicable Renewal Date, all applicable
representations and warranties in Section 4.02 hereof are confirmed as to such
Renewal Loan.
(b) As of the applicable Renewal Date, each Obligor of the
applicable Renewal Loan is not in default of its payment obligations under the
Prior Note or under the Related Documents, and is not in default of its
nonmonetary obligations under such Note or Related Documents.
(c) As of the applicable Renewal Date, no event has occurred and
is continuing which would permit the Seller to accelerate the maturity of any
Obligor's obligations under the applicable Renewal Loan or under the Prior
Note or the Related Documents.
(d) The Notes and Related Documents delivered to Buyer on or
prior to the applicable Renewal Date are true, correct, and complete original
counterparts of all instruments and documents evidencing or in any way
relating to the Loan and the related Indebtedness referred to therein; except
as included with the instruments and documents so delivered, such Notes and
Related Documents have not been amended; and each such Note and each such
Related Document to which an Obligor or Loan Guarantor is a party bears the
original signature of the Obligor or Loan Guarantor.
(e) The Loans and Notes designated by Seller as Renewal Loans
and Notes together with the Related Documents to which Obligors or Loan
Guarantors are parties have been duly executed by their respective Obligors or
Loan Guarantors and constitute the legal, valid and binding obligations of
their respective Obligors and Loan Guarantors enforceable against such
Obligors and Loan Guarantors in accordance with their respective terms.
(f) Each amount identified in a notice provided pursuant to the
terms of Section 3.02 as the "anticipated Renewal Balance" correctly
identifies the amount of the outstanding Principal Balance evidenced by the
Note to be accepted as of such Renewal Date and there are no offsets or
defenses to the payment of such amount that may be asserted against the Seller
either by way of defense or counterclaim.
(g) Uniform Commercial Code financing statements have been duly
filed in all places where filing is necessary, and all other or additional
acts have been taken as are necessary to perfect the Seller's security
interests arising pursuant to the Related Documents in the Collateral and such
security interests constitute a valid and perfected lien in and to all of the
Collateral of first priority (subject to no prior or equal liens or interests)
in the case of all Primary Collateral and of the same level of priority as
that enjoyed by the Seller on the Closing Date on which the Loan was first
sold and assigned hereunder in the case of all other Collateral, and will be
enforceable against all third parties in all jurisdictions as security for the
respective obligations of Obligors to the Seller under their respective Notes
and Related Documents.
(h) No Renewal Loan, related Renewal Note or any Related
Document, alone or in connection with Seller's prior course of conduct,
expressly or impliedly requires Seller or any other Person to make additional
advances thereunder.
(i) The Note related to the Renewal Note provides for full
amortization over its remaining term to maturity.
SECTION 4.04 Buyer's Representations and Warranties. Buyer
represents and warrants to Seller as follows:
(a) Buyer is a financial institution duly organized, validly
existing and in good standing under the laws of the United States of America,
and has full corporate power, authority and legal right to execute, deliver
and perform this Agreement and to purchase the Loans and related Property.
(b) Execution, delivery and performance by Buyer of this
Agreement and the purchase of the Loans and related Property hereunder have
been duly authorized by all necessary corporate action of Buyer, do not
require any shareholder approval or the approval or consent of any trustee or
the holders of any Indebtedness of Buyer, do not contravene any law,
regulation, rule or order binding on it or its Articles of Association or
Bylaws and do not contravene the provisions of or constitute a default under
any indenture, mortgage, contract or other agreement or instrument to which
Buyer is a party or by which Buyer or any of its properties may be bound or
affected.
(c) No Government Approval or filing or registration with any
Governmental Authority is required for the making and performance by Buyer of
this Agreement or in connection with any of the transactions contemplated
hereby.
(d) This Agreement has been duly executed and delivered by Buyer
and constitutes the legal, valid and binding obligation of Buyer enforceable
against Buyer in accordance with its terms.
SECTION 4.05 Repurchase Upon Breach of Certain
Representations and Warranties. (a) The representations and warranties and
agreements of the Seller set forth in Sections 4.01, 4.02 and 4.03 with
respect to the Seller and each Loan and related Property shall continue so
long as such Loan remains outstanding. Upon discovery by either Seller or
Buyer that any of such representations or warranties was incorrect as of the
time made, the party making such discovery shall give prompt notice to the
other party. In the event any defect, misrepresentation or omission
materially and adversely affects the interest of the Buyer, the Seller shall
eliminate or cure the circumstance or condition causing the defect within 10
days of the discovery thereof or, repurchase such Loan and the related
Property.
(b) Any such repurchase of a Loan and the related Property by
Seller shall be accomplished in the manner set forth in Section 2.01(e) and at
a price equal to the Repurchase Amount.
[End of Article IV]
<PAGE>
ARTICLE V
SERVICING AND COLLECTION
Subject to the provisions of Section 8.03, at all times prior to
the later of (a) the Termination Date or (b) the date on which all obligations
of the Seller under this Agreement have been performed in full, the following
terms and provisions of this Article V shall apply.
SECTION 5.01 Servicing; Delegation of Authority to Buyer and
Servicer. (a) The Buyer appoints the Servicer to act as the Buyer's
exclusive agent for performing all of the servicing and administrative
functions with respect to the Loans, the related Notes, the Related Documents
and the related Collateral not specifically reserved to the Buyer pursuant to
subsection (b) of this Section 5.01. The Servicer hereby accepts such
appointment and agrees to perform such Loan servicing and administrative
duties as are specifically enumerated herein as well as those not reserved to
the Buyer pursuant to subsection (b).
(b) The Buyer reserves the right to perform, and the Servicer
shall have no obligation to perform, the following servicing and
administrative functions with respect to the Loans and this Agreement: (i)
data services, including invoicing and billing Obligors, calculating Loan
Interest Rates, Monthly Payments and amortization schedules with respect to
the Notes, and posting Collections received from or on behalf of Obligors;
(ii) accounting services, including maintenance of the records relating to
Loan Collections and performance; (iii) bookkeeping services; (iv) determining
the Guaranty Amount and the Repurchase Amount due from time to time; and (v)
determining monthly, in connection with each Payment Date, the Available
Funds, the Periodic Payment, the Applicable Rate, the Servicing Fee and the
Guaranty Fee and (vi) maintaining the Account.
(c) The Servicer shall use the same diligence and practices in
servicing the Loans, the related Collateral and the Related Documents as it
uses in servicing and collecting indebtedness evidenced by notes and related
documents held for its own account and, in any event, shall endeavor to
collect or cause to be collected from each Obligor the amounts as and when due
and owing under such Obligor's Note and Related Documents. In performing its
duties hereunder, and subject to the specific limitations set forth herein,
Servicer shall act in accordance with its Credit and Collection Policy and
shall take such actions with respect to the Loans, Notes and Related Documents
as, in its reasonable business judgment, it may deem advisable to maintain or
enhance receipt of timely Collections thereunder. Promptly upon the request
of Servicer, Buyer agrees to execute and deliver such documents and take such
further acts (at Servicer's expense) as Servicer may reasonably request to
confirm and evidence the agency granted to Servicer pursuant to this
Section 5.01.
(d) Promptly after the execution and delivery of this Agreement,
the Servicer shall deliver to the Buyer a list certified by its secretary or
one of its assistant secretaries of the Servicing Officers and employees of
the Servicer involved in or responsible for, the administration and servicing
of the Loans, which list shall from time to time be updated by the Servicer
and which may be relied upon until so updated; provided that if the Servicer
has previously provided such a list to the Buyer and such list does not
require updating, the Servicer shall confirm the accuracy of the
previously-delivered list.
SECTION 5.02 Maintenance of System; Collection and
Maintenance of Information. (a) Servicer shall arrange and maintain with
respect to the Loans, related Notes and Related Documents, data processing,
accounting and related services adequate for the effective and timely
performance of its servicing obligations hereunder in accordance with good
business practices and in compliance with all applicable federal, state and
local laws and regulations.
(b) With respect to each Loan and related Obligor, Servicer
shall collect the following information: (i) within 120 days of the end of
each fiscal year of such Obligor, annual financial statements; (ii) within 50
days of the end of each fiscal quarter of such Obligor, interim financial
statements, together with a certificate of an authorized officer of such
Obligor, to the effect that the accompanying interim financial statements are
true and correct in all material respects; and (iii) evidence of continued
perfection of Buyer's security interest in the related Collateral. Servicer
shall maintain the foregoing information and shall make the same available to
the Buyer or its nominees or agents upon reasonable request.
SECTION 5.03 Maintenance of Lien Priority. So long as
Servicer is required to act as Buyer's agent for performing certain servicing
obligations with respect to the Loans, Servicer agrees to take all actions,
including lien searches and continuation statement filings, necessary or
desirable to ensure that the liens arising pursuant to the Related Documents
and securing repayment of any Obligor's indebtedness evidenced by a related
Note will be maintained as continuously perfected first priority (except in
the case of Collateral which is not Primary Collateral, in which event the
Servicer shall take all actions to maintain the priority sold and assigned
hereunder) security interests (except as otherwise approved by Buyer) in all
applicable jurisdictions.
SECTION 5.04 Obligor Inquiries; Credit and Collection
Policies. (a) Servicer agrees to accept primary responsibility for
telephonic and face-to-face communications with Obligors concerning the Loans,
related Notes and Related Collateral. In the event Obligor inquiries require
consideration by the Buyer, the Servicer agrees to coordinate with the Buyer
and the Obligors so as to provide prompt and appropriate responses to
Obligors' inquiries or concerns.
(b) Servicer agrees to follow, maintain and apply the credit,
extension and collection policies identified in the Credit and Collection
Policy in all material respects unless any order of any court, arbitrator or
other Governmental Authority or any determination of or change in any
applicable federal, state or local law or regulation should require otherwise
or unless Buyer shall otherwise consent in writing, which consent will not be
unreasonably withheld. Notwithstanding anything herein to the contrary,
Servicer is not authorized to and agrees that it will not without the Buyer's
prior written consent, (i) amend, extend, release, modify, or waive the terms
or conditions of any Loan, related Note or of any Related Document; (ii)
release any Collateral pledged in support of any Obligor's obligations under a
Note or Related Document (other than Seller's capital stock and patronage
dividends); or (iii) grant or permit to be granted any rebate, refund, credit
or other adjustment in respect of a Obligor's obligation under any Note or any
Related Document.
SECTION 5.05 Obligor Defaults. Upon the Servicer's becoming
aware of any Obligor Default, Servicer agrees to promptly give any notice to
Obligor required to commence the running of any applicable cure period
following a default in the performance by Obligor of its obligations under the
Loan, the related Note and Related Documents. If an Obligor Default shall
occur and be continuing or if a Loan shall otherwise become a Defaulted Loan,
Servicer shall promptly undertake the collection of such Obligor's
indebtedness in accordance with its Credit and Collection Policy. Without
limiting the foregoing the Servicer shall commence liquidation of the
Collateral pledged to secure such Obligor's obligations under its Loan within
thirty (30) days after the occurrence of such Obligor's Default or upon a Loan
becoming a Defaulted Loan, unless Servicer receives notice from the Seller of
its election to repurchase such Loan pursuant to Section 7.02 of this
Agreement. Buyer shall promptly notify Servicer of any payment default by an
Obligor under the related Note and Servicer shall promptly notify Buyer,
Seller and Guarantor of the occurrence of any other Obligor Default or of a
Loan becoming a Defaulted Loan for a reason other than a payment default. In
its efforts to collect the indebtedness evidenced by any Note, Servicer shall
in all events proceed in good faith and in a commercially reasonable manner
and when seeking to realize on Collateral pledged by any Obligor, shall
proceed in such a fashion as to preserve to Buyer its rights to seek
collection of a deficiency against such Obligor if the sale of the Collateral
is insufficient to pay such Obligor's obligations in full.
Notwithstanding any other provision in this Agreement to the
contrary, Buyer shall have the right, at its sole discretion, to assume the
servicing obligations of the Servicer hereunder in connection with the
liquidation of a Defaulted Loan and related Property and Servicer shall
cooperate with Buyer in effecting such transfer of obligations and liquidation
of Collateral. If Buyer assumes the servicing obligations with respect to the
liquidation of a Defaulted Loan, Buyer shall proceed as a prudent and
experienced servicer would under the circumstances and shall be entitled to
reimbursement for its reasonable fees and expenses in performing such
obligations in accordance with Section 5.10 hereof.
SECTION 5.06 Servicer Reports; Annual Compliance Report. (a)
On the Business Day preceding each Payment Date, Servicer shall deliver to
Buyer a report relating to the Loans identifying any event occurring during
the preceding Due Period of which Servicer has actual knowledge which
materially impairs or might reasonably be expected materially to impair any
Obligor's ability to repay the Debt relating to any Loan and evidenced by a
Note or to perform its obligations under any Related Document or which has or
might reasonably be expected to substantially reduce the value of the
Collateral or to impair the Buyer's lien thereon. In addition to the
foregoing, from time to time upon request of Buyer, the Servicer will deliver
to Buyer such other statements, lists, reports and other information as the
Buyer may reasonably request, and, to the extent any such information must be
obtained by Servicer from a third party, as the Servicer may reasonably be
expected to obtain.
(b) At the time of delivery of its annual audited financial
statements pursuant to Section 6.01(e) hereof, the Servicer shall also deliver
to the Buyer a certificate of a Responsible Officer to the effect that a
review of the activities of the Servicer during the same annual period as that
covered by the annual financial statements, and of its performance under this
Agreement during such period has been made under the supervision of the
officers executing such certificate with a view to determining whether during
such period the Servicer had performed and observed all of its obligations
under this Agreement, and either (i) stating that based on such review no
Servicer Default under this Agreement has occurred, or (ii) if a Servicer
Default has occurred, specifying such Servicer Default and the nature and
status thereof.
(c) Within 120 days after the end of each fiscal year of
Servicer, unless Buyer has in its sole discretion waived this delivery
requirement for any year, Servicer shall deliver to Buyer a report of a firm
of independent public accountants selected by the Servicer, which firm is
either of nationally recognized standing or acceptable to Buyer, to the effect
that such firm has examined certain documents and records relating to the
servicing of the Loans and related Property under this Agreement and that, on
the basis of such examination conducted substantially in compliance with
generally accepted audit standards, nothing came to their attention which
caused them to believe that the Servicer has not serviced the Loans and
related Property in accordance with its Credit and Collection Policy or
otherwise in accordance with this Agreement, except for such insignificant
exceptions or errors on records that, in the opinion of such firm, it is not
required to report. The Servicer shall provide a copy of such accountant's
reports to Buyer.
SECTION 5.07 Lockboxes. The Servicer hereby agrees (i) to
instruct all Obligors to cause all Monthly Payments, Payaheads and Principal
Prepayments on account of Loans to be mailed directly to a Permitted Lockbox;
and (ii) to use its best effort not to suffer or permit any funds other than
such Monthly Payments, Payaheads and Principal Prepayments to be mailed to
Permitted Lockboxes or deposited into related Lockbox Accounts;
SECTION 5.08 Payment of Guaranty Fees and Servicing Fees.
(a) On each Payment Date, the Buyer shall remit (i) to Servicer the Servicing
Fee and (ii) to Guarantor the Guaranty Fee; provided, however, that upon the
occurrence and continuation of a Servicer Default or a Guarantor Default, the
Buyer shall not be required to remit the Servicing Fee to the Servicer and
provided further, that if there shall have occurred and be continuing a
Servicer Default under Section 8.01 (other than under Section 8.01(b)) or a
Guarantor Default, the Buyer shall not be required to remit the Guaranty Fee
to the Guarantor.
(b) The Buyer shall be entitled to retain on each Payment Date
from amounts received as (i) Collections and other Available Funds (other than
Guaranty Payments) during the related Due Period and (ii) Guaranty Payments on
or before such Payment Date, the Periodic Payment; provided, however, that
upon the occurrence and continuation of a Servicer Default (other than a
Servicer Default under Section 8.01(b), in which event Buyer or a Successor
Servicer shall retain the Servicing Fee) or a Guarantor Default, the Buyer
shall be entitled to retain all Collections and other Available Funds.
(c) Buyer shall determine the Periodic Payment for each Payment
Date using the following methodology.
(1) As used herein and in the Guaranty Agreement,
"Periodic Payment" means for any Payment Date the sum of, for each Loan,
(a) the principal portion of the Monthly Payment actually received
during the related Due Period, other than the portion of the Principal
Balance of a Prior Note which, at the time it became due, constituted
the Renewal Balance under a Renewal Note; (b) any Principal Prepayment,
Payahead, Insurance Proceeds and Net Liquidation Proceeds actually
received during the related Due Period; (c) the principal portion of any
Guaranty Payment or Repurchase Proceeds with respect to the related Due
Period; and (d) the Monthly Interest Amount for the related Interest
Accrual Period.
(2) As used herein, in the Servicing Agreement and the
Guaranty Agreement, "Monthly Interest Amount" on any Payment Date shall
mean an amount equal to the sum of, for each Loan the product of (i) the
Principal Balance of such Loan during the related Due Period, times (ii)
the Applicable Rate times (iii) a fraction, the denominator of which is
three hundred sixty (360), and the numerator of which is the actual
number of days in the related Interest Accrual Period.
SECTION 5.09 Applicable Rate. As used in this Agreement and
the Guaranty Agreement, "Applicable Rate" for each Loan shall be determined as
follows. The Applicable Rate shall be established as of each LIBOR
Determination Date and shall be applicable for the next succeeding Interest
Accrual Period without regard to changes thereafter occurring during such
Interest Accrual Period in the principal amounts outstanding under the Notes,
in the Principal Balance of Loans purchased, or in LIBOR. Buyer shall, after
the determination of the Applicable Rate on each LIBOR Determination Date,
notify Seller, Servicer and Guarantor of such Applicable Rate; provided,
however, that any failure of Buyer to give such notice shall not affect
Seller's, Servicer's or Guarantor's obligations hereunder or under the
Guaranty Agreement.
The Applicable Rate for each Loan shall be computed and applied on
the basis of a year of three hundred sixty (360) days for the actual number of
days occurring in the applicable Interest Accrual Period. For each Interest
Accrual Period, the Applicable Rate shall mean an interest rate per annum
equal to the sum of (a) 140 basis points and (b) LIBOR in effect on the
applicable LIBOR Determination Date. For purposes hereof, the Buyer will
determine LIBOR by 12:00 noon, Eastern Standard Time, on each LIBOR
Determination Date on the basis of quotations provided by four Reference Banks
as of 11:00 A.M. (London time) on such LIBOR Determination Date as such
quotations appear on the display designated as page "LIBO" on the appropriate
display on the Bloomberg Financial Markets System (or such other page as may
replace the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks). LIBOR as determined by Buyer is the
arithmetic mean of such quotations (rounded, if necessary, to the nearest
whole multiple of 0.0625% per annum). If on any LIBOR Determination Date at
least two but fewer than all of the Reference Banks provide quotations, LIBOR
will be determined in accordance with the provisions set forth above on the
basis of the offered quotations of those Reference Banks providing such
quotations. If on the LIBOR Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR will be: (i) the rate
per annum (rounded, as aforesaid) that the Buyer determines to be either (x)
the arithmetic mean of the offered quotations that leading banks in the City
of New York selected by Buyer are quoting at or about 11:00 A.M. London time
on the relevant LIBOR Determination Date for one month Dollar deposits to the
principal London office of each of the Reference Banks or those of them (being
at least two in number) to which such offered quotations are, in the opinion
of Buyer, being so quoted or (y) in the event that Buyer can determine no such
arithmetic mean, the arithmetic mean of the offered quotations that leading
banks in the City of New York selected by Buyer are quoting at or about
11:00 A.M. London time on such LIBOR Determination Date to leading European
banks for one month Dollar deposits; or (ii) if the banks selected as
aforesaid by Buyer are not quoting as described in clause (i) above, LIBOR for
such Interest Accrual Period will be LIBOR as determined on the previous LIBOR
Determination Date. "Reference Banks" shall mean four major banks in the
London interbank market selected by Buyer.
SECTION 5.10 Computation and Payment of Servicing Fees;
Servicer's Expenses. The Servicing Fee for each Payment Date shall be an
amount equal to the sum of, for each Loan, the product of .50% times (ii) the
average outstanding Principal Balance of such Loan during the related Due
Period, times (iii) a fraction, the denominator of which is 360 and the
numerator of which is the actual number of days in the related Due Period.
In addition, as additional compensation for performing its
obligations hereunder, the Servicer will be entitled to be paid all late
payment charges, to the extent collected from Obligors. The Servicer shall
pay all expenses incurred by it in connection with its servicing activities as
herein provided, including expenses of any repossession or remarketing of
Collateral, payment of the premiums for any insurance policy, real property,
personal property and sales taxes on the Collateral, payment of fees and
disbursements of independent certified public accountants and payment of
expenses incurred in connection with reports to Buyer and shall be entitled to
reimbursement for such expenses out of Collections and other Available Funds,
and to the extent such moneys are insufficient, from a remittance from the
Buyer.
SECTION 5.11 Access to Certain Documentation and Certain
Information Regarding the Loans. The Servicer will provide to the Buyer
access to the documentation in its possession regarding the Loans, such access
being afforded without charge but only during normal business hours at the
offices of the Servicer or its designee or agent, as designated by the
Servicer.
SECTION 5.12 Concerning Renewal Notes. The Servicer may on
behalf of Buyer, and except as otherwise restricted by this Section 5.12,
permit Obligors to execute and deliver Renewal Notes in renewal of all or a
portion of the Principal Balance under a Prior Note. Servicer may not permit
any Renewal Note to become effective more than ten (10) days prior to the
Renewal Date and further, shall not permit any Renewal Note to be executed and
delivered and become effective at any time when Servicer knows that the
conditions set out in Sections 2.02, 3.02 and 3.04 to Buyer's acceptance of
such Renewal Note on the Renewal Date will not be satisfied.
SECTION 5.13 Servicer Representations and Warranties. The
Servicer hereby represents and warrants to, and agrees as of the date of
execution of this Agreement as follows:
(a) The Servicer is duly organized and is validly existing and
in good standing as an Oregon corporation, with corporate power and authority
to own its properties and to transact the business in which it is now engaged,
and the Servicer is duly qualified to do business and is in good standing in
each State of the United States where the nature of its business requires it
to be so qualified.
(b) The execution, delivery and performance of the Servicer's
obligations under this Agreement, and the consummation of the transactions
herein contemplated will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Servicer or any of its Subsidiaries pursuant to the
terms of, any indenture, mortgage, deed of trust, loan agreement or other
agreement (other than this Agreement) or instrument to which it or any of its
Subsidiaries is a party or by which it or any of its Subsidiaries is bound or
to which any of its property or assets is subject, nor will such action result
in any violation of the provisions of its Certificate of Incorporation or
By-Laws or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over it or any of its
properties; and no consent, approval, authorization, order, registration or
qualification of or with any court or any such regulatory authority or other
governmental agency or body is required for the consummation of the other
transactions contemplated by this Agreement.
(c) This Agreement has been duly authorized, executed and
delivered by the Servicer and this Agreement is the valid and legally binding
obligation of the Servicer, enforceable against the Servicer in accordance
with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
(d) No event with respect to the Servicer has occurred and is
continuing which would constitute a Servicer Default under Section 8.01 or an
event that with notice or lapse of time or both would become a Servicer
Default under this Agreement.
(e) The Servicer is "eligible" to borrow from NCB pursuant to
the provisions of the Bank Act.
SECTION 5.14 Servicer's Resignation. (a) The Servicer may
resign from the duties and obligations hereby imposed with the consent of the
Buyer.
(b) The Servicer may not assign this Agreement or any of its
rights, powers, duties or obligations hereunder, provided that the Servicer
may assign this Agreement in connection with a consolidation, merger,
conveyance, transfer or lease made in compliance with Section 6.01(i).
(c) Except as provided in Sections 5.14(a), 8.01 and 8.02(b),
the duties and obligations of the Servicer under this Agreement shall continue
until the Termination Date, and shall survive the exercise of any right or
remedy under this Agreement by the Seller or Buyer of any provision of this
Agreement, and notwithstanding the provisions of Sections 5.14(a), 8.01 and
8.02(b), prior to the Termination Date, the Servicer shall continue to serve
as Servicer hereunder until the Buyer accepts the duties of Servicer or a
Successor Servicer shall be appointed and assume the duties of Servicer
hereunder.
[End of Article V]
<PAGE>
ARTICLE VI
SELLER'S AND SERVICER'S COVENANTS
SECTION 6.01 Covenants. At all times prior to the later of
(i) the Termination Date or (ii) the date on which all obligations of the
Seller under this Agreement and of the Guarantor under the Guaranty Agreement
have been performed in full, Seller and Servicer agree to do all of the
following unless the Buyer shall otherwise consent in writing.
(a) Preservation of Corporate Existence, Etc. To preserve and
maintain its corporate existence, rights, and privileges in the jurisdiction
of its incorporation and will qualify and remain qualified as a foreign
corporation in each jurisdiction where such qualification is necessary or
advisable in view of the business and operations of Seller or Servicer, as the
case may be, or the ownership of its properties.
(b) Compliance with Laws. To comply in all material respects
with all laws, regulations, rules and orders of Governmental Authorities
applicable to Seller or Servicer, as the case may be, or to its operations or
property, except any thereof whose validity is being contested in good faith
by appropriate proceedings upon stay of execution of the enforcement thereof.
(c) Other Obligations. To pay and discharge before the same
shall become delinquent (after giving effect to all applicable grace periods)
all Debt, taxes and other obligations for which Seller or Servicer, as the
case may be, is liable or to which its income or property is subject and all
claims for labor and materials or supplies which, if unpaid, might become by
law a lien upon the assets of Seller or Servicer, as the case may be, except
any thereof whose validity or amount is being contested in good faith by the
Seller or Servicer, as the case may be, in appropriate proceedings, and except
other Debt, taxes and other obligations which, in the aggregate do not exceed
One Million Dollars ($1,000,000); provided, however, the covenant included in
this Section 6.01(c) shall not extend to any obligation of Seller or Servicer,
as the case may be, identified in Section 6.01(k), 8.01(f) or 9.01(f).
(d) Visitation: Records. At any reasonable time and from time
to time, to permit Buyer to examine and make copies of and abstracts from
Seller's or Servicer's records, as the case may be and books of accounts
relating to the Loans, the related Notes and Related Documents and to visit
the properties of the Seller or Servicer, as the case may be, and to discuss
the affairs, finances and accounts of the Seller or Servicer, as the case may
be, as they relate to the transactions contemplated by this Agreement with any
of its officers. The Seller or Servicer, as the case may be, will keep
adequate records and books of accounts in which complete entries will be made,
in accordance with U.S. GAAP, reflecting all financial transactions of the
Seller or Servicer, as the case may be, as they relate to the transactions
contemplated by this Agreement. Without limiting the foregoing, the Seller or
Servicer, as the case may be, shall establish and maintain manual or computer
records reflecting all receipts or disbursements made or received in respect
of the Loans, the related Notes which records will be maintained separate from
Seller's or Servicer's records, as the case may be relating to Loans, the
related Notes which are not Loans and will be clearly marked with a legend to
the effect that such records pertain to Loans sold to Buyer.
(e) Financial Information. To deliver to Buyer (i) as soon as
available and in any event within one hundred twenty (120) days after the end
of each fiscal year of the Seller or Servicer, as the case may be, the balance
sheet of the Seller or Servicer, as the case may be, as of the end of such
fiscal year and the related statements of income and retained earnings and
statement of changes in the financial position of the Seller or Servicer, as
the case may be, for such year, accompanied by the audit report thereon by
independent certified public accountants (which report shall be prepared in
accordance with U.S. GAAP and shall not be qualified by reason of restricted
or limited examination of any material portion of the Seller's or Servicer's
records, as the case may be and shall contain no disclaimer of opinion or
adverse opinion); (ii) as soon as available and in any event within sixty (60)
days after the end of each fiscal quarter of the Seller or Servicer, as the
case may be, the unaudited balance sheet and statement of income and retained
earnings of the Seller or Servicer, as the case may be, as of the end of such
fiscal quarter (including the fiscal year to the end of such fiscal quarter),
accompanied by a certificate of the chief financial officer of the Seller or
Servicer, as the case may be, that such unaudited balance sheet and statement
of income and retained earnings have been prepared in accordance with U.S.
GAAP and present fairly the financial position and the results of operations
of the Seller or Servicer, as the case may be, as of the end of and for such
fiscal quarter and setting forth calculations demonstrating that at the end of
such quarter the Seller was in compliance with Section 6.01(j); (iii) within
one hundred twenty (120) days after the close of each fiscal year of the
Seller or Servicer, as the case may be, a certificate signed by the chief
financial officer of the Seller, stating that as of the close of such fiscal
year no Termination Event or other event which, with notice or lapse of time
or both would have become a Termination Event had occurred and was continuing;
(iv) within one hundred twenty (120) days after the end of each fiscal year of
Seller or Servicer, as the case may be, a report setting forth information
relating to Seller's or Servicer, as the case may be portfolio, s the case may
be of loans originated or acquired in the ordinary course of its business and
owned by Seller or Servicer, as the case may be, during the related fiscal
year, including loan balances by types of loans, numbers of loans by types of
loans, interest rates of loans by type and loss and delinquency experience;
and (v) such other statements, reports and other information as Buyer may
reasonably request concerning the financial condition and the servicing and
collection operations of the Seller or Servicer, as the case may be.
(f) Notification. Promptly after learning thereof, to notify
Buyer of (i) the details of any action, proceeding, investigation or claim
against or affecting the Seller or Servicer, as the case may be instituted
before any court, arbitrator or Governmental Authority or, to the Seller's or
Servicer's knowledge, as the case may be, threatened to be instituted, which,
after taking into account the likelihood of success, might reasonably result
in a judgment or order against the Seller or Servicer, as the case may be (in
excess of insurance coverage and when combined with all other pending or
threatened claims), of more than One Million Dollars ($1,000,000); (ii) if the
Seller or Servicer, as the case may be, or any member of the Controlled Group
gives or is required to give notice to the PBGC of any "reportable event" (as
defined in subsections (b)(1)(2)(5)(6) of Section 403 of ERISA) with respect
to any Plan (or the Internal Revenue Service gives notice to the PBGC of any
"Reportable Event" as defined in subsection (c)(2) of Section 4043 of ERISA
and the Seller or Servicer, as the case may be, attains knowledge thereof)
which might constitute grounds for termination of such Plan under Title IV of
ERISA, or knows that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, a copy of the notice of
such reportable event given or required to be given to the PBGC; (iii) any
representation or warranty set forth in Section 4.02 or 4.03 (with respect to
Seller and Loans) and Section 5.12 (with respect to Servicer) which proves to
have been incorrect in any material respect when made; (iv) Seller's or
Servicer's material breach of its obligations under this Agreement; (v) any
Obligor Default (other than a payment default); (vi) any Loan that has become
a Defaulted Loan (other than by a payment default); (vii) any circumstance or
event of which Seller has actual knowledge which materially impairs or might
reasonably be expected to impair an Obligor's ability to repay or perform its
obligations under, the related Loan; or (viii) the occurrence of any Servicer
Default or Termination Event or other event which, with notice or lapse of
time or both, would constitute a Servicer Default or Termination Event.
(g) Additional Payments; Additional Acts. From time to time, to
(i) pay or reimburse the Buyer on request for all taxes imposed on this
Agreement or the sale of any Loans hereunder (other than taxes based on
Buyer's net income, items of tax preference, or gross receipts) and for all
expenses, including reasonable legal fees, actually incurred by Buyer in
connection with the preparation or modification of this Agreement, or the sale
of any Loans, related Notes and Related Documents or the security interest in
the related Collateral hereunder or the enforcement by judicial proceedings or
otherwise of any rights of the Buyer hereunder; and (ii) obtain and promptly
furnish to Buyer evidence of all such Government Approvals as may be required
to enable the Seller or Servicer, as the case may be to comply with its
obligations under this Agreement.
(h) Liens. Not to create, assume or suffer to exist any lien,
security interest or other encumbrance except (i) liens on the Seller's or
Servicer's properties securing mortgage indebtedness relating to such
properties, as the case may be, and any extensions, refinancing or renewals
thereof in an amount not exceeding the amount of such indebtedness prior to
such extension, refinancing or renewal; (ii) capital lease obligations; (iii)
liens to secure indebtedness for the deferred price of property acquired after
the date hereof, but only if such liens are limited to such property and its
proceeds; (iv) liens imposed by law (such as mechanic's liens) incurred in
good faith in the ordinary course of business which are not delinquent or
which remain payable without penalty or the validity or amount of which are
being contested in good faith by appropriate proceeding upon stay of execution
of the enforcement thereof; or (v) deposits or pledges under workmen's
compensation, unemployment insurance, social security or similar laws or made
to secure the performance of bids, tenders, contracts (except for the
repayment of borrowed money) or leases, or to secure statutory obligations or
surety or appeal bonds or to secure indemnity, performance or other similar
bonds given in the ordinary course of business.
(i) Liquidation, Merger, Sale of Assets, Etc. To not liquidate,
dissolve or enter into any merger, consolidation, joint venture, partnership
or other combination nor sell, lease, dispose of such portion of its business
or assets (excepting sales of goods in the ordinary course of business and
excepting sales of the Loans to the Buyer) as constitutes a substantial
portion thereof provided, however, so long as no Servicer Default or
Termination Event or event which with the passage of time or the giving of
notice or both would constitute a Servicer Default or Termination Event shall
have occurred and be continuing or will occur as a result of such merger or
consolidation, Seller or Servicer as the case may be, may merge or consolidate
with any Person or sell all or substantially all of its business or assets to
any other Person so long as (A)(i) the Seller or Servicer, as the case may be,
shall be the surviving or continuing corporation or (a), if the Seller or
Servicer, as the case may be, shall not be the surviving or continuing
corporation or shall sell all or substantially all of its assets to a Person
such surviving, continuing or purchasing Person shall be incorporated under
the laws of the United States or any jurisdiction thereof, shall assume in
writing all obligations of the Seller or Servicer, as the case may be, under
this Agreement, shall be eligible to borrow from NCB pursuant to the
provisions of the Bank Act and shall have a Consolidated Net Tangible Assets
not less than the Seller or Servicer, as the case may be, prior to the merger
or consolidation, and (B) at the time of such consolidation, merger or sale
and after giving effect thereto no Servicer Default or Termination Event shall
have occurred and be continuing.
(j) Transactions with Affiliates. To not directly or indirectly
enter into or permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property) with any of Seller's or
Servicer's Affiliates as the case may be, on terms that are less favorable to
Seller or Servicer, as the case may be, than those which might be obtained at
the time from Persons who are not Affiliates.
(k) ERISA Compliance. To not and not allow any member of its
Controlled Groups or any Plan of any of them to: (i) engage in any "prohibited
transaction" as such term is defined in Section 4.06 or Section 2003(a) of
ERISA; (ii) incur any "accumulated funding deficiencies" (as such term is
defined in Section 3.02 of ERISA) whether or not waived; (iii) terminate any
Pension Plan in a manner which could result in the imposition of a lien on any
property of the Seller or Servicer, as the case may be, or any member of their
respective Controlled Groups pursuant to Section 4068 of ERISA; or (iv)
violate state or federal securities laws applicable to any Plan.
(l) No Name Change, Etc. To not change its name, identity or
corporate structure in any manner which could make any financing or
continuation statement filed hereunder seriously misleading within the meaning
of Section 9-402(7) of any applicable enactment of the Uniform Commercial Code
without giving Buyer at last sixty (60) days prior written notice thereof.
(m) Relocation of Offices. To give Buyer at least sixty (60)
days prior written notice of any relocation of its chief executive offices or
the offices where records concerning the Loans and related Property are kept.
(n) Limitation on Transfers, Etc. To not transfer or attempt to
transfer in any manner whatsoever to any Person other than the Buyer pursuant
to the terms of this Agreement, and except in favor of the Buyer hereunder
shall not create, cause to be created or permit any lien, pledge, charge,
security interest, ownership interest, participation interest or any other
interest of any nature whatever in respect of the Loans and related Property.
(o) Bank Act Eligibility. To remain "eligible" to borrow from
NCB pursuant to the provisions of the Bank Act.
(p) No Changes. To make no change in the Credit and Collection
Policy, which change would impair the collectibility of any material amount of
the Loans; make no material change in the Credit and Collection Policy or in
its current payment terms with respect to Loans without prior written consent
of the Buyer, or change its name, identity or corporate structure in any
manner which would make any financing statement or continuation statement
filed in connection with this Agreement or the transactions contemplated
hereby seriously misleading within the meaning of Section 9-402(7) of the UCC
of any applicable jurisdiction or other applicable Laws unless it shall have
given the Buyer at least 45 days' prior written notice thereof and unless
prior thereto it shall have caused such financing statement or continuation
statement to be amended or a new financing statement to be filed such that
such financing statement or continuation statement would not be seriously
misleading; to make no material change in the terms of the Notes and Related
Documents relating to the Loans without the prior written notice to and
consent of the Buyer.
(q) Security Interest. To transfer to Buyer, at Buyer's
request, a security interest in all or any specified portion of that
Collateral securing any Loan which was not transferred to Buyer on the
applicable Closing Date (transferring to the Buyer the same interest as the
Seller had and disclosed to the Buyer on the applicable Closing Date) and to
provide evidence reasonably satisfactory to Buyer that all actions as are
necessary or appropriate to perfect Buyer's security interest in such
Collateral have been taken.
SECTION 6.02 Special Covenant of Seller. At all times prior
to the later of (i) the Termination Date or (ii) the date on which all
obligations of the Seller under this Agreement and Guarantor under the
Guaranty Agreement have been performed in full, Seller agrees not to (a) make
or own (including a participation in) any loan to any Obligor or member of its
Obligor Group unless such Obligor's or member's obligation, as the case may
be, to repay such loan is subordinate to such Obligor's or member's
obligation, as the case may be, to repay the Loan or Loans made to such
Obligor and sold to the Buyer under this Agreement and (b) own a corporation
or other business entity that makes loans to an Obligor or member of its
Obligor Group if such Obligor's or member's repayment obligation on such loan
is senior to its obligation to repay the Loan or Loans made to Obligor or its
member and sold to the Buyer hereunder.
[End of Article VI]
<PAGE>
ARTICLE VII
SELLER OBLIGATIONS AND REPURCHASE OPTIONS
SECTION 7.01 Purchase of Interest Rate Protection. Seller
hereby agrees to provide interest rate protection for Buyer, in the form of a
swap agreement, hedge, cap, guaranteed rate contract or other similar device
or agreement (each, an "Interest Rate Agreement"), or any combination of the
foregoing, or any other plan acceptable to Buyer (an "Interest Rate Protection
Plan"), if, for any three (3) consecutive months during the term of this
Agreement, the Prime Rate in effect on the LIBOR Determination Date for each
such month is equal to or less than the sum of the LIBOR on such Date and 150
basis points. An Interest Rate Agreement, if any, must satisfy the following
requirements: (i) have a term of 36 months (or such fewer number of months as
remain in the term of this Agreement); (ii) be provided by a party or parties
who is or are either rated "A" or higher by a Rating Agency or acceptable to
Buyer; (iii) be accompanied by an opinion of counsel to provider to the effect
that the Interest Rate Agreement is a legal, valid and binding Agreement of
provider, enforceable in accordance with its terms; (iv) provide for an
interest payment during each Interest Accrual Period at least equal to the
related LIBOR plus 150 basis points; and (v) be delivered by the Servicer
Payment Date in the month immediately following the month in which the
requirement of this Section 7.01 takes effect. An Interest Rate Protection
Plan must be coterminous with this Agreement.
SECTION 7.02 Optional Repurchase of Defaulted Loans and after
Obligor Default. In addition to the other repurchase obligations contained
herein, Seller will have the option to repurchase any Loan sold by Seller to
Buyer if (i) such Loan is a Defaulted Loan or (ii) an Obligor Default has
occurred and has then been continuing for at least thirty (30) days or (iii)
Buyer has received notice of any adverse event as described in Section 5.06 or
Section 6.01(f) hereof. Such Loan shall be repurchased by Seller from Buyer
by the last day of the Due Period during which Seller receives notice of any
such Defaulted Loan or the occurrence and continuation of an Obligor Default
or notice of adverse event, as the case may be. Such repurchase shall be
accomplished on the same terms as set forth in Section 2.01(e) and at the
Repurchase Amount.
SECTION 7.03 Minimal Balances. On any Payment Date, Seller
may elect to repurchase all Loans for their aggregate Principal Balance, if as
of such Payment Date, the aggregate Principal Balance is less than
five percent (5%) of the Maximum Purchase Amount. If Seller elects to
repurchase the Loans pursuant to this Section 7.03, Seller shall provide Buyer
with thirty (30) days prior written notice. The Repurchase Amount shall be
paid by Seller to Buyer in immediately available funds prior to 12:00 noon,
Washington, D.C. time. Immediately upon the payment of the required
Repurchase Amount, all right, title and interest in the Loans being
repurchased shall pass to Seller and such Loans shall cease to be "Loans" for
all purposes of this Agreement. Any resale of a Loan and related Property
pursuant to the terms of this Section 7.03 shall constitute the simultaneous
resale by Buyer and repurchase by Seller of all Loans and related Property.
Any resale of a Loan and related Property pursuant to this Section 7.03 shall
be without recourse or warranty of any kind except that Buyer shall be deemed
to have warranted that such Loans and related Property are free and clear of
all liens or claims resulting from or arising out of its acts or omissions
(other than acts of Buyer resulting from Seller's failure to perform as
required by this Agreement or Servicer's failure to perform as required by
this Agreement) or claims of Buyer's creditors.
SECTION 7.04 Optional Repurchase of Special Loans. United
Resources, Inc., as Seller and Servicer, United Grocers, Inc., as Servicer and
NCB entered into a Loan Purchase and Servicing Agreement dated as of May 13,
1994 and amended as of July 15, 1994 and September 28, 1995 (as amended and as
the same may be amended from time to time, the "Existing Loan Purchase and
Servicing Agreement") which provides for United Resources, Inc. to sell and
NCB to purchase loans satisfying the loan eligibility requirements of the
Existing Loan Purchase and Servicing Agreement, including certain Loans
initially expected to be sold and purchased pursuant to this Agreement. In
the event that any of the Loans relating to the Rays'/C&K Markets purchased by
the Buyer pursuant to this Agreement satisfy the loan eligibility requirements
of the Existing Loan Purchase and Servicing Agreement, Seller shall have the
right to repurchase any such Loans having aggregate Principal Balance of not
greater than $2,000,000 at the time and Repurchase Amount described in
Section 7.02. Pursuant to the terms of the Existing Loan Purchase and
Servicing Agreement, Seller will have the right to sell and Buyer will have
the obligation to purchase the Loans relating to the Rays'/C&K Markets on the
terms specified in such Agreement.
[End of Article VII]
<PAGE>
ARTICLE VIII
SERVICER DEFAULT
SECTION 8.01 Servicer Defaults. Any of the following acts or
occurrences shall constitute "Servicer Defaults" under this Agreement.
(a) Payment Default. Any failure by the Servicer to make any
required payment, transfer, withdrawal or deposit or to give instructions or
notice to the Buyer or Seller to make any required payment, transfer,
withdrawal or deposit on or before the date occurring five Business Days after
the date such payment, transfer, deposit or withdrawal or such notice or
instruction is required to be made or given, as the case may be, under the
terms of this Agreement;
(b) Performance Default. Failure on the part of the Servicer
duly to observe or perform in any material respect any of the other covenants
or agreements, including the providing of accurate and timely reports as
required in Article V hereof, to be performed under this Agreement which
failure continues unremedied for a period of 30 days after the date on which
written notice of such failure requiring the same to be remedied, shall have
been given to the Servicer by the Buyer;
(c) Involuntary Bankruptcy, Etc. The entry of a decree or order
for relief by a court having jurisdiction in respect of the Servicer or any
Affiliate or Subsidiary thereof in an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer or any Affiliate or Subsidiary thereof or of
any substantial part of the property of the Servicer or any Affiliate or
Subsidiary thereof, or ordering the winding up or liquidation of the affairs
of the Servicer or any Affiliate or Subsidiary thereof and the continuance of
any such decree or order unstayed and in effect for a period of 60 consecutive
days; or
(d) Voluntary Bankruptcy, Etc. The commencement by the
Servicer or any Affiliate or Subsidiary thereof of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other present
or future federal or state bankruptcy, insolvency or similar law, or the
consent by the Servicer or any Affiliate or Subsidiary thereof, as the case
may be, to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Servicer or any Affiliate or Subsidiary thereof or of any substantial part of
the property of the Servicer or any Affiliate or Subsidiary thereof or the
making by the Servicer or any Affiliate or Subsidiary thereof of an assignment
for the benefit of creditors or the failure by the Servicer or any Affiliate
or Subsidiary thereof, as the case may be, generally to pay its debts as such
debts become due or the taking of corporate action by the Servicer or any
Affiliate or Subsidiary thereof, as the case may be, in furtherance of any of
the foregoing; or
(e) Insolvency, Etc. Servicer or any Affiliate or Subsidiary
thereof shall (i) make a general assignment for the benefit of its creditors
or (ii) consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, or custodian of all or a substantial part of
the property of Servicer or any Affiliate or Subsidiary thereof, or (iii)
admit its insolvency or liability to pay its debts generally as they become
due, or (iv) fail generally to pay its debts as they become due, or (v) take
any action (or suffer any action to be taken by its directors or shareholders)
looking to the dissolution or liquidation of Servicer or any Affiliate or
Subsidiary thereof; or
(f) ERISA. Servicer or any member of the Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess of One Million
Dollars ($1,000,000) which it shall have become liable to pay to the PBGC or
to a Plan under Section 515 of ERISA or Title IV of ERISA; or notice of intent
to terminate a Plan or Plans (other than a multi-employer plan, as defined in
Section 4001(3) or ERISA), having aggregate Unfunded Vested Liabilities in
excess of Five Million Dollars ($5,000,000) shall be filed under Title IV of
ERISA by the Servicer, any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate any such Plan or Plans;
then, in the event of any Servicer Default, so long as the Servicer Default
shall not have been remedied, the Buyer may, by notice given to the Servicer,
terminate all of the rights and powers of the Servicer under this Agreement,
including without limitation all rights of the Servicer to receive the
Servicing Fee. Upon the giving of such notice, all rights and powers of the
Servicer under this Agreement shall vest in the Buyer, and the Buyer is hereby
authorized and empowered to execute and deliver on behalf of the Servicer, as
attorney-in-fact or otherwise, all documents and other instruments (including
any notices to Obligors deemed necessary or advisable by the Buyer), and to do
or accomplish all other acts or things necessary or appropriate to effect such
vesting, and the Servicer agrees to cooperate with the Buyer in effecting the
termination of the Servicer's rights and responsibilities hereunder and shall
promptly provide to the successor servicer appointed under Section 8.02 (the
"Successor Servicer") all documents and records (electronic and otherwise)
reasonably requested to enable it to assume the servicing functions hereunder.
SECTION 8.02 Buyer to Act; Appointment of Successor. On and
after the time the Servicer receives a notice of termination pursuant to
Section 8.01 or in the event of a resignation of the Servicer pursuant to
Section 5.11, the Buyer shall be the successor in all respects to the Servicer
in its capacity as Servicer under this Agreement and the transactions set
forth or provided for herein and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Servicer by the terms
and provisions hereof, however, that the Buyer shall have no obligation
whatsoever in respect of any liability incurred by the Servicer at or prior to
the time of receipt by the Servicer of said notice. As compensation therefor
the Buyer shall be entitled to receive any and all funds, including the
Servicing Fee, which the Servicer would have been entitled to receive if the
Servicer had continued to act hereunder. However, if the Buyer is unable or
unwilling to act as Successor Servicer hereunder, the Buyer may appoint any
Person with a net worth of at least $10,000,000 and whose regular business
includes the servicing of loans similar to the Loans as the Successor Servicer
hereunder in the assumption of all or part of the servicing functions
hereunder. In connection with such appointment and assumption, the Buyer may
make such arrangements for the compensation of such Successor Servicer from
payments on the Loans and related Property as the Buyer and such Successor
Servicer shall agree; provided, that no such compensation shall be in excess
of that permitted the Servicer hereunder or such amount as is commercially
reasonable at the time in question. The Buyer and such Successor Servicer
shall take such action, consistent with this Agreement, as shall be necessary
to effectuate any such succession.
SECTION 8.03 Effects of Servicing Transfer. (a) Upon any
termination of the rights and powers of the Servicer pursuant to either
Section 5.14 or Section 8.01 and the Buyer's succeeding to the rights and
obligations of the Servicer hereunder, the Buyer can unilaterally terminate
this Agreement.
(b) Upon any termination of the rights and powers of the
Servicer pursuant to either Section 5.14 or Section 8.01 and the vesting in
either the Buyer or a Successor Servicer of the rights and obligations of the
Servicer as described in Section 8.01 and 8.02, the Servicer shall have no
additional obligations or liabilities for acts or omissions of the Successor
Servicer or otherwise relating to its performance of its obligations under
this Agreement after the date of such termination.
(c) Upon the occurrence and continuation of any Servicer
Default, the Buyer shall not be required to pay the Servicer the Servicing
Fee. Further, upon the occurrence and continuation of a Servicer Default
(other than a Servicer Default under Section 8.01(b)), the Buyer shall not be
required to pay the Guarantor the Guaranty Fee.
[End of Article VIII]
<PAGE>
ARTICLE IX
TERMINATION EVENTS
SECTION 9.01 Termination Events. The occurrence of any of
the following events shall constitute a "Termination Event" hereunder.
(a) Breach of Covenant. Seller shall fail to perform or observe
any covenant, obligation or term of Articles VI or X or of Section 2.01(e),
2.02, 3.02, 4.05 or 7.01 of this Agreement and, except in the case of a breach
of Section 6.01(c) or Section 6.01(f)(iii), (iv) or (v), such failure shall
remain unremedied for thirty (30) days after written notice thereof shall have
been given to Seller by the Buyer; or
(b) Guarantor Defaults. Guarantor shall fail to perform or
observe any obligation, covenant or term of the Guaranty Agreement and such
failure shall remain unremedied for thirty (30) days after written notice
thereof shall have been given to Guarantor by Buyer; or
(c) Voluntary Bankruptcy, Etc. Either Seller, Guarantor or any
Subsidiary or Affiliate of Seller or Guarantor shall: (1) file a petition
seeking relief for itself under Title 11 of the United States Code, as now
constituted or hereafter amended, or file an answer consenting to, admitting
the material allegations of or otherwise not controverting, or fail timely to
controvert a petition filed against it seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended; or (2) file such
petition or answer with respect to relief under the provisions of any other
now existing or future applicable bankruptcy, insolvency, or other similar law
of the United States of America or any State thereof or of any other country
or jurisdiction providing for the reorganization, winding-up or liquidation of
corporations or an arrangement, composition, extension or adjustment with
creditors; or
(d) Involuntary Bankruptcy, Etc. An order for relief shall be
entered against either Seller, Guarantor or any Subsidiary or Affiliate of
Seller or Guarantor under Title 11 of the United States Code, as now
constituted or hereafter amended, which order is not stayed; or upon the entry
of an order, judgment or decree by operation of law or by a court having
jurisdiction in the premises which is not stayed adjudging it a bankrupt or
insolvent under, or ordering relief against it under, or approving as properly
filed a petition seeking relief against it under the provisions of any other
now existing or future applicable bankruptcy, insolvency or other similar law
of the United States of America or any State thereof or of any other country
or jurisdiction providing for the reorganization, winding-up or liquidation of
corporations or any arrangement, composition, extension or adjustment with
creditors, or appointing a receiver, liquidator, assignee, sequestrator,
trustee or custodian of the Seller, Guarantor or any Affiliate or Subsidiary
of Seller or Guarantor, or of any substantial part of the property of Seller,
Guarantor, or any Affiliate or Subsidiary, as the case may be, or ordering the
reorganization, winding-up or liquidation of its affairs, or upon the
expiration of one hundred twenty (120) days after the filing of any
involuntary petition against it seeking any of the relief specified in
Section 9.01(c) or this Section 9.01(d) without the petition being dismissed
prior to that time; or
(e) Insolvency, Etc. Either Seller, Guarantor or any Affiliate
or Subsidiary of the Seller or Guarantor shall (i) make a general assignment
for the benefit of its creditors or (ii) consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, or custodian
of all or a substantial part of the property of Seller, Guarantor, or any
Affiliate or Subsidiary, as the case may be, or (iii) admit its insolvency or
liability to pay its debts generally as they become due, or (iv) fail
generally to pay its debts as they become due, or (v) take any action (or
suffer any action to be taken by its directors or shareholders) looking to the
dissolution or liquidation of Seller, Guarantor, or any Affiliate or
Subsidiary, as the case may be; or
(f) ERISA. Either Seller or Guarantor or any member of the
Controlled Group shall fail to pay when due an amount amounts aggregating in
excess of One Million Dollars ($1,000,000) which it shall have become liable
to pay to the PBGC or to a Plan under Section 515 of ERISA or Title IV of
ERISA; or notice of intent to terminate a Plan or Plans (other than a
multi-employer plan, as defined in Section 4001(3) or ERISA), having aggregate
Unfunded Vested Liabilities in excess of Five Million Dollars ($5,000,000)
shall be filed under Title IV of ERISA by Seller or Guarantor, as the case may
be, any member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate any such Plan or Plans.
(g) Servicer Default. A Servicer Default shall occur and such
Servicer Default would materially and adversely affect the interest of the
Buyer.
(h) Termination Event under Existing Loan Purchase Agreement. A
Termination Event under the Existing Loan Purchase Agreement shall have
occurred and be continuing.
SECTION 9.02 Consequences of Termination Event. If any
Termination Event shall occur and be continuing, then in any such case and at
any time thereafter so long as any such Termination Event shall be continuing,
the Buyer may, at its option, immediately terminate the Buyer's commitment to
accept Renewal Notes and to make any Incremental Purchases hereunder.
In addition, upon the occurrence of any Termination Event
specified in (c), (d) or (e) of Section 9.01 or a Termination Event arising
out of Servicer's or Guarantor's insolvency or involvement in a voluntary or
involuntary bankruptcy proceeding, subject to the provisions of Section 10.13,
this Agreement shall automatically and immediately terminate.
Thereafter, and before exercising any other remedies provided
herein or by applicable law, Buyer may, at its option, require that Seller
repurchase all Loans and related Property Notes for the Repurchase Amount
within two 2 Business Days of receipt of notice from the Buyer of its election
to cause the repurchase of all Loans. In addition, Buyer may pursue all other
rights and remedies available herein and by applicable law including, without
limitation, its rights to pursue collection from the Seller in an amount equal
to the applicable Repurchase Amount.
SECTION 9.03 Remedies of a Secured Party. Following the
occurrence of a Termination Event, the Buyer shall have all remedies provided
by law and without limiting the generality of the foregoing shall have the
following remedies: (a) the remedies of a secured party under the Uniform
Commercial Code; (b) the right to make notification and pursue collection or,
at Buyer's option, to sell or cause Servicer, as agent for the Buyer, to sell
all or any part of the Loans and related Property; (c) the right to exercise
all of owner's or secured party's rights under the Loans and related Property;
and (d) to the extent that notice shall be required by law to be given, Seller
agrees that a period of twenty (20) days from the time the notice is sent
shall be a reasonable period of notification of a sale or other, disposition
of the Loans and related Property.
[End of Article IX]
<PAGE>
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Further Assurances. Each party hereto agrees to
execute and deliver to the other party and to perform all such other acts as
the other party may reasonably request to carry out the transactions
contemplated by this Agreement. Without limiting the foregoing, Buyer agrees
to endorse without recourse the Note related to any Loan being resold to
Seller pursuant to Articles II, IV or VII, and to execute assignments and
related Uniform Commercial Code financing statements to evidence the
assignment of the Related Documents to Seller.
SECTION 10.02 Indemnities. (a) Seller will defend and
hereby indemnify Buyer and its successors, assigns, servants and agents
(hereinafter "Indemnitees") against and agree to protect, save and keep
harmless and make whole each thereof, from any and all liabilities,
obligations, losses, damages, penalties, claims, actions, suits, costs
(including any net increase in the tax liability of an Indemnitee resulting
from its receipt of indemnity payments made under this Section 10.02),
expenses and disbursements, including reasonable attorneys' fees, of
whatsoever kind and nature imposed on, incurred by or asserted against any
Indemnitee in any way relating to or arising out of (i) this Agreement or any
of the documents entered into in connection herewith; (ii) the Buyer's
interest in the Loans or related Property purchased or accepted hereunder or
the enforcement of any claims thereunder; (iii) any claim made by any Obligor,
or any other party, related to the Loans or related Property purchased or
accepted hereunder, or the administration of the transactions evidenced by
such Loans and related Property or related to any other transactions between
the Obligors or their affiliates and the Seller or its affiliates; or (iv) any
environmental claim or liability relating to any real property securing any
Loans.
(b) The foregoing indemnities with regard to any particular
Indemnitee shall not extend to any liability, obligation, loss, damage,
penalty, claim, action, suit, cost, expense or disbursement (i) that results
from the willful misconduct or gross negligence of such Indemnitee or from any
breach of any representation or warranty made by such Indemnitee herein; (ii)
that constitutes any tax based on any Indemnitee's net income, items of tax
preference or gross receipts (except with respect to indemnity payments
hereunder); or (iii) that consists of the failure of any Obligor to pay its
obligations under the Notes as they become due unless such failure results
from a claim of such Obligor against Seller, Guarantor, Servicer or any
Subsidiary or Affiliate of any of them, or Buyer otherwise indemnified against
hereunder. Any indemnity payments required under this Section 10.02 shall be
paid within thirty (30) days following notice thereof from the Indemnitee to
Seller (which notice shall describe in reasonable detail the matter with
respect to which indemnification is required and shall set forth the
computation used in determining the amount of the indemnity payment). All of
the rights and privileges of each Indemnitee under this Section 10.02, and the
rights, privileges and obligations of Seller hereunder, shall survive the
expiration or other termination of this Agreement.
SECTION 10.03 No Waiver: Remedies Cumulative. No failure by
the Seller or Buyer to exercise, and no delay in exercising, any right, power
or remedy under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or remedy under this
Agreement preclude any other or further exercise thereof or the exercise of
any other right, power, or remedy. The rights and remedies provided herein
are cumulative and not exclusive of any right or remedy provided by law.
SECTION 10.04 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 10.05 Consent to Jurisdiction: Waiver of Immunities.
The Buyer and Seller hereby irrevocably submit to the jurisdiction of any
state or federal court sitting in the District of Columbia or the State of
Oregon in any action or proceeding brought to enforce or otherwise arising out
of or relating to this Agreement and irrevocably waive to the fullest extent
permitted by law any objection which they may now or hereafter have to the
laying of venue in any such action or proceeding in any such forum, and hereby
further irrevocably waive any claim that any such forum is an inconvenient
forum. The parties agree that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in any other jurisdiction
by suit on the judgment or in any other manner provided by law.
SECTION 10.06 Notices. All notices and other communications
provided for in this Agreement shall be in writing or (unless otherwise
specified) by telex, telegram or cable and shall be sent for next Business Day
delivery to each party at the address set forth under its name on the
signature page hereof, or at such other address as shall be designated by such
party in a written notice to each other party. Except as otherwise specified,
all such notices and communications if duly given or made shall be effective
upon receipt.
SECTION 10.07 Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective Successors
and assigns. Notwithstanding the foregoing, no party may assign or otherwise
transfer all or any part of its rights or obligations hereunder without the
prior written consent of the other parties, and any such assignment or
transfer purported to be made without such consent shall be ineffective. In
addition, Buyer may not sell the Loans and related Property or participations
therein without the consent of the Seller, except that by executing this Loan
Purchase and Servicing Agreement, Seller shall be deemed to have consented to
the sale and assignment of the Loans and related Property to NCB Retail
Finance Corporation, a special purpose corporation established by Buyer.
SECTION 10.08 Capital Markets Funding. Seller hereby agrees
to cooperate with Buyer in making such modifications to this Agreement and the
Related Documents, in executing such other documents and certificates, in
causing to be prepared and delivered such opinions, certificates, financial
reports and letters, and in taking such other actions, including changing
accounting firms, as are reasonably necessary to achieve capital markets
funding of the Loans and the related Property or to improve the execution of
such funding.
SECTION 10.09 Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall as to such
jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties waive
any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
SECTION 10.10 Attorney's Fees. In the event it is necessary
for any party hereto or its Successors or assigns to institute suit in
connection with this Agreement or the breach thereof, the prevailing party in
such suit shall be entitled to reimbursement for its reasonable costs,
expenses and attorney's fees incurred including fees incurred on any appeal.
SECTION 10.11 Setoff. In addition to any rights now or
hereafter granted under applicable law, upon the occurrence of any Termination
Event or Servicer Default, Buyer is hereby authorized by Seller at any time,
without notice to Seller, to set off and to appropriate and to apply to the
amounts then owed by Seller or Servicer hereunder or by Guarantor under the
Guaranty Agreement, as the case may be, to Buyer any and all deposits (general
or special, including, but not limited to, indebtedness evidenced by
certificates of deposit, whether matured or unmatured, but not including trust
accounts) and any other indebtedness at any time held or owing by Buyer to
Seller.
SECTION 10.12 Limitation on Third Party Beneficiaries. No
provision, warranty, representation, or agreement herein, whether express or
implied, is intended to or shall be construed as conferring upon any Person
not a party hereto (including, without limitation, any Obligor) any rights or
remedies whatsoever.
SECTION 10.13 Term of Agreement. This Agreement shall
terminate upon the earlier to occur of (i) the reduction of the aggregate
Principal Balance of the Loans (including Liquidated Loans as to which there
remain unpaid Liquidation Losses) to zero or (ii) the date on which this
Agreement is automatically terminated following the occurrence of any of the
specified Termination Events pursuant to Section 9.02; provided, however, that
(a) the rights accrued to the Buyer prior to such termination, (b) the
obligations of the Guarantor under the Guaranty Agreement and (c) the
indemnification provisions set forth in Section 10.02 shall be continuing and
shall survive any termination of this Agreement.
SECTION 10.14 Entire Agreement; Amendment. This Agreement
comprises the entire agreement of the parties and may not be amended or
modified except by written agreement of the parties hereto. No provision of
this Agreement may be waived except in writing and then only in the specific
instance and for the specific purpose for which given.
SECTION 10.15 Headings. The headings of the various
provisions of this Agreement are for convenience of reference only, do not
constitute a part hereof, and shall not affect the meaning or construction of
any provision hereof.
SECTION 10.16 Counterparts. This Agreement may be executed in
any number of identical counterparts, any set of which signed by all parties
hereto shall be deemed to constitute a complete, executed original for all
purposes.
[End of Article X]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Purchase and Servicing Agreement (Holdback Program) to be executed by their
respective officers or agents thereunto duly authorized as of the date first
above written.
UNITED RESOURCES, INC., as Seller
and Servicer
By /s/ George P. Fleming
Its President
By /s/ Alan C. Jones
Its Alan C. Jones, V. P.
Notice Address:
6433 S.E. Lake Road
Portland, Oregon 97222
Attention: President
NATIONAL CONSUMER COOPERATIVE BANK,
as Buyer
By
Its
By
Its
Notice Address:
1401 Eye Street, N.W.
Suite 700
Washington, D.C. 20005
ACKNOWLEDGEMENTS:
UNITED GROCERS, INC.,
as Guarantor
By /s/ Alan C. Jones
Its Alan C. Jones, President
By /s/ George P. Fleming
Its Asst. Secretary
<PAGE>
Execution Copy
GUARANTY AGREEMENT
(Holdback Program)
dated as of
September 28, 1995
between
UNITED GROCERS, INC.
as Guarantor
and
NATIONAL CONSUMER COOPERATIVE BANK
as Buyer
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
GUARANTOR AND GUARANTY
Section 2.01 Guarantor's Guaranty and Repurchase
Guaranty . . . . . . . . . . . . . . . . . . . . . 3
Section 2.02 Computation and Payment of Guaranty
Fees . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
GUARANTOR REPRESENTATIONS AND WARRANTIES
Section 3.01 Guarantor Representations and
Warranties . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV
COVENANTS OF GUARANTOR
ARTICLE V
GUARANTOR DEFAULTS
Section 5.01 Guarantor Defaults . . . . . . . . . . . . . . . . 10
ARTICLE VI
MISCELLANEOUS
Section 6.01 Further Assurances . . . . . . . . . . . . . . . . 12
Section 6.02 Indemnities. . . . . . . . . . . . . . . . . . . . 12
Section 6.03 No Waiver: Remedies Cumulative . . . . . . . . . . 13
Section 6.04 Governing Law. . . . . . . . . . . . . . . . . . . 13
Section 6.05 Consent to Jurisdiction: Waiver of
Immunities . . . . . . . . . . . . . . . . . . . . 13
Section 6.06 Notices. . . . . . . . . . . . . . . . . . . . . . 13
Section 6.07 Assignment . . . . . . . . . . . . . . . . . . . . 13
Section 6.08 Capital Markets Funding. . . . . . . . . . . . . . 14
Section 6.09 Severability . . . . . . . . . . . . . . . . . . . 14
Section 6.10 Attorney's Fees. . . . . . . . . . . . . . . . . . 14
Section 6.11 Setoff . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.12 Limitation on Third Party Beneficiaries. . . . . . 14
Section 6.13 Continuing Agreement . . . . . . . . . . . . . . . 15
Section 6.14 Entire Agreement: Amendment. . . . . . . . . . . . 15
Section 6.15 Headings . . . . . . . . . . . . . . . . . . . . . .15
Section 6.16 Counterparts . . . . . . . . . . . . . . . . . . . .15
Exhibit A - Information Regarding Litigation, Etc.
<PAGE>
GUARANTY AGREEMENT
This GUARANTY AGREEMENT (Holdback Program) is executed as of
September 28, 1995 between UNITED GROCERS, INC., an Oregon corporation, as
guarantor (the "Guarantor") and NATIONAL CONSUMER COOPERATIVE BANK, a
financial institution organized under the laws of the United States ("Buyer").
PREAMBLES
WHEREAS, United Resources, Inc., as Seller and Servicer ("United
Resources"), and the Buyer are entering into as of the date hereof a certain
Loan Purchase and Servicing Agreement (Holdback Program) (the "Holdback Loan
Purchase Agreement") which provides for United Resources to sell and Buyer to
purchase loans (the "Loans" or "Holdback Loans") satisfying the loan
eligibility and other requirements of the Holdback Loan Purchase Agreement;
and
WHEREAS, United Resources, as Seller and Servicer, the Guarantor
and the Buyer entered into a certain Loan Purchase and Servicing Agreement
dated as of May 13, 1994 and amended as of July 15, 1994 and as of
September 28, 1995 (as amended and as the same may be from time to time
amended, the "Existing Loan Purchase Agreement") which provides for United
Resources to sell and Buyer to purchase loans ("Existing Agreement Loans")
satisfying the loan eligibility and other requirements of the Existing Loan
Purchase Agreement; and
WHEREAS, in order to induce the Buyer to enter into the Holdback
Loan Purchase Agreement and the Existing Loan Purchase Agreement, the
Guarantor agreed to provide certain guaranties with respect to the Loans and
the Seller's obligations under the Holdback Loan Purchase Agreement and the
Existing Loan Purchase Agreement; and
WHEREAS, the guaranty provisions relating to the Existing Loan
Purchase Agreement are currently included in Article VII of the Existing Loan
Purchase Agreement; and
WHEREAS, the parties have determined to enter into this Guaranty
Agreement (this "Agreement") in which the guaranty provisions relating to the
Holdback Loan Purchase Agreement will be set out; and
WHEREAS, the Guarantor has agreed to make available to the Buyer
the "Guaranty Amount" under the Existing Loan Purchase Agreement (herein, the
"Existing Guaranty Amount") to the extent the "Guaranty Amount" provided in
this Agreement is exhausted and conversely, to make available to the Buyer,
the Guaranty Amount provided in this Agreement to the extent the Existing
Guaranty Amount is exhausted; and
WHEREAS, the Buyer has agreed to accept the guaranty provisions
described in these Preambles and the Buyer, Guarantor and Seller have executed
an amendment to the Existing Loan Purchase Agreement to, among other things,
reflect such provisions and the Buyer and Guarantor desire to execute this
Agreement to reflect such provisions.
NOW, THEREFORE, for full and fair consideration, the parties
hereto agree that this Guaranty Agreement shall read as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms. Terms used herein and not
otherwise defined shall have the meanings given in Article I of the Holdback
Loan Purchase Agreement. In addition, the following terms, as used herein,
have the following meanings:
"Consolidated Net Tangible Assets" shall have the meaning given in
clause (j) of Article IV.
"Existing Guaranty" shall mean the "Guaranty" provided by the
Guarantor in accordance with Article VII of the Existing Loan Purchase
Agreement.
"Existing Guaranty Amount" shall mean the "Guaranty Amount"
available under the Existing Loan Purchase Agreement.
"Fixed Charge Coverage" shall have the meaning provided in clause
(i) of Article IV.
"Guaranty" shall mean the first loss guaranty of Liquidation
Losses provided by Guarantor in accordance with Section 2.01(a) of this
Agreement.
"Guaranty Amount" shall mean, at any time, an amount equal to (a)
the sum of forty nine percent (49%) of the Principal Balance of each Loan as
of the applicable Closing Date, minus (b) all amounts previously paid
hereunder by Guarantor to Buyer pursuant to the Guaranty or the Existing
Guaranty.
"Guaranty Fee" shall have the meaning given in Section 2.02 of
this Agreement.
"Guaranty Payments" shall mean the amounts paid by Guarantor to
the Buyer pursuant to the Guaranty or the Repurchase Guaranty, as applicable.
"Repurchase Guaranty" shall mean the guaranty of Seller's
repurchase obligation provided by the Guarantor pursuant to Section 2.01(b) of
this Agreement.
ARTICLE II
GUARANTOR AND GUARANTY
Section 2.01 Guarantor's Guaranty and Repurchase Guaranty.
In order to induce Buyer to purchase the Loans, Guarantor hereby agrees to
provide the following guaranties:
(a) Guarantor hereby agrees to provide to the Buyer a Guaranty
of Liquidation Losses, equal at any time to the then current Guaranty Amount.
Following (i) the earlier of (A) the collection of all Liquidation Proceeds,
Insurance Proceeds and other amounts with respect to a Defaulted Loan and (B)
a Defaulted Loan being deemed a Liquidated Loan, and (ii) determination of
Liquidation Loss thereon (which in the case of a Defaulted Loan deemed a
Liquidated Loan may be the full Principal Balance of such Loan), the Buyer
shall notify Guarantor of the amount of Liquidation Loss and, within five (5)
Business Days of receipt of such notice, Guarantor shall make a Guaranty
Payment to the Buyer in the amount of such Liquidation Loss; provided,
however, that Guarantor's obligation to make a Guaranty Payment shall be
limited to first, the then available Guaranty Amount, and if the Guaranty
Amount is exhausted, the then available Existing Guaranty Amount.
(b) Guarantor hereby agrees to provide to the Buyer a Repurchase
Guaranty of Seller's repurchase obligation pursuant to Section 2.01(e),
2.02(c), 3.02, 4.05 and 9.02 of the Holdback Loan Purchase Agreement. If the
Buyer shall not have received the Repurchase Amount on the day on which due
and shall have so notified the Guarantor and the Seller, within two Business
Days of receipt of such notice, Guarantor shall make a Guaranty Payment to the
Buyer in the amount of such Repurchase Amount.
Section 2.02 Computation and Payment of Guaranty Fees. On
each Payment Date, the Buyer shall remit to the Guarantor as a guaranty fee
(the "Guaranty Fee"), the amount, if any, by which (a) the amount to the sum
of total Collections and other Available Funds received during, or
attributable to, the related Due Period exceeds (b) the sum of the Periodic
Payment and the Servicing Fee. Upon the occurrence and continuation of a
Servicer Default under the Holdback Loan Purchase Agreement (other than a
Servicer Default under Section 8.01(b) thereof) or a Guarantor Default, the
Guarantor shall no longer be entitled to receive the Guaranty Fee.
ARTICLE III
GUARANTOR REPRESENTATIONS AND WARRANTIES
Section 3.01 Guarantor Representations and Warranties. The
Guarantor hereby represents and warrants to, and agrees as follows as of each
Closing Date and as of the date of execution of this Agreement:
(a) The Guarantor is duly organized and is validly existing and
in good standing as an Oregon corporation, with corporate power and authority
to own its properties and to transact the business in which it is now engaged;
the Guarantor is duly qualified to do business and is in good standing in each
State of the United States where the nature of its business requires it to be
so qualified; and the Guarantor is doing business only under the corporate and
"doing business as" names listed on Exhibit F to the Holdback Loan Purchase
Agreement.
(b) The performance of Guarantor's obligations under this
Agreement, and the consummation of the transactions herein contemplated will
not conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any of the property or assets of Guarantor or
any of its Subsidiaries pursuant to the terms of, any indenture, mortgage,
deed of trust, loan agreement or other agreement (other than this Agreement)
or instrument to which it or any of its Subsidiaries is a party or by which it
or any of its subsidiaries is bound or to which any of its property or assets
is subject, nor will such action result in any violation of the provisions of
its Certificate of Incorporation or By-Laws or any statute or any order, rule
or regulation of any court or governmental agency or body having jurisdiction
over it or any of its properties; and no consent, approval, authorization,
order, registration or qualification of or with any court or any such
regulatory authority or other governmental agency or body is required for the
consummation of the other transactions contemplated by this Agreement.
(c) This Agreement has been duly authorized, executed and
delivered by Guarantor and this Agreement is the valid and legally binding
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization and
other similar laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
(d) The Guarantor is "eligible" in Section 3015 to borrow from
NCB pursuant to the provisions of the Bank Act.
(e) Except as described in Exhibit A hereto, there are no
actions, proceedings, investigations, or claims against or affecting Guarantor
now pending before any court, arbitrator or other Governmental Authority (nor
to the knowledge of Guarantor has any thereof been threatened nor does any
basis exist therefor) which if determined adversely to the Guarantor would be
likely to have a material adverse effect on the financial condition or
operations of Guarantor or on Guarantor's ability to perform its obligations
under this Agreement. With respect to the litigation described in Exhibit A
hereto, a determination in such litigation that is materially adverse to the
Guarantor would not have a material adverse effect on the financial condition
or operations of Guarantor or on Guarantor's ability to perform its
obligations under this Agreement.
ARTICLE IV
COVENANTS OF GUARANTOR
At all times prior to the later of (i) the Termination Date or
(ii) the date on which all obligations of the Seller under the Holdback Loan
Purchase Agreement and Guarantor under this Agreement and the Existing Loan
Purchase Agreement have been performed in full, Guarantor agrees to do all of
the following unless the Buyer shall otherwise consent in writing.
(a) Preservation of Corporate Existence, Etc. To preserve and
maintain its corporate existence, rights, and privileges in the jurisdiction
of its incorporation and will qualify and remain qualified as a foreign
corporation in each jurisdiction where such qualification is necessary or
advisable in view of the business and operations of Guarantor or the ownership
of its properties.
(b) Compliance with Laws. To comply in all material respects
with all laws, regulations, rules and orders of Governmental Authorities
applicable to Guarantor or to its operations or property, except any thereof
whose validity is being contested in good faith by appropriate proceedings
upon stay of execution of the enforcement thereof.
(c) Other Obligations. To pay and discharge before the same
shall become delinquent (after giving effect to all applicable grace periods)
all Debt, taxes and other obligations for which Guarantor is liable or to
which its income or property is subject and all claims for labor and materials
or supplies which, if unpaid, might become by law a lien upon the assets of
Guarantor, except any thereof whose validity or amount is being contested in
good faith by the Guarantor in appropriate proceedings, and except other Debt,
taxes and other obligations which, in the aggregate do not exceed One Million
Dollars ($1,000,000); provided, however, that this covenant shall not extend
to any obligation of Guarantor identified in clause (n) below.
(d) Financial Information. To deliver to Buyer (i) as soon as
available and in any event within one hundred twenty (120) days after the end
of each fiscal year of the Guarantor, the consolidated balance sheet of the
Guarantor as of the end of such fiscal year and the related statements of
income and retained earnings and statement of changes in the financial
position of the Guarantor for such year, accompanied by the audit report
thereon by independent, certified public accountants (which report shall be
prepared in accordance with U.S. GAAP and shall not be qualified by reason of
restricted or limited examination of any material portion of the Guarantor's
records and shall contain no disclaimer of opinion or adverse opinion) and an
Annual Report on Form 10-K for such year filed by the Guarantor with the
Securities and Exchange Commission; (ii) as soon as available and in any event
within sixty (60) days after the end of each fiscal quarter of the Guarantor,
the unaudited balance sheet and statement of income and retained earnings of
the Guarantor as of the end of such fiscal quarter (including the fiscal year
to the end of such fiscal quarter), accompanied by a certificate of the chief
financial officer of the Guarantor, that such unaudited balance sheet and
statement of income and retained earnings have been prepared in accordance
with U.S. GAAP and present fairly the financial position and the results of
operations of the Guarantor, as of the end of and for such fiscal quarter and
setting forth calculations demonstrating that at the end of such quarter the
Guarantor was in compliance with clauses (h) through (l) and (n) of this
Article IV, inclusive; (iii) within one hundred twenty (120) days after the
close of each fiscal year of the Guarantor, a certificate signed by the chief
financial officer of the Guarantor stating that as of the close of such fiscal
year no Termination Event or Servicer Default or other event which, with
notice or lapse of time or both would have become a Termination Event or
Servicer Default had occurred and was continuing; (iv) within one hundred
twenty (120) days after the end of each fiscal year of Guarantor, a report
setting forth information relating to the portfolio of loans originated or
acquired by Guarantor and each of its Subsidiaries and Affiliates (other than
United Resources, Inc.) in the ordinary course of their respective businesses
and owned by Guarantor and each of its Subsidiaries and Affiliates (other than
United Resources, Inc.) during the related fiscal year, including loan
balances by types of loans, numbers of loans by types of loans, interest rates
of loans by type and loss and delinquency experience; and (v) such other
statements, reports and other information as Buyer may reasonably request
concerning the financial condition and the servicing and collection operations
of the Guarantor; provided, however, that if either the Guarantor or any of
its Subsidiaries or Affiliates (as specified) does not originate and/or
service loans of the kind sold and assigned by Seller pursuant to the Holdback
Loan Purchase Agreement, the covenants in subsections (iv) and (v) of this
subsection (d) shall be satisfied by a certification of a Responsible Officer
to the effect that during the preceding fiscal year, Guarantor or the
specified Subsidiary or Affiliate did not originate or service loans.
(e) Notification. Promptly after learning thereof, to notify
Buyer of (i) the details of any action, proceeding, investigation or claim
against or affecting the Guarantor instituted before any court, arbitrator or
Governmental Authority or, to the Guarantor's knowledge threatened to be
instituted, which, after taking into account the likelihood of success, might
reasonably result in a judgment or order against Guarantor (in excess of
insurance coverage and when combined with all other pending or threatened
claims) of more than One Million Dollars ($1,000,000); (ii) if the Guarantor
or any member of the Controlled Group gives or is required to give notice to
the PBGC of any "reportable event" (as defined in subsections (b)(1)(2)(5)(6)
of Section 403 of ERISA) with respect to any Plan (or the Internal Revenue
Service gives notice to the PBGC of any "Reportable Event" as defined in
subsection (c)(2) of Section 4043 of ERISA and the Guarantor attains knowledge
thereof) which might constitute grounds for termination of such Plan under
Title IV of ERISA, or knows that the plan administrator of any Plan has given
or is required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the PBGC;
(iii) any representation or warranty set forth in Article III of this
Agreement which proves to have been incorrect in any material respect when
made; (iv) Seller's material breach of its obligations under the Holdback Loan
Purchase Agreement, Guarantor's material breach of its obligations under this
Agreement or Servicer's material breach of its obligations under the Servicing
Agreement; or (v) the occurrence of any Servicer Default or Termination Event
or other event which, with notice or lapse of time or both, would constitute a
Servicer Default or Termination Event.
(f) Additional Acts. From time to time, to obtain and promptly
furnish to Buyer evidence of all such Government Approvals as may be required
to enable the Guarantor to comply with its obligations under this Agreement.
(g) Working Capital. To maintain, on a consolidated basis, a
ratio of current assets to current liabilities of at least 1.3 to 1.0. For
purposes of this subsection current assets shall not include (i) any deferred
assets other than prepaid items such as insurance, taxes or other similar
items; (ii) any amounts due from corporations which are subsidiaries of or
otherwise affiliated with the Guarantor; and (iii) an amount equal to the
appropriate deduction for depreciation, depletions, obsolescence,
amortization, valuation, contingency or other reserves determined in
accordance with generally accepted accounting principles. For purposes of
this subsection, current liabilities shall not include Funded Debt maturing
within one year from the date of determination whether or not extendable at
the option of the Guarantor.
(h) Member Notes Receivable Ratio. To maintain on a
consolidated basis at all times, the Guarantor Member Portfolio at less than
150% of Consolidated Tangible Net Worth. "Guarantor Member Portfolio" means
the sum of (i) all Debt of members to Guarantor or any of its Subsidiaries,
including Seller, which have not been sold; plus (ii) all investments by
Guarantor or any of its Subsidiaries, including Seller, in Guarantor's
members; plus (iii) all indebtedness of members to Guarantor or any of its
Subsidiaries, including Seller, which have been sold with recourse to
Guarantor or any of its Subsidiaries, including Seller, at 50% or greater.
(i) Fixed Charge Coverage. To maintain on a consolidated basis
a ratio of Fixed Charge Coverage (for the four most recent fiscal quarters) of
at least 1.4 to 1.0. "Fixed Charge Coverage" means for any period the ratio
derived from dividing (a) the sum of net income for such period (before income
taxes, patronage dividends, and extraordinary items) plus Fixed Charges by (b)
Fixed Charges. "Fixed Charges" means the sum of (a) interest expense on
Funded Debt, (b) the amortization of any discount applied in advancing Funded
Debt to Guarantor and (c) gross rental expense net of any lease or sublease
entered into by Guarantor if Guarantor has in turn subleased the related
leased or subleased property to any of Guarantor's Subsidiaries, Affiliates or
members for a payment obligation at least equal to Guarantor's on the first
lease or sublease and the Subsidiary, Affiliate or member is current on its
payment obligations on the sublease.
(j) Liens and Sales. Not to create, assume or suffer to exist
any lien, security interest or other encumbrance except (i) liens on the
Guarantor's properties securing mortgage indebtedness relating to such
properties, as the case may be, and any extensions, refinancing or renewals
thereof in an amount not exceeding the amount of such indebtedness prior to
such extension, refinancing or renewal; (ii) capital lease obligations; (iii)
liens to secure indebtedness for the deferred price of property acquired after
the date hereof, but only if such liens are limited to such property and its
proceeds; (iv) liens imposed by law (such as mechanic's liens) incurred in
good faith in the ordinary course of business which are not delinquent or
which remain payable without penalty or the validity or amount of which are
being contested in good faith by appropriate proceeding upon stay of execution
of the enforcement thereof; or (v) deposits or pledges under workmen's
compensation, unemployment insurance, social security or similar laws or made
to secure the performance of bids, tenders, contracts (except for the
repayment of borrowed money) or leases, or to secure statutory obligations or
surety or appeal bonds or to secure indemnity, performance or other similar
bonds given in the ordinary course of business. Notwithstanding the
foregoing, the total amount secured by all such liens, security interests or
other encumbrances shall not at any time exceed 15% of Guarantor's
Consolidated Net Tangible Assets as of such time. "Consolidated Net Tangible
Assets" shall be, on a consolidated basis, the difference between total assets
and current liabilities, excluding, however, from the determination of total
assets (i) all assets which should be classified as intangible assets (such as
good will, patents, trademarks, copyrights and franchises) and (ii) to the
extent not already deducted from total assets, all reserves including those
for deferred income taxes, depreciation, obsolescence or amortization of
properties and (iii) all capital stock or other investments by the Guarantor
in any direct or indirect subsidiary of Guarantor other than in (x) any
offshore investment subsidiary, or (y) a subsidiary having all or
substantially all of its operations in the United States.
(k) Minimum Capital and Subordinated Debt. To maintain the sum
of Subordinated Debt and Consolidated Tangible Net Worth at a total of not
less than $70,000,000.
(l) Liquidation, Merger, Sale of Assets, Etc. To not liquidate,
dissolve or enter into any merger, consolidation, joint venture, partnership
or other combination nor sell, lease, dispose of such portion of its business
or assets (excepting sales of goods in the ordinary course of business and
sales of Loans under this Agreement) as constitutes a substantial portion
thereof provided, however, so long as no Termination Event or event which with
the passage of time or the giving of notice or both would constitute a
Termination Event shall have occurred and be continuing or will occur as a
result of such merger or consolidation, Guarantor may merge or consolidate
with any Person or sell all or substantially all of its business or assets to
any other Person so long as (A)(1) the Guarantor shall be the surviving or
continuing corporation, or (2) if the Guarantor shall not be the surviving or
continuing corporation or shall sell substantially all of its assets to a
Person, such surviving, continuing or purchasing Person shall be incorporated
under the laws of the United States or any jurisdiction thereof and shall
assume in writing all obligations of the Guarantor under this Agreement, shall
be eligible to borrow form NCB under the provisions of the Bank Act and shall
satisfy the financial covenants set forth in clauses (g), (h), (i) and (k) of
this Article IV, and (B) at the time of such consolidation, merger or sale and
after giving effect thereto, no Termination Event shall have occurred and be
continuing. Without limitation on the foregoing, the Guarantor, and its
consolidated subsidiaries, will not during any four consecutive calendar
quarters sell in excess of 10% of their Consolidated Net Tangible Assets
unless the proceeds of such sale or sales are reinvested within 12 months in
assets to be owned and utilized by the Guarantor in the ordinary course of its
business; provided, however, in determining compliance with the foregoing
requirement, sales of the following assets will be disregarded: (a)
individual assets having a book value of less than $25,000 and (b)
indebtedness of Guarantor's members to Guarantor sold under this Agreement.
(m) Transactions with Affiliates. To not directly or indirectly
enter into or permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property) with any of Guarantor's
Affiliates, on terms that are less favorable to Guarantor than those which
might be obtained at the time from Persons who are not Affiliates.
(n) ERISA Compliance. To not and not allow any member of its
Controlled Groups or any Plan of any of them to: (i) engage in any "prohibited
transaction" as such term is defined in Section 4.06 or Section 2003(a) of
ERISA; (ii) incur any "accumulated funding deficiencies" (as such term is
defined in Section 3.02 of ERISA) whether or not waived; (iii) terminate any
Pension Plan in a manner which could result in the imposition of a lien on any
property of the Guarantor, or any member of its Controlled Group pursuant to
Section 4068 of ERISA; or (iv) violate state or federal securities laws
applicable to any Plan.
(o) Subordinate Position. To (i) make or own (including a
participation) no loan to any Obligor or member of its Obligor Group unless
such Obligor's or member's obligations, as the case may be, to repay such loan
is subordinate to such Obligor's or member's obligation, as the case may be,
to repay the Loan or Loans made to such Obligor and sold by the Seller to the
Buyer under the Holdback Loan Purchase Agreement and (ii) own no corporation
or other business entity that makes loans to any Obligor or member of its
Obligor Group if such Obligor's or members repayment obligation on such loan
is senior to its payment obligation to the Loan or Loans made to Obligor or
its member and sold to Buyer under the Holdback Loan Purchase Agreement.
(p) NCB Borrower Eligibility. To maintain its status as an
"eligible" borrower under the provisions of the Bank Act.
ARTICLE V
GUARANTOR DEFAULTS
Section 5.01 Guarantor Defaults. Any of the following acts
or occurrences shall constitute "Guarantor Defaults" under this Agreement.
(a) Guaranty Default. Guarantor shall fail to make any payments
due under the Guaranty, Repurchase Guaranty or Existing Guaranty and such
failure shall remain unremedied for five (5) Business Days after written
notice thereof shall have been given to Guarantor by Buyer; or
(b) Performance Default. Guarantor shall fail to perform or
observe any other obligation, covenant or term of this Agreement and such
failure shall remain unremedied for thirty (30) days after written notice
thereof shall have been given to Guarantor by Buyer; or
(c) Voluntary Bankruptcy, Etc. Guarantor shall: (1) file a
petition seeking relief for itself under Title 11 of the United States Code,
as now constituted or hereafter amended, or file an answer consenting to,
admitting the material allegations of or otherwise not controverting, or fail
timely to controvert a petition filed against it seeking relief under Title 11
of the United States Code, as now constituted or hereafter amended; or (2)
file such petition or answer with respect to relief under the provisions of
any other now existing or future applicable bankruptcy, insolvency, or other
similar law of the United States of America or any State thereof or of any
other country or jurisdiction providing for the reorganization, winding-up or
liquidation of corporations or an arrangement, composition, extension or
adjustment with creditors; or
(d) Involuntary Bankruptcy, Etc. An order for relief shall be
entered against Guarantor under Title 11 of the United States Code, as now
constituted or hereafter amended, which order is not stayed; or upon the entry
of an order, judgment or decree by operation of law or by a court having
jurisdiction in the premises which is not stayed adjudging it a bankrupt or
insolvent under, or ordering relief against it under, or approving as properly
filed a petition seeking relief against it under the provisions of any other
now existing or future applicable bankruptcy, insolvency or other similar law
of the United States of America or any State thereof or of any other country
or jurisdiction providing for the reorganization, winding-up or liquidation of
corporations or any arrangement, composition, extension or adjustment with
creditors, or appointing a receiver, liquidator, assignee, sequestrator,
trustee or custodian of the Guarantor, or of any substantial part of the
property of Guarantor, or ordering the reorganization, winding-up or
liquidation of its affairs, or upon the expiration of one hundred twenty (120)
days after the filing of any involuntary petition against it seeking any of
the relief specified in Section 5.01(c) or this Section 5.01(d) without the
petition being dismissed prior to that time; or
(e) Insolvency, Etc. Guarantor shall (i) make a general
assignment for the benefit of its creditors or (ii) consent to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, or
custodian of all or a substantial part of the property of Guarantor or (iii)
admit its insolvency or liability to pay its debts generally as they become
due, or (iv) fail generally to pay its debts as they become due, or (v) take
any action (or suffer any action to be taken by its directors or shareholders)
looking to the dissolution or liquidation of Guarantor then, in the event of
any Guarantor Default specified in (a) above, so long as the Guarantor Default
shall not have been remedied, the Buyer may, by notice to the Servicer,
terminate all of the rights of the Guarantor under this Agreement, and, in the
event of a Guarantor Default specified in (b), (c) or (d) above, the Buyer
shall immediately and automatically terminate the rights of the Guarantor
under this Agreement. In addition, the Buyer shall have the right, upon the
occurrence of a Guarantor Default, to pursue all legal remedies available to
it.
ARTICLE VI
MISCELLANEOUS
Section 6.01 Further Assurances. Each party hereto agrees to
execute and deliver to the other party and to perform all such other acts as
the other party may reasonably request to carry out the transactions
contemplated by this Agreement.
Section 6.02 Indemnities. (a) Guarantor will defend and
hereby indemnify Buyer and its successors, assigns, servants and agents
(hereinafter "Indemnities") against and agree to protect, save and keep
harmless and make whole each thereof, from any and all liabilities,
obligations, losses, damages, penalties, claims, actions, suits, costs
(including any net increase in the tax liability of an Indemnitee resulting
from its receipt of indemnity payments made under this Section 5.02), expenses
and disbursements, including reasonable attorneys' fees, of whatsoever kind
and nature imposed on, incurred by or asserted against any Indemnitee in any
way relating to or arising out of (i) this Agreement, the Holdback Loan
Purchase Agreement, or any of the documents entered into in connection with
any of them; (ii) the Buyer's interest in the Loans or related Property
purchased or accepted under the Holdback Loan Purchase Agreement or the
enforcement of any claims thereunder; (iii) any claim made by any Obligor, or
any other party, related to the Loans or related Property purchased or
accepted hereunder, or the administration of the transactions evidenced by
such Loans and related Property or related to any other transactions between
the Obligors or their affiliates and the Seller or its affiliates; or (iv) any
environmental claim or liability relating to any real property securing any
Loans.
(b) For any claims arising against United Resources, Inc. in its
capacity as the Servicer, the Guarantor will defend and hereby indemnify the
Buyer, its directors, officers, employees and agents, against any and all
costs, expenses, losses, damages, claims and liabilities in respect of any
grossly negligent action taken by, or grossly negligent omission of, the
Servicer with respect to its servicing obligations under the Loan Purchase
Agreement.
(c) The foregoing indemnities with regard to any particular
Indemnitee shall not extend to any liability, obligation, loss, damage,
penalty, claim, action, suit, cost, expense or disbursement (i) that results
from the willful misconduct or gross negligence of such Indemnitee or from any
breach of any representation or warranty made by such Indemnitee herein; (ii)
that constitutes any tax based on any Indemnitee's net income, items of tax
preference or gross receipts (except with respect to indemnity payments
hereunder); or (iii) that consists of the failure of any Obligor to pay its
obligations under the Notes as they become due unless such failure results
from a claim of such Obligor against Seller, Guarantor, Servicer or any
Subsidiary or Affiliate of any of them, or Buyer otherwise indemnified against
hereunder. Any indemnity payments required under this Section 6.02 shall be
paid within thirty (30) days following notice thereof from the Indemnitee to
Guarantor (which notice shall describe in reasonable detail the matter with
respect to which indemnification is required and shall set forth the
computation used in determining the amount of the indemnity payment). All of
the rights and privileges of each Indemnitee under this Section 6.02, and the
rights, privileges and obligations of Guarantor hereunder, shall survive the
expiration or other termination of this Agreement.
Section 6.03 No Waiver: Remedies Cumulative. No failure by
the Guarantor or Buyer to exercise, and no delay in exercising, any right,
power or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy under this
Agreement preclude any other or further exercise thereof or the exercise of
any other right, power, or remedy. The rights and remedies provided herein
are cumulative and not exclusive of any right or remedy provided by law.
Section 6.04 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
Section 6.05 Consent to Jurisdiction: Waiver of Immunities.
Guarantor and Buyer hereby irrevocably submit to the jurisdiction of any state
or federal court sitting in the District of Columbia or the State of Oregon in
any action or proceeding brought to enforce or otherwise arising out of or
relating to this Agreement and irrevocably waive to the fullest extent
permitted by law any objection which they may now or hereafter have to the
laying of venue in any such action or proceeding in any such forum, and hereby
further irrevocably waive any claim that any such forum is an inconvenient
forum. The parties agree that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in any other jurisdiction
by suit on the judgment or in any other manner provided by law.
Section 6.06 Notices. All notices and other communications
provided for in this Agreement shall be in writing or (unless otherwise
specified) by telex, telegram or cable and shall be sent for next Business Day
delivery to each party at the address set forth under its name on the
signature page hereof, or at such other address as shall be designated by such
party in a written notice to the other party. Except as otherwise specified,
all such notices and communications if duly given or made shall be effective
upon receipt.
Section 6.07 Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective Successors
and assigns. Notwithstanding the foregoing, the Guarantor may not assign or
otherwise transfer all or any part of its rights or obligations hereunder
without the prior written consent of the other parties, and any such
assignment or transfer purported to be made without such consent shall be
ineffective. In addition, Buyer may, however, sell, assign or transfer the
Loans and related Property which are the subject of the guaranties provided
herein without the consent of the Guarantor. Further, the Guarantor agrees to
recognize any such buyers or assignees as successors and assigns of the Buyer
hereunder, with all rights of the Buyer hereunder.
Section 6.08 Capital Markets Funding. Guarantor hereby
agrees to cooperate with Buyer in making such modifications to this Agreement,
in executing such other documents and certificates, in causing to be prepared
and delivered such opinions, certificates, financial reports and letters, and
in taking such other actions, including changing accounting firms, as are
reasonably necessary to achieve capital markets funding of the Loans and the
related Property or to improve the execution of such funding.
Section 6.09 Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall as to such
jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties waive
any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
Section 6.10 Attorney's Fees. In the event it is necessary
for any party hereto or its Successors or assigns to institute suit in
connection with this Agreement or the breach thereof, the prevailing party in
such suit shall be entitled to reimbursement for its reasonable costs,
expenses and attorney's fees incurred including fees incurred on any appeal.
Section 6.11 Setoff. In addition to any rights now or
hereafter granted under applicable law, upon the occurrence of any Termination
Event or Servicer Default, Buyer is hereby authorized by Guarantor at any
time, with notice to Guarantor, to set off and to appropriate and to apply to
the amounts then owed by Guarantor hereunder or the Seller or Servicer under
the Holdback Loan Purchase Agreement, as the case may be, to Buyer any and all
deposits (general or special, including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured, but not
including trust accounts) and any other indebtedness at any time held or owing
by Buyer to Guarantor.
Section 6.12 Limitation on Third Party Beneficiaries. No
provision, warranty, representation, or agreement herein, whether express or
implied, is intended to or shall be construed as conferring upon any Person
not a party hereto (including, without limitation, any Obligor) any rights or
remedies whatsoever.
Section 6.13 Continuing Agreement. This Guaranty Agreement
is a continuing agreement and shall remain in full force and effect until the
Holdback Loan Purchase Agreement and the Existing Loan Purchase Agreement
shall have terminated and all of United Resources' obligations under the
Holdback Loan Purchase Agreement and the Existing Loan Purchase Agreement have
been satisfied; provided, however, that if the Holdback Loan Purchase
Agreement and the Existing Loan Purchase Agreement are terminated pursuant to
Section 9.02 of the Holdback Loan Purchase Agreement and Section 10.02 of the
Existing Loan Purchase Agreement, respectively, then the Guarantor's
obligations under this Guaranty Agreement shall survive the termination of the
Holdback Loan Purchase Agreement and the Existing Loan Purchase Agreement; and
provided further, that (a) the rights accrued to the Buyer prior to
termination of this Agreement and (b) the indemnification rights set forth in
Section 6.02 hereof shall be continuing and shall survive termination of this
Guaranty Agreement.
Section 6.14 Entire Agreement; Amendment. This Agreement
comprises the entire agreement of the parties and may not be amended or
modified except by written agreement of the parties hereto. No provision of
this Agreement may be waived except in writing and then only in the specific
instance and for the specific purpose for which given.
Section 6.15 Headings. The headings of the various
provisions of this Agreement are for convenience of reference only, do not
constitute a part hereof, and shall not affect the meaning or construction of
any provision hereof.
Section 6.16 Counterparts. This Agreement may be executed in
any number of identical counterparts, any set of which signed by the parties
hereto shall be deemed to constitute a complete, executed original for all
purposes.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended
and Restated Guaranty Agreement to be executed by their respective officers or
agents thereunto duly authorized as of the date first above written.
UNITED GROCERS, INC., as Guarantor
By /s/ Alan C. Jones
Its President
By /s/ George P. Fleming
Its Assistant Secretary
Notice Address:
6433 S.E. Lake Road
Portland, Oregon 97222
Attention: President
NATIONAL CONSUMER COOPERATIVE BANK,
as Buyer
By
Its
By
Its
Notice Address:
1401 Eye Street, N.W.
Suite 700
Washington, D.C. 20005
ACKNOWLEDGMENT:
UNITED RESOURCES, INC.
as Seller and Servicer
By /s/ George P. Fleming
Its President
By /s/ Alan C. Jones
Its Vice President
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
Schedule of Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
For the Years Ended
Sept. 29 Sept. 30 Oct. 1 Oct. 2 Sept. 27
1995 1994 1993 1992 1991
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Computation of
Earnings:
Pretax Income $2,153,474 $ 2,563,731 $ 2,290,818 $ 3,103,286 $ 2,699,466
Plus Patronage
Dividend 8,350,000 8,730,168 9,000,000 10,211,000 10,427,000
Less
capitalized
interest -0- -0- (64,929) (578,611) -0-
Total Earnings 10,503,474 11,293,899 11,225,889 12,735,675 13,126,466
Computation of
Fixed Charges:
Total
Interest
Expense 12,773,947 9,156,822 8,281,946 9,303,377 9,051,471
Interest factor
in rental
Expense 5,350,735 5,172,638 4,864,189 3,769,920 3,254,212
Total
Fixed
Charges (1) 18,124,682 14,329,460 13,146,135 13,073,297 12,305,683
Total Earnings
and Fixed
Charges (2) 28,628,156 25,623,359 24,436,953 26,187,583 25,432,149
Ratio of
Earnings
to Fixed
Charges
(2)/(1) 1.58 1.79 1.85 1.97 2.07
Notes:
A. Adjusted income used to compute the ratio of adjusted income to
fixed charges represents net income to which has been added income
taxes, patronage dividends and fixed charges. Fixed charges consist of
interest on all indebtedness and that portion of rentals considered to
be the interest factor.
B. Interest portion of buildings and equipment rental expense was
calculated at 60% for each year.
</TABLE>
<PAGE>
SUBSIDIARIES
of
UNITED GROCERS, INC.
September 29, 1995
B.A.T. Enterprises, Inc.
Grocers Insurance Company
Grocers Insurance Group, Inc.
Grocers Insurance Agency, Inc.
Northwest Process, Inc.
Premier Consulting, Inc.
Rich and Rhine, Inc.
U.G. Resources, Inc.
UGIC, Ltd.
United Resources, Inc.
United Store Development, Ltd.
United Workplace Consultants, Inc.
Western Security Services, Ltd.
Western Passage Express, Inc.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the consolidated
financial statements of United Grocers, Inc.,
for the fiscal year ended September 29, 1995
and is qualified in its entirety by reference
to such financial statements.
<MULTIPLIER> 1
<FISCAL-YEAR-END> SEP-29-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-29-1995
<PERIOD-TYPE> YEAR
<S> <C>
<CASH> 13,045,456
<SECURITIES> 40,809,762
<RECEIVABLES> 70,706,049
<ALLOWANCES> 1,684,996
<INVENTORY> 81,477,754
<CURRENT-ASSETS> 212,447,047
<PP&E> 107,739,587
<DEPRECIATION> 46,611,815
<TOTAL-ASSETS> 322,456,063
<CURRENT-LIABILITIES> 159,936,742
<BONDS> 115,623,670
0
0
<COMMON> 27,235,112
<OTHER-SE> 15,122,375
<TOTAL-LIABILITY-AND-EQUITY> 322,456,063
<SALES> 1,018,248,456
<TOTAL-REVENUES> 1,018,248,456
<CGS> 870,097,228
<TOTAL-COSTS> 111,901,500
<OTHER-EXPENSES> 14,232,470
<LOSS-PROVISION> 1,894,189
<INTEREST-EXPENSE> 12,773,947
<INCOME-PRETAX> 2,153,474
<INCOME-TAX> 774,469
<INCOME-CONTINUING> 1,379,005
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,379,005
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
