REGISTRATION NO. ____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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UNITED GROCERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Oregon 93-0301970
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
6433 S. E. Lake Road (Milwaukie, Oregon), Post Office Box 22187,
Portland, Oregon 97222
(503) 833-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ALAN C. JONES, President
United Grocers, Inc.
6433 S. E. Lake Road (Milwaukie, Oregon), Post Office Box 22187,
Portland, Oregon 97222
(503) 833-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
Miller, Nash, Wiener, Hager & Carlsen
111 S. W. Fifth Avenue
Portland, Oregon 97204-3699
Attention: Erich W. Merrill, Jr.
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time following the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. [X]
<TABLE>
<CAPTION>
Title of each class of Amount being Proposed maximum Proposed maximum Amount of
securities being registered offering price per unit aggregate offering registration fee
registered price
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Common Stock, 250,000 shares $61.53 $15,382,500 $ 4,661.36
$5 par value
Series K Notes $50,000,000 100% $50,000,000 $15,151.51
</TABLE>
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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UNITED GROCERS, INC.
Cross Reference Sheet Between
the Items of Part I of Form S-2 and the Prospectus
<TABLE>
<CAPTION>
Location or Caption
Items in Form S-2 in Prospectus
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1. Forepart of the Registration Statement and Cover page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages Statement of Available
of Prospectus Information; Incorporation
of Certain Documents by
Reference; Table of Contents
3. Summary Information, Risk Factors and Ratio Prospectus Summary; Risk Factors
of Earnings to Fixed Charges
4. Use of Proceeds Introduction
5. Determination of Offering Price Introduction
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution Introduction
9. Description of Securities to be Risk Factors; Introduction;
Registered Description of Membership
Stock; Description of Notes
10. Interests of Named Experts and Counsel *
11. Information with Respect to Prospectus Summary; Risk Factors;
the Registrant Introduction;
The Company; Recent Developments;
Incorporation of Certain Documents
by Reference
12. Incorporation of Certain Information Incorporation of Certain
by Reference Documents by Reference
13. Disclosure of Commission Position on *
Indemnification for Securities
Act Liabilities
* Omitted either because the item is inapplicable or because the answer is in the negative.
</TABLE>
<PAGE>
UNITED GROCERS, INC.
(Portland, Oregon)
250,000 SHARES
COMMON STOCK, $5 PAR VALUE
$50,000,000 SERIES K 5% SUBORDINATED
REDEEMABLE CAPITAL INVESTMENT NOTES
MATURING APPROXIMATELY 10 YEARS FROM DATE OF ISSUE
Common stock ("Membership Stock") is sold solely to members of
United Grocers, Inc. ("United"), at adjusted book value determined for each
calendar year as of the end of United's preceding fiscal year. In addition to
shares sold to newly admitted members as a prerequisite for membership,
Membership Stock may be issued to existing members for cash or in payment of
patronage dividends.
See "The Company."
Notes are issued in registered form in denominations of $100 or
multiples of $100 at 100% of principal amount, with interest payable quarterly.
Notes are issued in noncertificated form. Notes are redeemable at United's
option during the 7 years prior to maturity at a price equal to principal plus
accrued interest. United does not expect any public market for Notes to develop.
Although it is not legally obligated to do so, United intends to prepay any
Note, at any time, upon request of the holder. See "Introduction."
The board of directors of United has decided to pay interest at the
rate of 6.25% per annum during the period March 16, 1996, to June 15, 1997, on
all Notes outstanding at any time during that period. On June 16, 1997, the
interest rate on all Notes will revert to the stated rate of 5% per annum unless
the board of directors takes further action. The decision to pay interest at
6.25% per annum is a voluntary action taken by the board of directors in
recognition of prevailing interest rates. There can be no assurance that the
interest rate on Notes after June 15, 1997, will exceed 5% per annum. The only
right evidenced by the Notes is to receive timely payment of principal and
interest at 5% per annum.
PRICE TO UNDERWRITING PROCEEDS
PUBLIC DISCOUNTS AND TO UNITED
COMMISSIONS
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Per Share $61.53 None $61.53
Per Note 100% None 100%
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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This offering is not underwritten; all sales will be made by United
through its regular employees. United reserves the right to withdraw, cancel or
modify the offer without notice and to reject orders in whole or in part.
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THE DATE OF THIS PROSPECTUS IS MAY ___, 1997
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TABLE OF CONTENTS
Page
Statement of Available Information.............................................2
Incorporation of Certain Documents by Reference................................2
Prospectus Summary.............................................................4
Risk Factors...................................................................7
Introduction..................................................................11
The Company...................................................................14
Recent Developments...........................................................17
Description of Membership Stock...............................................18
Description of Notes..........................................................19
Legal Matters.................................................................22
Experts.......................................................................22
Additional Information........................................................23
No person is authorized to give any information or to make any
representations other than those contained herein, and, if given or made, such
information or representations must not be relied upon as having been
authorized. Neither the delivery hereof nor any sale hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of United since the date hereof. This prospectus does not constitute an
offer to sell or a solicitation of any such offer in any state to any person to
whom it is unlawful to make such an offer in such state.
STATEMENT OF AVAILABLE INFORMATION
United files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission
("Commission"). The public may read and copy any reports, statements and other
information filed by United at the Commission's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. United's filings
are also available to the public from commercial document retrieval services and
at the Internet web site maintained by the SEC at "http://www.sec.gov."
United intends to provide its security holders annual reports
containing audited financial statements which have been examined and reported on
by independent certified public accountants.
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE
United incorporates herein by reference (i) its annual report on
Form 10-K for the fiscal year ended September 27, 1996, and (ii) the material
under the captions "Board of Directors" and "Management" and the information on
pages 1 through 20 of the bound insert included in United's annual report to its
security holders for the year ended September 27, 1996. In addition, all
documents filed by United pursuant to Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934, as amended, after September 27, 1996 (the end
of the most recent fiscal year), shall be deemed to be incorporated by reference
in this prospectus and to be a part hereof from the date of filing of the
documents (such documents, and the documents enumerated above, are hereinafter
referred to as "Incorporated Documents"). Any statement contained in an
Incorporated Document shall be deemed to be modified or superseded for purposes
of this prospectus and the registration statement of which it is a part to the
extent that a statement contained herein or in any other subsequently filed
Incorporated Document or in an accompanying prospectus supplement modifies or
supersedes the statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
prospectus or the registration statement.
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This prospectus is accompanied by a copy of United's 1996 annual
report to security holders, its current report on Form 10-Q for the quarter
ended December 27, 1996, and its current report on Form 8-K filed April 29,
1997. United will provide, without charge, to each person to whom a copy of this
prospectus is delivered, upon the written or oral request of any such person, a
copy of the above mentioned Form 10-K (other than certain exhibits). Requests
should be directed to John W. White, Vice President, United Grocers, Inc., Post
Office Box 22187, Portland, Oregon 97269-2187, telephone (503) 833-1000.
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<PAGE>
PROSPECTUS SUMMARY
The following material summarizes certain matters described in
the prospectus. It is necessarily incomplete and is qualified in its entirety by
reference to the remainder of the prospectus.
UNITED
The Company
United Grocers, Inc., 6433 S. E. Lake Road (Milwaukie,
Oregon), Post Office Box 22187, Portland, Oregon
97269-2187; telephone (503) 833-1000.
Principal
Business A wholesale grocery distributor which
operates as a cooperative. United sells groceries and
related products at wholesale to approximately 353
independent retail grocery stores operated by its
members in Oregon, western Washington and northern
California.
Use of Proceeds of Working capital and general corporate purposes.
Offering
See "Introduction--Use of Proceeds" and "The Company."
MEMBERSHIP STOCK
Shares Offered to Retail grocers who have been accepted as members of
United on the basis of 200 shares per retail store.
Membership Stock will also be issued to members in
payment of patronage dividends and to members who wish
to acquire additional shares for cash.
Price Adjusted book value computed as of the end of each
fiscal year (the Friday nearest September 30) to be
effective for the following calendar year ($61.53 per
share, or $12,306 for 200 shares, during 1997).
Repurchase Under its present bylaws United is obligated to
repurchase shares held by terminated members at the
price at which Membership Stock is then being offered
(book value as of the end of the fiscal year preceding
the year of termination, adjusted for certain items).
A portion of the repurchase price may, under certain
circumstances, be paid in installments on such terms
as the board of directors determines.
Voting Rights One vote for each shareholder of record.
Transfer Membership Stock is not transferable.
Dividends and Federal
Tax Consequences It is United's policy not to declare dividends other
than patronage dividends based upon members'
purchases. The total amount of patronage dividends
(including Membership Stock) is taxable to individual
members when distributed.
See "Introduction," "The Company" and "Description of Membership Stock."
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<PAGE>
NOTES
Notes Offered Series K Subordinated Redeemable Capital Investment
Notes.
Interest 5% per annum, payable quarterly. The board of
directors of United has decided to pay interest at the
rate of 6.25% per annum during the period March 16,
1996, to June 15, 1997, on all Notes outstanding at
any time during that period. On June 16, 1997, the
interest rate on all Notes will revert to the stated
rate of 5% per annum unless the board of directors
takes further action. The decision to pay interest at
6.25% per annum is a voluntary action taken by the
board of directors in recognition of prevailing
interest rates. There can be no assurance that the
interest rate on Notes after June 15, 1997, will
exceed 5% per annum. The only right evidenced by the
Notes is to receive timely payment of principal and
interest at 5% per annum.
Denominations $100 and multiples thereof.
Price 100% of the principal amount.
Certificates Notes will be noncertificated. The rights of holders
of Notes will be evidenced by the Investment Note
Register maintained by United. United will provide
holders of Notes with quarterly statements of their
Note holdings.
Maturity of Principal On the interest payment date coinciding with, or next
following, the expiration of 10 years from date of
issue.
Prepayment In the event of death of a registered holder or joint
registered holder of a Note, United will be legally
obligated to prepay the Note upon request of the
person entitled to the Note. Although United has no
other obligation to prepay Notes, its policy has been
to prepay any Note, upon 10 days notice, at the
request of the holder. However, United may discontinue
such policy at any time. In April and May 1997,
prepayments were temporarily suspended due to an
unusual volume of requests. See "Introduction--Notes
Offered." The prepayment price is the principal amount
plus accrued interest.
Type Unsecured, subordinated to Senior Indebtedness. The
amount of Senior Indebtedness outstanding as of
September 27, 1996, was approximately $156,200,000.
There is no limit upon the amount of Senior
Indebtedness that United may incur.
Redemption Redeemable at the option of United during the 7 years
prior to maturity at a price equal to principal plus
accrued interest.
Transfer Notes are transferable but no market for Notes exists
or is expected to develop.
Indenture Trustee First Bank National Association.
See "Introduction" and "Description of Notes."
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<PAGE>
SELECTED FINANCIAL DATA
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FISCAL YEARS ENDED
SEPT. 27 SEPT. 29 SEPT. 30 OCT. 1 OCT. 2
1996 1995 1994 1993 1992
(Dollars in thousands, except per share amounts)
Income Statement(1):
Net sales and operating
<S> <C> <C> <C> <C> <C>
revenues $1,301,507 $1,018,248 $954,220 $876,985 $896,587
Income before members'
patronage dividends, income
taxes, and accounting change 4,227 10,503 11,294 11,291 13,314
Patronage dividends 4,000 8,350 8,730 9,000 10,211
Net income(2)(3)(9) 152 1,379 1,563 1,714 2,723
Balance Sheet:
Working capital(4)(8) 59,224 52,510 45,258 41,819 53,326
Total assets(7) 384,144 322,456 306,836 285,342 261,289
Liabilities
Current(9) 195,238 159,937 147,443 136,809 113,759
Long-term 143,134 115,624 114,669 105,539 104,645
Members' equity(8) 41,459 42,357 40,425 39,112 39,141
Adjusted book value per share(5) 61.53 62.14 59.50 57.00 53.94
Ratio of adjusted income
to fixed charges(1)(6) 1.19 1.58 1.79 1.85 1.97
</TABLE>
(1) In fiscal 1993, United changed its method of accounting for inventories
to the first-in, first-out method. Amounts for prior periods have been
restated to reflect the change.
(2) Earnings per share are not shown because earnings are distributed only
in the form of patronage dividends; under United's policy no earnings
are available for the purpose of paying dividends on the Membership
Stock.
(3) In fiscal 1992, United changed its method of accounting for income
taxes, resulting in a one-time increase in net income of $526,314.
(4) In fiscal 1992, United changed its method of accounting for investments,
resulting in an increase in current assets at October 2, 1992, of
$26,684,291 and a corresponding decrease in non-current assets.
(5) Adjusted book value per share, which is the offering price per share, is
computed by subtracting from total members' equity at fiscal 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 amount by shares outstanding at fiscal year end.
(6) 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, less capitalized interest. Fixed
charges consist of interest on all indebtedness and that portion of
rentals considered to be the interest factor.
(7) In fiscal 1994, United changed its method of accounting for reinsurance.
Amounts for fiscal 1993 have been restated to reflect the change. See
Note 10 to the Consolidated Financial Statements.
(8) In fiscal 1995, United changed its method of accounting for investments
to comply with SFAS No. 115. The change is not applied retroactively to
prior years financial statements. See Note 2 to the Consolidated
Financial Statements.
(9) In fiscal 1996, United changed its method of accounting for post
retirement benefits other than pensions. The change is not applied
retroactively to prior years' financial statements. See Note 12 to the
Consolidated Financial Statements.
For additional information, reference is made to the Consolidated Financial
Statements and other information incorporated herein by reference as described
under "Incorporation of Certain Documents by Reference."
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<PAGE>
RISK FACTORS
Persons considering purchasing the Membership Stock and Notes
offered hereby should carefully consider the following risk factors in addition
to the other information contained in this Prospectus.
LACK OF MARKET FOR UNITED'S MEMBERSHIP STOCK OR NOTES. There is
no established market for the Membership Stock or Subordinated Redeemable
Capital Investment Notes presently outstanding, and it is unlikely that a market
will be available in which the Membership Stock and Notes offered by this
Prospectus can be sold. The shares of Membership Stock offered hereby may not be
sold or otherwise transferred or pledged by the holder without United's written
consent. Notes are issued in noncertificated form and, accordingly, may not be
readily salable. See "Description of Membership Stock,"
"Introduction--Membership Stock Offered," and "Introduction--Notes Offered."
SUBORDINATION OF NOTES. Payment of the principal and interest on
the Notes offered hereby is subordinated in right of payment, in case of
liquidation of United, to the prior payment in full of the principal of and
interest on Senior Indebtedness, as set forth in the Supplemental Indenture. As
of September 27, 1996, Senior Indebtedness (as defined in the Supplemental
Indenture) amounted to approximately $156,200,000. There is no restriction on
the Company's ability to incur additional Senior Indebtedness from time to time.
In addition, if a default occurs and is continuing beyond the expiration of any
grace period on any Senior Indebtedness, United may not make any payment on the
Notes or in connection with the redemption or purchase of Notes during the
continuation of the default. See "Introduction--Notes Offered" and "Description
of Notes--Subordination."
RISKS OF LEVERAGE. The majority of United's operating capital
consists of borrowed funds. United intends to borrow additional funds for
various purposes in the future. Borrowings will have to be repaid with cash flow
from operations or proceeds of capital transactions, which could reduce the
amounts otherwise available for distribution to members as patronage dividends
or as payment of principal or interest on the Notes. See "The Company--Cost
Savings." United is currently (or was until recently) out of compliance with one
of the financial covenants required by United's lenders. Some of United's
lenders waived United's noncompliance for the period prior to December 31, 1996,
subsequently modified the covenants to bring United into compliance, and raised
the interest rate paid by United by .5 percent. Although United believes its
other lenders will waive United's noncompliance and agree to a new covenant or
covenants, United realizes that the interest rates charged on amounts borrowed
by United from its other lenders may increase and other terms for repayment of
indebtedness may change. United's dependence on borrowed funds in general and
the increased interest and other costs it may incur as a result of changes in
lending agreements may affect United's ability to pay dividends on Membership
Stock, to pay principal and interest on Notes, or to repurchase Membership Stock
or Notes; may make United more susceptible to economic downturns; may limit
United's ability to withstand competitive pressure; and may affect United's
ability to obtain financing in the future for working capital, capital
expenditures, and general corporate purposes.
NO OBLIGATION TO REDEEM NOTES. United is not legally obligated
to prepay Notes except upon the death of the holder. Although it has been
United's policy to prepay any Note upon 10 days' notice at request of the
holder, United may discontinue this policy at any time. In April and May 1997,
United temporarily suspended prepayments because of an unusual volume of
requests. See "Introduction--Notes Offered."
DEPENDENCE ON KEY PERSONNEL. United's success depends to a
significant extent upon the continued service of its executive officers and
other key personnel. On April 18, 1997, United's President and Chief Executive
Officer, Alan C. Jones, announced his resignation. To assist in the
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<PAGE>
transition, Alan C. Jones will serve as acting President and Chief Executive
Officer until a successor is found. John W. White continues to serve as United's
Vice President.
NO OBLIGATION TO PAY MORE THAN STATED INTEREST RATE. Notes bear
interest at a stated interest rate 5% per annum. United's board of directors has
voluntarily decided to pay interest at 6.25% per annum from December 16, 1996,
to March 15, 1997, after which date the interest rate on all Notes will revert
to the stated rate of 5% per annum unless United's board of directors takes
further action. There can be no assurance that the interest rate payable on
Notes after March 15, 1997, will exceed 5% per annum. See "Introduction--Notes
Offered."
RE-ENGINEERING AND RESTRUCTURING PLANS. United has adopted a
program to re-engineer its operations and dispose of certain assets in order to
improve its efficiencies and reduce costs. Although there is no certainty that
these changes will result in achieving the desired improvements, United believes
the improvements are important if United is to remain competitive.
ONE VOTE PER MEMBER. United's bylaws and articles of
incorporation provide that each holder of record of Membership Stock is entitled
to one vote regardless of the number of shares owned. Members who control family
corporations or other separate entities that hold shares may control more than
one vote because each controlled entity is a separate holder of record. See
"Introduction--Notes Offered" and "Description of Membership Stock."
LIMITATIONS ON INVESTMENT RETURN. Although United has regularly
paid patronage dividends to its members in the past, no assurance can be given
as to when or whether patronage dividends will be paid in the future. There can
be no assurance that United will have in any year sufficient net earnings from
United's cooperative business to permit the payment of patronage dividends. See
"The Company--Membership." Dividends other than patronage dividends have not
been paid by United, and it is not anticipated that any dividends other than
patronage dividends will be paid in the future. See "The Company--Cost Savings,"
"The Company--Deposit," "Description of Membership Stock," and
"Introduction--Membership Stock Offered."
SHARE REDEMPTION--LIMITATIONS. In general, United has no
obligation to redeem or otherwise repurchase Membership Stock. In addition, upon
termination of membership or upon a member's tender of shares for redemption,
the member's Membership Stock will be purchased by United only if the purchase
is permitted by United's redemption policy and by restrictions imposed by
corporate law. Under the Oregon Business Corporation Act, a redemption is
permitted only if after paying the redemption price, in the judgment of United's
board of directors: (a) United would be able to pay its debts as they become due
in the usual course of business; and (b) United's total assets would at least
equal the sum of its total liabilities plus the amount that would be needed to
satisfy the preferential rights of shareholders upon dissolution. There is no
assurance that United's financial condition will always be such that it will be
legally permitted or able to repurchase shares tendered for redemption. In
addition, United's bylaws provide that the repurchase price for the redemption
of any shares over and above the number of shares the member was required to
purchase as a condition of membership may, in the discretion of United's board
of directors, be paid in 20 quarterly installments with interest or in such
other manner as the board of directors may determine. Redemptions may be
effected by payment to the member or credit to the member's account. Because
shares will be issued and redeemed at a price based on adjusted book value as of
the close of the fiscal year last ended, any decrease in book value between
issuance and redemption could result in a reduction in value to the member. See
"Introduction--Membership Stock Offered," "The Company--Membership," and
"Description of Membership Stock."
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POSSIBLE CHANGE OF MEMBERSHIP STOCK BOOK VALUE. United's
Membership Stock is offered at its adjusted book value, which is subject to
change. There can be no assurance that the adjusted book value of the Membership
Stock will not decline. See "Description of Membership Stock" and
"Introduction--Membership Stock Offered."
NO ASSURANCE OF SALE. United anticipates that the securities
offered hereby will not all be sold in the immediate future and that the
offerings will therefore be made on a continuous basis over a period of time.
The offering of Membership Stock is being made only to persons who are engaged
in the operation of retail food stores that are customers of United and who have
applied for and been accepted for membership by United's board of directors. In
addition, the offering of Membership Stock and Notes is not underwritten.
Accordingly, there can be no assurance that all or any portion of the Membership
Stock or Notes offered hereby will be sold. See "The Company--Membership,"
"Description of Membership Stock," and "Introduction--Membership Stock Offered."
MEMBERSHIP STOCK AND PATRONAGE DIVIDENDS SET OFF AGAINST MEMBER
INDEBTEDNESS. United's bylaws provide that a member's Membership Stock is made a
guarantee fund to United and its subsidiaries for any and all advances, debts,
liabilities and obligations of every kind owed by the member to United or any of
its subsidiaries. Therefore, before United makes any payment for Membership
Stock upon termination of a membership, United is entitled, at its option, to
deduct from the book value of the member's Membership Stock the full amount of
all obligations owed by the member to United or any of its subsidiaries.
United's bylaws also provide that, prior to the distribution of patronage
dividends to a holder of Membership Stock, United may apply such patronage
dividends as an offset against any indebtedness owed to United by the holder,
provided that the holder shall nevertheless receive in cash 20% of the total
patronage dividends distributable to that holder for that year. By becoming a
holder of Membership Stock, each member is deemed to have granted United a first
lien upon (1) all patronage dividends accrued for the account of such holder
with respect to which United possesses a right of offset and (2) any document
which constitutes a written notice of allocation held by the holder at any time.
These bylaw provisions may result in a reduction in the amount otherwise payable
to a holder of Membership Stock in exchange for Membership Stock or as patronage
dividends. United's board of directors is further entitled to expel a member
(and to purchase the member's Membership Stock at book value less indebtedness
owed by the member to United or any of its subsidiaries) if the member discloses
confidential information, misuses his or her position as an officer or director
of United, purchases goods for the benefit of a party who does not hold
Membership Stock, violates any federal or state law or any bylaw of United, or
otherwise acts in a dishonorable or dishonest manner or in a manner detrimental
to United or its members.
RISKS RELATED TO EXPANSION. In fiscal year 1996, United acquired
the assets and certain liabilities and lease exposure associated with the
wholesale operations of Bay Area Foods, Inc., in California. Acquisitions
involve a number of risks, including the diversion of management's attention
to the assimilation of the operations, personnel, and assets of the acquired
businesses, integration of management information systems, retention of key
management personnel, renegotiation of bank credit lines, adjustment of
relationships with customers and suppliers, and increases in general and
administrative expenses. No assurance can be given that the California
acquisition will not materially adversely affect United or that the acquisition
will enhance United's performance.
COMPETITION. Generally, food products are commodities and
retailers base their purchasing decisions principally on the delivered price of
the product. As a result, the grocery industry, including the wholesale food
distribution business, is characterized by intense competition and low profit
margins. United competes with a number of local, regional, and national grocery
wholesalers and with a number of major businesses that market their products
directly to retailers, including companies having greater assets and larger
sales volumes than United. United's customers also compete at the retail level
with
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independent grocery and food retailers and several chain grocery store
organizations, some of which have integrated wholesale and retail operations. A
decision by any large company to focus on United's existing markets or target
markets could have a material adverse effect on United's business and results of
operations. Although United believes that it competes favorably with respect to
factors such as quality, merchandising, service, systems of sales and
distribution, name recognition, and loyalty, there can be no assurance that
United will not experience competitive pressure, particularly with respect to
pricing, that could adversely affect its results of operations.
PRODUCT SUPPLY. The supply and price of many food products and
commodities purchased and sold by United can be affected by a number of factors
beyond the control of United, such as economic factors affecting growing
decisions, frosts, drought, floods, other weather conditions, various plant
diseases, pests, and other acts of nature. There can be no assurance that these
factors will not materially and adversely affect United's results of operations
in the future.
GEOGRAPHIC CONCENTRATION. United's members are concentrated in
California, Oregon, and Washington. As such, United's sales may be adversely
affected by natural occurrences, economic downturns, and other conditions
affecting those markets.
RISKS ASSOCIATED WITH PERISHABLE PRODUCTS. The food products
sold by United include fresh fruits, vegetables, dairy products, and other
perishable goods with a limited shelf life. Because it is not practicable to
hold excess inventory of perishable products, United's results of operations are
partly dependent on its ability to accurately forecast its near-term sales in
order to adjust supply of perishable items accordingly. Failure to accurately
forecast such sales could result in United either being unable to meet higher
than anticipated demand or carrying excess inventory that cannot be profitably
sold, and could have an adverse effect on United's business or results of
operations.
COST SENSITIVITY AND PRICING; DEPENDENCE ON SUPPLIERS. United's
profitability is highly sensitive to cost increases that cannot always be passed
on to its customers in the form of higher prices or otherwise recovered.
Moreover, certain products sold by United are obtained from a single or limited
number of suppliers. Although United believes it could develop alternative
sources for all of its products, significant delays or interruptions in the
delivery of products from current suppliers could adversely affect United's
profitability.
INCOME TAX LIABILITY FOR PATRONAGE DIVIDENDS. A purchaser of
shares of Membership Stock will be required to report as gross income, for
federal income tax purposes, the patronage dividends, if any, distributed by
United to such purchaser. Shares of Membership Stock issued as a portion of a
patronage dividend must be reported as income at their full stated dollar
amount, along with cash received as the other portion of such dividends.
Although a minimum of 20 percent of each recipient's total annual patronage
dividend is required to be paid by United in cash, the cash portion may be
insufficient, depending upon the income tax bracket of each recipient, to
provide funds for the full payment of the federal income tax liability incurred
by the recipient with respect to such patronage dividends. Shares of Membership
Stock distributed as patronage dividends are subject to state income taxes in
Oregon and to state income and corporation franchise taxes in California, and
may be subject to such taxes in other states. See "The Company--Patronage
Dividends and Tax Matters."
COOPERATIVE TAX STATUS. Although United is incorporated as an
Oregon business corporation, it has historically operated and anticipates that
it will continue to operate as a cooperative, reporting its tax liability in
accordance with rules applicable to corporations operating on a cooperative
basis. Because applicable laws, regulations, rulings, and judicial
interpretations with respect to taxation of cooperatives have been subject to
change from time to time, no assurance can be given that the cooperative income
tax status of United could not be challenged successfully by the Internal
Revenue
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Service based on a future change in or interpretation of law. If such status
were to be challenged successfully, United would incur a significant income tax
liability. See "The Company--Patronage Dividends and Tax Matters."
OWNERSHIP OF PROPERTIES. United owns or leases certain retail
grocery store sites (the "Store Sites") which it in turn leases to members.
United's revenues will depend in part on the success of the particular grocery
stores operated on the Store Sites. The success of these grocery stores will be
affected by a number of factors, including, for example, the managerial and
financial capabilities of the members to which the Store Sites are leased, the
location of other competitive grocery stores in relation to the Store Sites, the
ability of United to compete with other grocery store suppliers generally, and
the assistance and services provided by United to its members.
RISKS OF DECREASES, DELAYS, OR DEFAULTS IN RENTAL PAYMENTS. A
decrease in the amount of rentals paid to United with respect to one or more of
the Store Sites (for example, because of sales decline or because a grocery
store is no longer operated on a Store Site) would affect adversely United's
return on its investment. In addition, United would be affected adversely by
failure of member-lessees to make their required rental payments in a timely
manner or by a default in the payment of rent due under such members' leases.
Such delays or defaults could require United to apply its funds to pay amounts
that otherwise would be borne by the member-lessees, such as local property
taxes, rents due under leases on the Store Sites, and maintenance and other
costs with respect to the Store Sites. United does not require its
member-lessees to carry lease insurance that could fund payment of rent under
the leases in case of a default by the member-lessees.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus and the
information incorporated by reference, including without limitation statements
containing the words "believes," "anticipates," "intends," "expects" and words
of similar import, constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. The forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of United to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. These factors with
respect to United include, among others, the following: adverse changes in
national or local economic conditions, competition from other grocery
wholesalers, changes in the availability, cost and terms of financing, changes
in operating expenses, United's ability to successfully complete business
improvement initiatives, and other risks and uncertainties described in this
Prospectus. Certain of these factors are discussed in more detail elsewhere in
this Prospectus, including without limitation under the captions "Risk Factors,"
"The Company," "Recent Developments," "Description of Membership Stock," and
"Description of Notes." Given these uncertainties, shareholders and prospective
investors are cautioned not to place undue reliance on the forward-looking
statements. United disclaims any obligation to update any such factors or to
publicly announce the result of any revisions to any of the forward-looking
statements contained herein to reflect future events or developments.
INTRODUCTION
GENERAL. United is offering to sell 250,000 shares of its
Membership Stock and $50,000,000 in principal amount of Notes. All sales will be
made by United through its regular employees, who will not receive any
additional remuneration in connection with the sales. No sales will be made
through brokers and there are no underwriters. Membership Stock is not
transferable and there is, therefore, no public market for it. United does not
expect that any public market for Notes will develop. United anticipates that
the securities offered hereby will not all be sold in the immediate future
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and that the offerings will, therefore, be made on a continuous basis over a
period of time. There is no assurance that any portion of the offerings will be
sold.
USE OF PROCEEDS. United expects to use the proceeds from the
sale of the securities offered hereby for working capital and general corporate
purposes. To the extent that proceeds are insufficient to meet United's
requirements for working capital at any particular time, United intends to rely
upon increased borrowing from banks. Although United has not in the past
experienced any substantial difficulty in obtaining bank financing, there can be
no assurance that United will be able to obtain additional bank financing or
that it will be able to obtain such financing at interest rates which it
considers reasonable.
MEMBERSHIP STOCK OFFERED. Membership Stock is sold only upon
approval by United's board of directors to retail grocers who have applied for
and been accepted for membership in United. Retail grocers accepted for
membership will thereby gain the right to purchase groceries and related
products from United on a cooperative basis. See "The Company." Membership Stock
is sold in units of 200 shares for each retail store accepted for membership.
Shares will be sold from time to time as United's board of directors admits
additional members and as existing members are accepted for membership with
respect to additional stores. Membership Stock will also be issued to existing
members in partial payment of patronage dividends (see "The Company") and to
members who wish to purchase additional shares for cash.
Membership Stock is offered at its adjusted book value, as
determined by United's annual audited balance sheet as of the end of each fiscal
year, effective the following January 1. Adjusted book value per share is
computed by subtracting from total members' equity at fiscal 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 amount by shares outstanding at fiscal
year end. At September 27, 1996, the adjustment for investments accounted for on
the equity method was primarily due to United's investment in Western Family
Holding Company. The adjusted book value at September 27, 1996, was $61.53 per
share. Thus, the offering price for 200 shares during calendar year 1997 is
$12,306.
From time to time, United sells Membership Stock to new members
on an installment basis. If the board of directors determines that an
applicant's financial standing merits such treatment, Membership Stock may be
issued upon receipt of a cash down payment plus a promissory note or other
undertaking to pay the balance of the purchase price. The amount of the down
payment, interest rate and other terms of installment sales may vary depending
on the applicant's financial standing.
United's bylaws provide that, upon termination of membership,
Membership Stock will be repurchased by United at the price at which Membership
Stock is then being offered (adjusted book value). United's board of directors
may elect to pay the repurchase price in installments upon such terms as the
board of directors determines with respect to any shares held over and above the
number of shares a member was initially required to purchase upon acceptance to
membership. For additional information, see "Description of Membership Stock."
Although United has no other obligation to repurchase Membership Stock, the
board of directors has indicated that it will consider requests for repurchase
of Membership Stock from members which are corporations upon a bona fide
transfer of ownership of the corporate member.
It is United's policy not to declare dividends other than patronage dividends
based on a member's purchases from United. The total amount of patronage
dividends (including Membership Stock) is taxable to individual members when
distributed. See "The Company."
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United's bylaws provide that the number of shares of Membership
Stock which a member is required to purchase shall be established by the board
of directors. The board of directors has decided that, at present, members must
purchase a unit of 200 shares for each retail store for which they are admitted
as members. This number is subject to change from time to time. There will not
be any refund on or redemption of any shares already purchased as a result of
any decrease in the number of shares required for new stores. Existing members
will not be required to purchase additional shares as a result of any future
increase in the number of shares required per store.
United's bylaws and articles of incorporation also provide that
each holder of record of Membership Stock is entitled to one vote regardless of
the number of shares owned. Thus, a newly admitted member purchasing 200 shares
of Membership Stock will have the same voting rights as an existing member
directly holding a greater or lesser number of shares. Certain members control
family corporations or other separate entities that own shares. Those members
may control more than one vote because each controlled entity is a separate
holder of record. See "Description of Membership Stock."
Under United's present policies, members acquiring additional
Membership Stock may have (i) the possibility, under certain circumstances, of
receiving a greater portion of future patronage dividends in cash (see "The
Company--Deposit") and (ii) the possibility of realizing gain in the event of
future appreciation in the book value of Membership Stock (see "Description of
Membership Stock"). MEMBERS CONSIDERING ACQUIRING ADDITIONAL SHARES OF
MEMBERSHIP STOCK SHOULD BE AWARE THAT THERE CAN BE NO ASSURANCE THAT UNITED'S
FUTURE OPERATIONS WILL RESULT IN THE PAYMENT OF PATRONAGE DIVIDENDS OR IN ANY
APPRECIATION IN BOOK VALUE. In the event of losses in future years, the book
value of Membership Stock could decline. Also, as described more fully under
"The Company" and "Description of Membership Stock," the proportion of patronage
dividends to be paid in cash and the method of payment for repurchased shares of
Membership Stock are all subject to the discretion of United's board of
directors, and the right to repurchase at book value upon termination of
membership is subject to change by a vote of United's members. Acquisition of
additional shares of Membership Stock will not give a member any additional
voting rights.
Any increase in the total number of shares outstanding will, of
course, proportionately reduce the effect of future changes in total members'
equity upon book value per share. In other words, future increases or decreases
in members' equity resulting from earnings or losses will have a lesser effect
per share if the total number of shares outstanding is increased.
NOTES OFFERED. United is offering Notes only in fully registered
form without coupons in denominations of $100 or multiples of $100 at 100% of
principal amount. Notes bear interest at 5% per annum, payable quarterly, and
mature on the interest payment date coinciding with, or next following, the
expiration of 10 years from the date of issue. The board of directors of United
has decided to pay interest at the rate of 6.25% per annum during the period
March 16, 1996, to June 15, 1997, on all Notes outstanding at any time during
that period. On June 16, 1997, the interest rate on all Notes will revert to the
stated rate of 5% per annum unless the board of directors takes further action.
The decision to pay interest at 6.25% per annum is a voluntary action taken by
the board of directors in recognition of prevailing interest rates. The board
expects to review the interest rate paid on Notes from time to time in light of
prevailing interest rates and other factors. There can be no assurance that the
interest rate on Notes after June 15, 1997, will exceed 5% per annum. The only
right evidenced by the Notes offered hereby is to receive timely payment of
principal and interest at 5% per annum.
Notes are issued as noncertificated Notes. The rights of Note
holders are evidenced by the Investment Note Register. Note holders are
therefore dependent on the Investment Note Registrar to maintain accurate
records regarding their Note holdings. United presently serves as Investment
Note
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<PAGE>
Registrar. Because there is no certificate, Notes may not be readily saleable.
However, no market for Notes exists or is expected to develop.
Notes are unsecured and are subordinated in right of payment to
Senior Indebtedness (as defined, see "Description of Notes--Subordination") in
the event of any liquidation or dissolution. The amount of Senior Indebtedness
at September 27, 1996, was approximately $156,200,000 (consisting of
approximately $88,489,000 in unsubordinated long-term debt and approximately
$67,711,000 in current liabilities). Notes may be redeemed at United's option
during the 7 years prior to maturity at a redemption price equal to their
principal amount plus accrued interest. For additional information, see
"Description of Notes."
Upon the death of a registered holder or joint registered
holder, United will be legally obligated to prepay the Note upon request of the
person entitled to the Note. United may require evidence of death before making
prepayment. Although United has no other legal obligation to prepay Notes, its
present intention is to prepay any Note, at any time, upon request of the
holder. The prepayment price upon death or under United's prepayment policy is
the principal amount of the Note plus accrued interest.
United's prepayment policy may provide holders of Notes with
liquidity which they might not otherwise have. Although United's present
intention is to continue its prepayment policy indefinitely, it may discontinue
such policy at any time. In the event that United discontinues its prepayment
policy, holders of Notes might, because of the absence of an established market,
be unable to sell their Notes prior to maturity or might be unable to sell the
Notes other than at a price below their principal amount.
It is anticipated that most sales of Notes will be made to
members of United, friends and relatives of members, key employees and other
persons with existing relationships with United. United allows members to
purchase Notes on a regular basis by adding the purchase price to any such
member's weekly invoice for grocery purchases.
THE COMPANY
GENERAL. United, a wholesale grocery distributor, is an Oregon
business corporation organized in 1915 which operates and is taxed as a
cooperative.
It 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 37 cash-and-carry depots, principally to nonmember grocers, restaurants,
and institutional buyers.
United's board of directors consists of nine members serving
staggered three-year terms, and they may not be elected to consecutive terms.
Directors, all grocers, must either be proprietors or partners owning a
membership in United or the holder of a substantial interest in a corporation
owning a membership in United. United's directors are Dick Leonard, Dean Ryan,
Gordon Smith, Robert A. Lamb, Ron Mansacola, H. Larry Montgomery, Kenneth W.
Findley, Gaylon Baese, and James Glassel.
The management of the corporation is under the direction of a
President and Chief Executive Officer who is employed and guided by the board of
directors. Alan C. Jones, the current President and
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Chief Executive Officer, announced his resignation April 18, 1997, but plans to
continue to serve until his replacement is hired. John W. White has performed
and will continue to perform the duties of Vice President.
Additional information is set forth in the documents incorporated
herein by reference.
MEMBERSHIP. United has approximately 248 members operating a
total of approximately 353 retail grocery stores. All applicants for membership,
who must be retail grocers, 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 Membership
Stock.
Upon termination of membership, a member's shares of Membership
Stock are redeemed. Sales and redemptions of Membership Stock are made at
adjusted book value. Adjusted book value for this purpose is determined
according to United's most recent annual audited balance sheet, adjusted for
certain items, effective for the following calendar year. See "Description of
Membership Stock."
United's board of directors may elect to pay the repurchase price
in installments with respect to any shares held over and above the number of
shares a member was initially required to purchase upon acceptance to
membership. See "Description of Membership Stock."
The following table shows the adjusted book value per share of
Membership Stock for the past five years:
<TABLE>
<CAPTION>
Fiscal years ended
SEPT. 27 SEPT. 29 SEPT. 30 OCT. 1 OCT. 2
1996 1995 1994 1993 1992
---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C>
Adjusted book value per share $61.53 $62.14 $59.50 $57.00 $53.94
</TABLE>
The issuance of the additional shares offered hereby may result
in substantial dilution of the rate of increase or decrease in adjusted book
value per share. See "Introduction."
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. While the complex pricing systems used in the
wholesale grocery industry make item-by-item price comparisons impracticable,
United believes that its pricing structure, including the various cost savings
available to members, compares favorably on an overall basis with the pricing
structures of its competitors. A cost equalization 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 for the preceding four weeks,
excluding drop shipment purchases. The cost equalization percentages are
designed to reflect the economies of scale realized by United in servicing
larger 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
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suppliers. The amount of rebates and allowances paid to members with respect to
particular items may vary from the amount realized by United from its 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. For fiscal year 1996,
the board decided to distribute 86.65% of the overage that was available for
distribution. Decisions concerning the portion of 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.
See "Deposit."
As a result of cost equalization, rebates, allowances and
patronage dividends, the total cost savings each member realizes will vary
depending on the member's volume of purchases and merchandising of particular
products.
PATRONAGE DIVIDENDS AND TAX MATTERS. The following discussion
summarizes the operation of certain aspects of the federal income tax treatment
of cooperatives. The tax treatment of cooperatives is subject to change from
time to time as the Internal Revenue Code of 1986, as amended ("Code"), is
amended and as new regulations and interpretations are periodically adopted.
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 Code requires that not less than 20 percent of each member's
patronage dividend be paid in cash. It is United's policy to at least meet that
minimum requirement and to pay the balance of patronage dividends in Membership
Stock. See "Deposit" for information regarding the method used by United to
determine the patronage dividends to be paid in cash in excess of the Code's
minimum requirement.
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, including the adjusted book value of 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 generally retain all profits (or losses) from
their operations and are subject to all applicable income taxes.
DEPOSIT. Members are encouraged to accumulate holdings of
Membership Stock. Such holdings are referred to in the cooperative grocery trade
as "Deposits," although the Membership Stock is not physically deposited with
United. The amount of a member's Deposit is defined to be the adjusted book
value of his or her Membership Stock. The Deposit does not include notes
representing United's obligation to pay the deferred balance of the price of
Membership Stock repurchased from members or Capital Investment Notes. The
Deposit is used to:
a. Provide a guarantee fund for the member's purchases on open
account.
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<PAGE>
b. Ensure the funding of United's operations.
c. Serve as a basis for calculating cash patronage dividends. The
method of calculation is intended to encourage members to maintain
Deposits of at least one and one half times their average weekly
purchases ("AWP") from United. AWP is the average of a member's weekly
purchases of all items from United during the fiscal year for which
patronage dividends are being calculated.
In recent years, the noncash portion of patronage dividends has
been paid in Membership Stock, and it is anticipated that future payments will
also be made in Membership Stock. The board's present policy is to pay patronage
dividends as follows:
1. If the Deposit is less than one and one half times AWP, the
member's patronage dividend is paid 20 percent in cash and 80 percent in
Membership Stock.
2. If the Deposit equals or exceeds one and one half times AWP
but is less than 4,000 shares, the member's patronage dividend is paid 80
percent in cash and 20 percent in Membership Stock.
3. If the Deposit equals or exceeds one and one half times AWP
and is at least 4,000 shares, the member's patronage dividend is paid 100
percent in cash.
4. In the case of multiple store operations, Deposit and AWP
requirements are applied on a per store basis.
5. If a member's Deposit exceeds 4,000 shares of Membership Stock
per store, excess shares may be submitted for redemption over a five-year
period. Twenty percent of the shares submitted for each store will be
redeemed each year at the current share price for that year.
The board's Deposit policy is subject to change from time to
time. Although the board expects to retain the general principle of paying
increasing portions of patronage dividends in cash as a member's Deposit
increases, the board may, in the future, decide to consider additional factors
in the payment of patronage dividends. Therefore, there can be no assurance that
the purchase of Membership Stock by a member will result in the member's
receiving any particular portion of future patronage dividends in cash.
RECENT DEVELOPMENTS
OPERATING ACTIVITIES. The Company has begun an enterprise
re-engineering effort in order to reduce the costs of its operations.
Specifically, the Company is isolating its costs and revenues for each service,
activity, and commodity so its member customers can receive necessary
information to improve costs and efficiencies at the wholesale level.
Anticipated completion date of this effort is mid- 1997.
Throughout the next two years, the Company intends to continue to
close redundant warehouse locations. The closure of the Company's Medford
warehouse facility and shift in business emphasis to California and Portland,
Oregon, are expected to improve distribution efficiencies and create cash as
assets are sold and inventory levels are reduced.
The Company's information systems integration efforts are
expected to be substantially completed over the next two years. The system
integration is expected to support consolidation of certain
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distribution operations, allow for the creation of increased operating controls
across multiple warehouse locations, and develop the flexibility to manage
customers with many different needs.
FINANCIAL POSITION. The Company plans to reduce its number of
non-operating properties over the next two years. These properties are primarily
assets associated with retail property locations acquired in settlement of
outstanding loans, and many are now pending sale or are under lease to other
entities. The closure of redundant warehouse distribution properties is also
expected to reduce total assets and corresponding debt levels.
As previously reported, the Company has been engaged in and
intends to continue discussions with its lenders and expects to renegotiate
existing credit agreements. It is anticipated that the renegotiated bank and
other senior credit agreements will require the Company to provide security for
substantially all borrowings thereunder.
CHIEF EXECUTIVE OFFICER. On April 18, 1997, Alan C. Jones
announced his intended retirement from his position as Chief Executive Officer
and President. The Company has commenced a national search for a qualified
replacement. Mr. Jones has indicated his willingness to serve as Chief Executive
Officer and President until a replacement is found.
DESCRIPTION OF MEMBERSHIP STOCK
United's authorized Membership Stock consists of 10,000,000
shares of Membership Stock, $5 par value. Membership Stock is sold only to
members of United. All members must be actively engaged in the retail grocery
business and must be approved by the board of directors, primarily on grounds of
financial responsibility and operational ability, before being admitted to
membership.
Each member must purchase the number of shares of Membership
Stock as determined by the board of directors for each retail store the member
operates. Each shareholder of record is entitled to one vote, regardless of the
number of shares owned. Certain members control family corporations or other
separate entities that own shares. Those members may control more than one vote
because each controlled entity is a separate holder of record. Voting for
directors is noncumulative.
Membership Stock is not transferable and is not negotiable. Under
United's bylaws all shares are sold at adjusted book value and, upon a member's
death, retirement, voluntary withdrawal, expulsion or cessation of purchases
from United, will be repurchased by United at adjusted book value as determined
by United's annual audited balance sheet as of the end of each fiscal year,
effective the following January 1. Adjusted book value per share is computed by
subtracting from total members' equity, 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 amount by shares outstanding at fiscal year end (as restated for any
stock splits, stock dividends or similar changes). United's bylaws provide that
the repurchase price for any shares over and above the number of shares the
member was required to purchase as a condition of membership for a retail store
or stores may, in the discretion of United's board of directors, be paid in 20
quarterly installments with interest at the same rate being paid from time to
time (presently 6.25%) on United's Capital Investment Notes then being offered
or in such other manner as the board of directors may from time to time
determine.
United's board has adopted a policy, subject to change without
notice, requiring United to repurchase on request the number of shares a member
owns in excess of 4,000. The excess shares are repurchased over a five-year
period at the current adjusted book value each year, payable in cash.
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United's obligation to repurchase the shares of members is
subject to the general limitations imposed by the Oregon Business Corporation
Act that United may not purchase shares if, after giving the purchase effect,
United would not be able to pay its debts as they become due in the usual course
of business or United's total assets would be less than its total liabilities.
A member is subject to expulsion by the board of directors for
the following reasons: (l) disclosure to nonmembers of confidential information
relating to United's business, (2) abuse of office by officers, (3) purchase of
goods for the benefit of a nonmember, (4) commission of a felony, (5) violation
of the corporation's bylaws, or (6) action to the detriment of the corporation.
Since 1954, no members have been expelled. Patronage dividends for the fiscal
year in which a membership is terminated are paid in cash following the end of
the fiscal year, based on the member's purchases from United during the fiscal
year. All bylaw provisions, including those relating to the repurchase of
Membership Stock at adjusted book value, are subject to amendment by a vote of a
two-thirds majority of the quorum of shares voting on such amendment.
Shares of Membership Stock are issued from time to time upon
payment of less than the full purchase price. Upon payment of the full purchase
price, shares of Membership Stock are fully paid and nonassessable. A member's
interest in the adjusted book value of shares of Membership Stock, is, however,
subject to being set off against any debts of the member to United or its
subsidiaries.
The shares of Membership Stock are entitled to share pro rata in
any liquidating distributions and dividends other than patronage dividends. It
is not the policy of the board of directors to declare any dividends other than
patronage dividends. In the event of any liquidation of United, the rights of
holders of Membership Stock with respect to any liquidating distributions and
the rights of former holders of Membership Stock with respect to any deferred
payments due them would be subordinated to all other claims against United's
assets.
Shares of Membership Stock are not subject to any sinking fund
provisions and have no conversion rights.
DESCRIPTION OF NOTES
The Notes offered hereby are issued as the tenth series of
Capital Investment Notes under an indenture dated as of February 1, 1978,
between United and United States National Bank of Oregon, as trustee ("U. S.
Bank"), as supplemented by supplemental indentures dated as of August 15, 1979,
November 11, 1981, December 15, 1984, December 15, 1986, January 27, 1989,
January 22, 1991, July 6, 1992, January 9, 1995, and January 21, 1997, (which
indenture, as so supplemented, is herein referred to as the "Indenture"). First
Bank National Association ("Trustee") has assumed U. S. Bank's rights and
obligations as trustee under the Indenture. A copy of the Indenture is on file
with the Securities and Exchange Commission as an exhibit to the registration
statement of which this prospectus forms a part. The following description
summarizes certain provisions of the Indenture and is subject to the detailed
provisions of the Indenture, to which reference is hereby made for a complete
statement of such provisions. Whenever particular Sections or terms defined in
the Indenture are referred to herein, such Sections or definitions are
incorporated by reference. References in parentheses are to Sections of the
indenture dated as of February 1, 1978, except that references marked with an
asterisk (*) are to Sections of the supplemental indenture dated as of January
21, 1997. See "Additional Information."
GENERAL. Notes bear interest from the date of issue at the stated
annual rate indicated on the cover page of this prospectus. United may, under
the Indenture, issue Notes at other interest rates, but no change in interest
rates may affect the stated interest rate on Notes then outstanding. Interest is
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paid on the 15th day of March, June, September, and December for the quarters
ending on those dates to the persons in whose names the Notes are registered as
of the last business day of the calendar month preceding the payment date.
(Secs. 3.06 and 4.02*)
Notes mature on the interest payment date which is on, or next
following, the date ten years from the date of issue, are unsecured obligations
of United and, except for Series K Notes issued upon registration of, transfer
of, or in exchange or in lieu of other Series K Notes as described below, are
limited to $50,000,000 aggregate principal amount, all of which is being offered
pursuant to this prospectus. Notes are issuable only in registered form, without
coupons, in denominations of $100 or any multiple of $100 approved by United.
Notes are issued as noncertificated Notes. (Secs. 1.15, 3.02, 2.01*, 4.01* and
4.02*)
Principal and interest on all Notes are payable at the principal
office of United in Clackamas County, Oregon, provided that, at the option of
United, interest and principal payments on Notes may be made by check mailed to
the address of the registered holders of the Notes. United intends to pay
interest and principal by check. (Secs. 3.01, 7.02 and 3.03*) United will
exchange Notes for other Notes of the same series and of a like principal amount
and having the same terms and conditions upon written request of the holder. No
service charge will be made to the holder for any exchange or transfer, except
for any tax or governmental charge incidental thereto. (Secs. 3.04 and 3.04*)
United is required to mail quarterly statements of Note holdings to holders of
Notes. (Sec. 4.03*)
United may from time to time without the consent of any holder of
an outstanding Note issue under the Indenture, by means of an indenture
supplemental thereto, additional Capital Investment Notes having different terms
and of a series other than the Notes. The amount of additional Capital
Investment Notes or other debt which may be issued by United is not limited by
the Indenture. (Sec. 4.01)
The Indenture does not contain any covenant or provision that
protects the holders of Notes against a reduction in the value of the Notes
resulting from a highly leveraged transaction, whether or not such transaction
involves a change in control of United. Similarly, no holder of Senior
Indebtedness of United at September 27, 1996, is protected against a reduction
in the value of Senior Indebtedness held by such holder resulting from a highly
leveraged transaction, except that certain agreements relating to Senior
Indebtedness require that United maintain specified financial ratios.
PREPAYMENT. Although United is not obligated to prepay Notes
except in the event of the death of a registered holder, United's policy has
been to prepay the principal amount of any Note, together with accrued interest
to the date of payment, upon 10 days' notice at the request of the holder. In
April and May 1997, prepayments were temporarily suspended because of an unusual
volume of requests.
In the event of the death of a registered holder or joint
registered holder of a Note, United is obligated, at the option of the person
legally entitled to become the holder of the Note, to prepay the principal
amount of the Note, together with accrued interest to the date of payment. Any
request for prepayment must be made to United in writing. United may, as a
condition precedent to the prepayment, require the submission of evidence
satisfactory to United of the death of the registered holder or joint registered
holder and such additional documents or other material as it may consider
necessary to establish the person entitled to become the holder of the Note or
such other facts as it considers relevant to the fulfillment of its prepayment
obligation. (Sec. 5.01*)
REDEMPTION. The Notes may be redeemed at the election of United
during the seven years prior to maturity at their principal amount, plus accrued
interest, upon not less than 30 days' notice by mail to the registered holder.
United, in its sole discretion, may designate for redemption Notes maturing on
specified dates or bearing specified interest rates. If less than all the Notes
with a specified maturity
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date or interest rate are to be redeemed, the Trustee shall select the
particular Notes to be redeemed in whole or in part. (Secs. 5.02* and 5.03*) No
interest on Notes selected for redemption will accrue after the date fixed for
redemption. (Sec. 5.04*)
SUBORDINATION. Payment of the principal of, and interest on, the
Notes is subordinated in the manner and to the extent set forth in the Indenture
in right of payment to the prior payment in full of all Senior Indebtedness.
(Sec. 6.01*) Senior Indebtedness is defined as indebtedness of United, whether
outstanding on the date of the Indenture or thereafter incurred, (a) for money
borrowed by United (other than indebtedness evidenced by Capital Investment
Notes and Registered Redeemable Building Notes); (b) for money borrowed by
others and guaranteed by United; (c) constituting purchase money indebtedness
incurred for the purchase of tangible property and for the payment of which
United is directly or contingently liable; (d) arising under any document
creating an absolute or contingent obligation of United to purchase promissory
notes and related documents from third parties; or (e) for fees, expenses, and
other obligations of United due in connection with indebtedness of United that
constitutes Senior Indebtedness; unless by the terms of the instrument creating
or evidencing the indebtedness it is provided that such indebtedness is not
superior in right of payment to the Notes. (Secs. 1.01*) The Indenture does not
limit the amount of Senior Indebtedness which United may incur.
The Indenture provides that, in the event of and during the
continuation of any default beyond the expiration of any grace period on any
Senior Indebtedness, no payment may be made on the Notes or for the redemption
or purchase of Notes. (Sec. 6.03*) Upon any distribution of assets of United,
upon any liquidation, dissolution, winding up or reorganization of United,
whether in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors, or other proceeding, all principal of
(and premium, if any) and interest on all Senior Indebtedness must be paid in
full before the holders of the Notes are entitled to receive or retain any
payment. Subject to the payment in full of all Senior Indebtedness, the holders
of the Notes are subrogated to the rights of the holders of the Senior
Indebtedness to receive distributions of assets of United applicable to Senior
Indebtedness until the Notes are paid in full. (Sec. 6.02*) By reason of such
subordination, in the event of insolvency, creditors of United who are holders
of Senior Indebtedness may recover more, ratably, than the holders of the Notes,
and creditors of United who are not holders of Senior Indebtedness or of the
Notes may recover less, ratably, than the holders of Senior Indebtedness, and
may recover more, ratably, than the holders of the Notes.
MODIFICATION OF INDENTURE. Modifications and amendments of the
Indenture may be made by United and the Trustee with the consent of the holders
of 66 2/3 percent in principal amount of the Capital Investment Notes of all
series then outstanding, provided that no such modification or amendment may,
without the consent of the holder of each Note affected thereby, (a) change the
maturity date of the principal or the interest payment dates; (b) reduce the
principal amount of or the interest on any Note; (c) change the currency of
payment; (d) impair the right to institute suit for the enforcement of any such
payment on or after the maturity date or the Redemption Date, as the case may
be; or (e) reduce the above-stated percentage of holders of Capital Investment
Notes necessary to modify or amend the Indenture. (Sec. 13.02)
EVENTS OF DEFAULT; NOTICE AND WAIVER. The following constitute
Events of Default: (a) default in the payment of any interest continued for 30
days; (b) default in the payment of the principal of (or premium, if any, on)
any Capital Investment Note at its maturity; (c) default in the performance of
any other covenant or warranty of United, continued for 60 days after written
notice as provided in the Indenture; (d) acceleration of any Senior Indebtedness
of United as a result of a default with respect thereto if such acceleration is
not rescinded within 30 days after written notice as provided in the Indenture;
and (e) certain events in bankruptcy, insolvency or reorganization. (Sec. 9.01)
If an Event of Default shall happen and be continuing, the Trustee or the
holders of not less than 25% in
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principal amount of outstanding Capital Investment Notes may declare the
principal of all the Capital Investment Notes to be due and payable immediately.
(Sec. 9.02)
The Indenture provides that the Trustee will, within 90 days
after the occurrence of a default, give to the holders of Capital Investment
Notes notice of such default known to it, unless such default shall have been
cured or waived; but, except in the case of a default in the payment of the
principal of (or premium, if any) or interest on any of the Capital Investment
Notes, the Trustee shall be protected in withholding such notice if it in good
faith determines that the withholding of such notice is in the interest of such
holders. (Sec. 9.14)
The holders of a majority in principal amount of the outstanding
Capital Investment Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, provided that such direction shall not be in
conflict with any rule of law or the Indenture. (Sec. 9.12) Before proceeding to
exercise any right or power under the Indenture at the direction of such
holders, the Trustee is entitled to receive from such holders reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with any such direction. (Sec. 10.02)
The holders of not less than a majority in principal amount of
the outstanding Capital Investment Notes may, on behalf of the holders of all
the Capital Investment Notes, waive any past default except (a) a default in the
payment of principal of (or premium, if any) or interest on any Capital
Investment Note, and (b) a default in respect of a covenant or provision of the
Indenture which cannot be amended without the consent of the holder of each
Capital Investment Note affected. (Sec. 9.13)
United is required to furnish to the Trustee annually a statement
as to the fulfillment by United of all its obligations under the Indenture.
(Sec. 7.06)
OTHER. The Notes have no sinking fund provisions. The Indenture
contains no restrictions on the dividends that may be paid by United and imposes
no obligations with respect to the maintenance of reserves, levels of net worth,
liabilities, working capital or the like.
REGARDING THE TRUSTEE. United has no agreements or business
relationships with the Trustee other than those contained in or contemplated by
the Indenture. The Trustee is required to furnish annual reports to holders of
Notes as to certain matters relating to the Notes, the Trustee's performance and
the Trustee's eligibility to act as Trustee. (Sec. 8.03)
LEGAL MATTERS
The validity of the Membership Stock and Notes offered hereby
have been passed upon for United by Miller, Nash, Wiener, Hager & Carlsen,
Portland, Oregon, who have acted as special counsel to United in connection with
this offer.
EXPERTS
The consolidated financial statements of United incorporated in
this prospectus by reference have been audited by DeLap, White & Raish,
independent certified public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in auditing and accounting in giving said report.
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<PAGE>
ADDITIONAL INFORMATION
This prospectus omits certain information contained in a
registration statement filed by United with the Securities and Exchange
Commission. For further information, reference is made to the registration
statement, including the financial schedules and exhibits filed as a part
thereof. See "Statement of Available Information."
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<PAGE>
PART II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution.
a. Registration fees $ 19,813.87
b. Printing, mailing and engraving costs 7,000.00*
c. Legal fees 25,000.00*
d. Accounting fees 20,000.00*
e. Blue sky fees 4,209.56
f. Other 0.00
-----------
Total $76,023.43*
* Expense is estimated.
Item 15. Indemnification of Directors and Officers
Section 60.367 of Oregon Revised Statutes (a part of the Oregon
Business Corporation Act) provides in substance that any director held liable
pursuant to that section for the unlawful payment of a dividend or other
distribution of assets of a corporation shall be entitled to contribution from
the shareholders who accepted the dividend or distribution, knowing the same to
have been made in violation of said Act or the articles of incorporation. The
section also provides that any such director shall be entitled to contribution
from the other directors who voted for or assented to the dividend or
distribution without complying with the applicable standards of conduct
prescribed by said Act.
As authorized by said Act, Article V of the registrant's restated
articles of incorporation provides:
"ARTICLE V
"A. Indemnification; Actions and Suits Other than by the
Corporation. Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action taken or not taken in his
capacity as such director, officer, employee or agent may be indemnified by
the corporation against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding, including any
appeal relating thereto, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person (i) did not act in good faith and in a
manner which he
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reasonably believed to be in or not opposed to the best interest of the
corporation or (ii) with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
"B. Indemnification; Actions and Suits by the Corporation. Any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action taken or not taken in his
capacity as such director, officer, employee or agent, may be indemnified
by the corporation against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or settlement
of such action or suit, including any appeal relating thereto, if he acted
in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable for negligence
or misconduct in the performance of his duty to the corporation unless and
only to the extent that the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such
court shall deem proper.
"C. Indemnification as a Matter of Right. To the extent that a
person referred to in Sections A and B of this Article has been successful
on the merits or otherwise in defense of any action, suit or proceeding
referred to in Sections A and B of this Article, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection therewith, as a matter of right.
"D. Indemnification Other Than as a Matter of Right. Any
indemnification under Sections A and B of this Article of a person referred
to therein (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification is proper in the circumstances because the applicable
standard of conduct set forth in Sections A and B of this Article, as the
case may be, has been met. Such determination shall be made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, (ii) if such a
quorum is not obtainable, or, even if obtainable, and a quorum of
disinterested directors so directs by independent legal counsel in a
written opinion, or (iii) by the shareholders.
"E. Payment of Expenses in Advance. Expenses incurred in
defending a civil or criminal action, suit or proceeding, may be paid by
the corporation in advance of the final disposition of such action, suit or
proceeding, as authorized in the manner provided in Section D of this
Article upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately
be determined that he is entitled to be indemnified by the corporation as
authorized in this Article.
"F. Provision Not Exclusive. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which those
indemnified may be entitled
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under any other provision of these Restated Articles of Incorporation, or
any bylaw, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of
such a person.
"G. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such capacity
or arising out of his status as such, whether or not the corporation has
the authority or obligation to indemnify him against such liability under
the provisions of this Article."
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("1933 Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
The registrant maintains a policy of insurance (incorporated by
reference in Exhibit 10-B hereto) which provides for coverage of certain of the
registrant's obligations under this provision. The undertaking of the registrant
in the preceding paragraph shall not apply to insurance against liability
arising under the 1933 Act.
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Item 16. Exhibits.
The exhibits are listed in the accompanying index to exhibits.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the 1933 Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement.
(2) That, for the purpose of determining any liability under the
1933 Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the 1933 Act, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that
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is specifically incorporated by reference in the prospectus to provide such
interim financial information.
See Item 15 regarding the Securities and Exchange Commission's
position on indemnification.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Milwaukie, State of Oregon, on April 28, 1997.
UNITED GROCERS, INC.
(Registrant)
By: /s/ JOHN W. WHITE
John W. White, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on April 28, 1997.
Name Title
Principal executive officer
/s/ ALAN C. JONES President
Alan C. Jones Secretary and Treasurer
Principal financial officer and
principal accounting officer
/s/ JOHN W. WHITE Vice President and
John W. White Chief Financial Officer
A majority of the Board of Directors
* DICK LEONARD Director
Dick Leonard
* DEAN RYAN Director
Dean Ryan
* GORDON SMITH Director
Gordon Smith
* ROBERT A. LAMB Director
Robert A. Lamb
* RON MANCASOLA Director
Ron Mansacola
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* H. LARRY MONTGOMERY Director
H. Larry Montgomery
* KENNETH W. FINDLEY Director
Kenneth W. Findley
* GAYLON BAESE Director
Gaylon Baese
* JAMES GLASSEL Director
James Glassel
* By /s/ JOHN W. WHITE
John W. White
Attorney-in-fact
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<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
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).
4.A Form of certificate representing shares of the registrant's
common stock, $5 par value (incorporated by reference to Exhibit
4-A to the registrant's registration statement on Form S-2, No.
33-26631).
4.B 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.C Copy of supplemental indenture dated as of January 21, 1997,
between the registrant and First Bank National Association, as
trustee, relating to the registrant's Series K 5% Subordinated
Redeemable Capital Investment Notes.
4.D 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).
4.E Copy of the registrant's bylaws, as amended (incorporated by
reference to Exhibit 3 to the registrant's quarterly report on
Form 10-Q for the period ended March 29, 1996).
5 Opinion of Miller, Nash, Wiener, Hager & Carlsen.*
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).
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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, as described under Item 15 (incorporated
by reference to Exhibit 10-C to the registrant's Form 10-K for
the fiscal year ended October 1, 1993).
10.D1a Copy of amended and restated credit agreement dated as of May 31,
1996, among the registrant, Bank of America NW, N.A., United
States National Bank of Oregon, and HongKong and Shanghai Banking
Corporation, Limited.
10.D1b Copy of Amendment Number One to Amended and Restated Credit
Agreement of May 31, 1996, dated as of July 25, 1996, by and
among the registrant, Bank of America NW, N.A., United States
National Bank of Oregon, and The HongKong and Shanghai Banking
Corporation, Limited.
10.D1c Copy of Amendment Number Two to Amended and Restated Credit
Agreement of May 31, 1996, dated as of September 27, 1996, by and
among the registrant, Bank of America NW, N.A., United States
National Bank of Oregon, and The HongKong and Shanghai Banking
Corporation, Limited.
10.D1d Copy of Amendment Number Three to Amended and Restated Credit
Agreement of May 31, 1996, dated as of October 28, 1996, by and
among the registrant, Bank of America NW, N.A., United States
National Bank of Oregon, and The HongKong and Shanghai Banking
Corporation, Limited.
10.D1e Copy of Amendment Number Four to Amended and Restated Credit
Agreement of May 31, 1996, dated as of November 29, 1996, by and
among the registrant, Bank of America NW, N.A., United States
National Bank of Oregon, and The HongKong and Shanghai Banking
Corporation, Limited.
10.D1f Copy of Amendment Number Five to Amended and Restated Credit
Agreement of May 31, 1996, dated as of December 26, 1996, by and
among the registrant, Bank of America NW, N.A., United States
National Bank of Oregon, and The HongKong and Shanghai Banking
Corporation, Limited.
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10.D1g Copy of Amendment Number Six to Amended and Restated Credit
Agreement of May 31, 1996, dated as of January 31, 1997, by and
among the registrant, Bank of America NW, N.A., United States
National Bank of Oregon, and The HongKong and Shanghai Banking
Corporation, Limited.
10.D1h Copy of Amendment Number Seven to Amended and Restated Credit
agreement of May 31, 1996, dated as of February 28, 1997, by and
among the registrant, Bank of America NW, N.A., United States
National Bank of Oregon, and The HongKong and Shanghai Banking
Corporation, Limited.
10.D2 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).
10.D3 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).
10.D4 Copy of Loan Purchase and Servicing Agreement dated as of May 13,
1994, between 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).
10.D5 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).
10.D6 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 (incorporated by reference to Exhibit 4.F3 to
the registrant's Form 10-K for the fiscal year ended September
29, 1995).
II-10
<PAGE>
10.D7 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 (incorporated by reference
to Exhibit 4.F4 to the registrant's Form 10-K for the fiscal year
ended September 29, 1995).
10.D8 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).
10.D9 Interest rate and currency exchange agreement dated as of April
22, 1993, between the registrant and Bank of America National
Trust and Savings Association (incorporated by reference to
Exhibit 10- C19 to Post-Effective Amendment No. 1 to the
registrant's registration statement on Form S-2, No. 33-57272).
10.E1 Typical forms executed in connection with loans to members,
including directors:
10.E1a Installment note (Stevens-Ness form 217), with optional interest
rate riders.
10.E1b Promissory note (Stevens-Ness form 216), with optional interest
rate riders.
10.E1c Installment note (incorporated by reference to Exhibit 10-D1c to
the registrant's Form 10-K for the fiscal year ended September
29, 1995).
10.E1d Renewal note for fixed rate loan (incorporated by reference to
Exhibit 10-D1d to the registrant's Form 10-K for the fiscal year
ended September 29, 1995).
10.E1e Subsequent note (four forms).
10.E1f Loan agreement (two forms).
10.E1g Loan agreement for subsequent notes (two forms).
10.E1h Amendment to loan and security agreements, including optional
clauses.
10.E1i Amendment to installment note and security agreements
(incorporated by reference to Exhibit 10-D1i to the registrant's
Form 10-K for the fiscal year ended September 29, 1995).
10.E1j Security agreement (Stevens-Ness form 1201).
10.E1k Purchase money security agreement (Stevens-Ness form 1202).
10.E1l Security agreement for equipment (Stevens-Ness form 1203).
10.E1m Inventory loan and security agreement (Stevens-Ness form 1206).
10.E1n Security agreement (equipment and inventory).
II-11
<PAGE>
10.E1o Security agreement for subsequent notes.
10.E1p Capital Stock Note.
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the registrant has
filed the forms listed above in lieu of filing each document executed in
connection with loans to directors. A schedule showing the principal amount and
interest rate of each director loan at November 30, 1996, appears in Item 13.C
of the registrant's Form 10-K for the fiscal year ended September 27, 1996. The
registrant agrees to furnish a copy of any omitted loan document to the
Securities and Exchange Commission upon request.
10.E2a Typical form of residual stock redemption note executed in
connection with redemption of common stock from members,
including directors.
10.E2b Schedule listing material details of residual stock redemption
notes payable to directors and nominees.
Pursuant to Instruction 2 to Item 601 of Regulation S-K, the registrant has
filed the form and schedule listed above in lieu of filing each document
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.F Copy of sublease agreement for Tigard store dated August 28,
1991, between the registrant and Howards on Scholls, Inc., and
Gaylon Baese, a director of the registrant.
10.G1 Copy of sublease agreement for Troutdale store dated December 15,
1993, between the registrant and a partnership in which Robert A.
Lamb, a director of the registrant, is a partner (incorporated by
reference to Exhibit 10.F1 to the registrant's Form 10-K for the
fiscal year ended September 29, 1995).
10.G2 Copy of sublease agreement for Wilsonville store dated June 25,
1991, between the registrant and a partnership in which Robert A.
Lamb, a director of the registrant, is a partner (incorporated by
reference to Exhibit 10.F2 to the registrant's Form 10-K for the
fiscal year ended September 29, 1995).
10.G3 Copy of guarantee from the registrant to Key Bank on behalf of
Garden Home store owned by a partnership in which Robert A. Lamb,
a director of the registrant, is a partner.
10.H1 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 director
of the registrant (incorporated by reference to Exhibit 10.G to
the registrant's Form 10-K for the fiscal year ended September
29, 1995).
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<PAGE>
10.H2 Copy of sublease agreement for Shasta Lake store dated April 8,
1996, between the registrant and Al Mancasola's Grocery Markets,
Inc., a company in which Ron Mancasola, a director of the
registrant, has an ownership interest.
10.I1 Copy of operating agreement of Willamette Foods Marketplace, LLC,
effective as of March 3, 1996, between United Resources, Inc., a
subsidiary of registrant and PML Investments, LLC.
10.I2 Copy of operating agreement of West Linn Foods Marketplace, LLC,
effective as of March 3, 1996, between United Resources, Inc., a
subsidiary of the registrant, and PML Investments, LLC.
12 Statement of computation of ratio of adjusted income to fixed
charges (incorporated by reference to Exhibit 12 to the
registrant's Form 10-K for the fiscal year ended September 27,
1996).
13 1996 annual report to security holders. (Pursuant to item
601(b)(13) of Regulation S-K, only those portions of such annual
report which are expressly incorporated by reference in the
prospectus forming a part of this registration statement shall be
deemed "filed" with the Securities and Exchange Commission.)
23.A Consent of Miller, Nash, Wiener, Hager & Carlsen (filed as part
of Exhibit 5).
23.B Consent of DeLap, White & Raish.
24 Power of attorney.
25 Statement of Eligibility of Trustee.
27 Financial Data Schedule.
* To be filed by pre-effective amendment.
** Denotes management contract or compensatory plan or arrangement.
II-13
UNITED GROCERS, INC.
AND
FIRST TRUST NATIONAL ASSOCIATION
TRUSTEE
----------------
SUPPLEMENTAL INDENTURE
DATED AS OF JANUARY 21, 1997
SERIES K CAPITAL INVESTMENT NOTES
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Parties................................................................................... 1
Recitals.................................................................................. 1
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 1.01. Definitions........................................................ 2
Section 1.02. Provisions of General Application.................................. 3
Section 1.03. Provisions Specially Applicable to Series K Notes.................. 3
Section 1.04. Effect of Headings and Table of Contents........................... 3
Section 1.05. Successors and Assigns............................................. 4
Section 1.06. Separability Clause................................................ 4
Section 1.07. Governing Law...................................................... 4
Section 1.08. Counterparts....................................................... 4
ARTICLE TWO
Series K Note Forms
Section 2.01. Forms Generally.................................................... 4
ARTICLE THREE
Series K Notes
Section 3.01. Authorization of Series K Notes.................................... 5
Section 3.02. Entry in Investment Note Register of Series J Investment Notes..... 5
Section 3.03. Form, Issue, Dating, Payment of Principal at Maturity and
Cancellation of Series K Notes..................................... 6
Section 3.04. Registration of Transfer and Exchange of Series K Notes............ 6
Section 3.05. Persons Deemed Owners.............................................. 7
ARTICLE FOUR
Designation and Entry in Investment
Note Register, Stated Maturity, and
Rate of Interest of Series K Notes
Section 4.01. Designation and Entry in Investment Note Register.................. 8
Section 4.02. Stated Maturity and Rate of Interest............................... 8
Section 4.03. Quarterly Statement of Series K Note Holdings...................... 9
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ARTICLE FIVE
Prepayment and Redemption of Series K Notes
Section 5.01. Prepayment......................................................... 9
Section 5.02. Election to Redeem.................................................. 9
Section 5.03. Procedure for Redemption........................................... 10
Section 5.04. Effect of Redemption............................................... 11
ARTICLE SIX
Subordination of Series K Notes
Section 6.01. Agreement of Subordination......................................... 11
Section 6.02. Distribution on Dissolution and Reorganization; Subrogation of
Series K Notes..................................................... 12
Section 6.03. Payments on Series K Notes......................................... 14
Section 6.04. Trustee Authorized to Effectuate Subordination..................... 15
Section 6.05. Rights of Trustee as a Holder of Senior Indebtedness............... 15
Section 6.06. Reliance by Holders of Senior Indebtedness......................... 15
Section 6.07. Subordination Not to Be Prejudiced by Certain Acts................. 15
ARTICLE SEVEN
Miscellaneous
Section 7.01. No Alteration of Prior Series of Investment Notes.................. 15
Section 7.02. Additional Supplemental Indentures................................. 16
Section 7.03. Amendment of Section 9.01 of Indenture............................. 16
Section 7.04. Satisfaction and Discharge of Indenture............................ 16
Testimonium............................................................................... 17
Signatures and Seal....................................................................... 17
Acknowledgments........................................................................... 18
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</TABLE>
<PAGE>
THIS SUPPLEMENTAL INDENTURE dated as of January 21, 1997, between
UNITED GROCERS, INC., an Oregon corporation (hereinafter called the "Company"),
having its principal offices at 6433 S.E. Lake Road, Milwaukie, Oregon, and
FIRST TRUST NATIONAL ASSOCIATION, a national banking association (hereinafter
called the "Trustee") having its principal corporate trust office at 1000 S.W.
Broadway, Suite 1750, Portland, Oregon 97205,
W I T N E S S E T H :
WHEREAS the Company and the Trustee, as successor to the
corporate trust business of United States National Bank of Oregon, are parties
to an Indenture dated as of February 1, 1978 (hereinafter called the
"Indenture"), providing for the issuance by the Company of its Capital
Investment Notes (hereinafter called "Investment Notes");
WHEREAS the Indenture provides for the issuance of one or more
series of Investment Notes, each series to have such provisions as set forth in
the Indenture and indentures supplemental thereto;
WHEREAS the Company and the Trustee, as successor to the
corporate trust business of United States National Bank of Oregon, are parties
to supplemental indentures dated as of the dates set forth below, providing for
the issuance by the Company of the series of Investment Notes indicated:
Date Series
August 15, 1979 B
November 11, 1981 C
December 15, 1984 D
December 15, 1986 E
January 27, 1989 F
January 22, 1991 G
July 6, 1992 H
January 9, 1995 J
WHEREAS the Company has duly authorized the creation of an issue
of an additional series of Investment Notes (hereinafter sometimes called
"Series K Notes"); and
WHEREAS all things have been done that are necessary (1) to make
the Series K Notes the valid obligations of the Company once the Terms (as
defined herein) of the Series K Notes have been entered in the Investment Note
Register (as defined herein) and notice thereof has been given to the Trustee
and (2) to make this Supplemental Indenture a valid agreement of the Company, in
accordance with the terms of the Series K Notes and of this Supplemental
Indenture;
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<PAGE>
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE
WITNESSETH that, in consideration of the premises and the purchase of Series K
Notes by the Holders thereof, the Company covenants and agrees to and with the
Trustee, for the equal and proportionate benefit of all present and future
Holders of Series K Notes, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 1.01. Definitions.
Unless otherwise defined herein, the terms defined in the
Indenture have the meanings assigned to them therein and the rules of
construction specified therein shall apply hereto.
"Senior Indebtedness" means all indebtedness of the Company of
every kind and character, whether outstanding on the date of the Indenture or
thereafter created (other than indebtedness evidenced by the Investment Notes
and the Building Notes), (i) for money borrowed by the Company, (ii) for money
borrowed by others and guaranteed by the Company, (iii) constituting purchase
money indebtedness incurred for the purchase of tangible property and for the
payment of which the Company is directly or contingently liable, (iv) arising
under any document creating an absolute or contingent obligation of the Company
to purchase promissory notes and related documents from third parties, or (v)
for fees, expenses, and other obligations of the Company due in connection with
indebtedness of the Company that constitutes Senior Indebtedness; unless in each
case by the terms of the instrument creating or evidencing the indebtedness or
obligation it is provided that such indebtedness or obligation is not superior
in right of payment to the Investment Notes.
"Series K Notes" means the Series K Capital Investment Notes
provided for by this Supplemental Indenture once the Terms of the Series K Notes
have been entered in the Investment Note Register and notice thereof has been
given to the Trustee pursuant to Section 4.01.
"Terms," with respect to any Series K Note, means all of the
following items of information: number, name and address of Holder, date from
which interest is payable, date of issue, maturity date, principal sum, and
annual rate of interest.
References to Articles or Sections are references to the Articles
or Sections hereof unless such references are specifically identified as being
references to Articles or Sections of the Indenture.
- 2 -
<PAGE>
SECTION 1.02. Provisions of General Application.
Except as otherwise specifically provided herein, the provisions
of Article One of the Indenture, Sections 3.01 through 3.06, 3.08, and 3.10 of
the Indenture and Articles Seven through Thirteen of the Indenture, as amended
with respect to Series K Notes by Article Seven of this Supplemental Indenture,
which provisions are applicable to the rights, privileges, duties, and
obligations of the Company, the Trustee, the Holders, and other Persons with
respect to Investment Notes generally, shall apply to the Series K Notes as
fully to all intents and purposes as though set forth in full herein, it being
the intent hereof that the Series K Notes authorized hereby shall constitute
Additional Investment Notes which are Investment Notes as contemplated by the
Indenture.
This Supplemental Indenture shall be construed as supplemental to
the Indenture and shall form a part thereof. The Indenture, including
specifically but without limitation Section 1.06 thereof, is hereby incorporated
by reference herein and is hereby ratified, approved, and confirmed.
SECTION 1.03. Provisions Specially Applicable to Series K Notes.
To the extent the provisions of the Indenture govern the Series K
Notes as provided in Section 1.02:
(1) The reference to "Article Six" contained in Section 9.08 of
the Indenture shall be deemed to include a reference to Article Six hereof.
(2) The references to "Series A Notes" contained in Section 13.01
of the Indenture shall be deemed to be references to "Series A Notes, Series B
Notes, Series C Notes, Series D Notes, Series E Notes, Series F Notes, Series G
Notes, Series H Notes, Series J Notes, and Series K Notes."
(3) Pursuant to Sections 1.01 and 13.05 of the Indenture,
references to the Trust Indenture Act in the Indenture and references therein to
terms defined in the Trust Indenture Act to the extent the same form a part of
this Supplemental Indenture shall mean the Trust Indenture Act as in effect at
the date as of which this Supplemental Indenture is executed.
SECTION 1.04. Effect of Headings and Table of Contents.
The Article and Section headings herein and in the Table of
Contents are for convenience of reference only, are not to be considered a part
hereof, and shall not affect the construction hereof.
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<PAGE>
SECTION 1.05. Successors and Assigns.
All covenants and agreements in this Supplemental Indenture by
the Company shall bind its successors and assigns, whether so expressed or not.
SECTION 1.06. Separability Clause.
In case any provision in this Supplemental Indenture or in the
Investment Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 1.07. Governing Law.
This Supplemental Indenture shall be governed by and construed in
accordance with the laws of the state of Oregon.
SECTION 1.08. Counterparts.
This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
ARTICLE TWO
Series K Note Forms
SECTION 2.01. Forms Generally.
Notwithstanding any provision in the Indenture to the contrary,
Series K Notes will be issued as noncertificated Series K Notes. Except as
otherwise expressly provided herein, each Holder of a Series K Note shall be
entitled to receive payments of principal and interest in the same amounts and
currency and at the same time and place and shall be entitled to all other
rights under the Indenture and this Supplemental Indenture as if the Holder of
said Series K Note were a Holder of a certificated Series K Note having the same
Terms. Except as otherwise expressly provided herein, each reference in the
Indenture or in this Supplemental Indenture to authentication and delivery of
Investment Notes shall, when made with respect to Series K Notes, be deemed to
include a reference to the entry of the Terms thereof in the Investment Note
Register and the giving of notice thereof to the Trustee and each Series K Note
as to which the Terms have been entered in the Investment Note Register and
notice thereof has been given to the Trustee pursuant to Section 4.01 shall be
deemed to be a duly authenticated and delivered Investment Note, notwithstanding
the provisions to the contrary in the third and fifth paragraphs of Section 3.03
of the Indenture.
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<PAGE>
ARTICLE THREE
Series K Notes
SECTION 3.01. Authorization of Series K Notes.
Pursuant to the provisions of Sections 3.01, 3.10, and 13.01(6)
of the Indenture, there is hereby authorized for issuance a series of Additional
Investment Notes which shall be the Series K Notes as specified herein.
SECTION 3.02. Entry in Investment Note Register of Series K
Investment Notes.
Upon Company Order, without any further action by the Company,
the Terms of the Series K Notes authorized herein shall be entered in the
Investment Note Register and notice shall be given to the Trustee as provided in
Section 4.01. The Trustee acknowledges receipt of the following documents
pursuant to and in satisfaction of the provisions of Section 3.10 of the
Indenture:
(1) A Board Resolution authorizing the execution of this
Supplemental Indenture and the issuance of Series K Notes of up to the principal
amount specified in Section 4.01 and requesting the entry by the Investment Note
Registrar in the Investment Note Register of the Terms of such Series K Notes
and notification thereof to the Trustee.
(2) An Officers' Certificate stating that no event has occurred
and is continuing which is, or after notice or lapse of time or both would
become, an Event of Default and that all conditions precedent provided for in
the Indenture and in this Supplemental Indenture relating to the entry in the
Investment Note Register of the Terms of the Series K Notes and notification
thereof to the Trustee have been complied with.
(3) A counterpart of this Supplemental Indenture authorizing the
issuance of the Series K Notes executed by the Company and the Trustee.
(4) An Opinion of Counsel:
(A) Specifying all conditions precedent provided for in the
Indenture and in this Supplemental Indenture relating to the issuance of Series
K Notes and the entry in the Investment Note Register of the Terms of such
Series K Notes and notification thereof to the Trustee and stating that all such
conditions have been complied with;
(B) Stating that once the Terms of the Series K Notes have been
entered in the Investment Note Register and notice thereof has been given to the
Trustee, such Series K Notes will constitute legal, valid, and binding
obligations of the Company, enforceable in accordance with their terms and
entitled to the benefits of the Indenture and this
- 5 -
<PAGE>
Supplemental Indenture subject to applicable bankruptcy, reorganization,
insolvency or other laws relating to or affecting the enforcement of creditors'
rights;
(C) Stating that all applicable stamp taxes or other governmental
charges (if any) in respect of the original issue of the Series K Notes have
been paid;
(D) Stating that the Supplemental Indenture constitutes the valid
and binding obligation of the Company enforceable in accordance with its terms
except as enforcement may be limited by laws affecting creditor's rights
generally or by principles of equity or public policy; and
(E) Stating that the amendments and supplements to the Indenture
made by this Supplemental Indenture are permitted by Section 13.01 of the
Indenture.
The acts and documents specified above with respect to the
authorization and issuance of Series K Notes shall be deemed to be the
equivalent of the acts and documents specified in Section 3.10 of the Indenture
with respect to the execution, authentication, delivery, and issue of
certificated Investment Notes.
SECTION 3.03. Form, Issue, Dating, Payment of Principal at
Maturity and Cancellation of Series K Notes.
Series K Notes will be noncertificated. A Series K Note is issued
upon both the entry of its Terms in the Investment Note Register and
notification thereof by an officer of the Company to the Trustee. The date of
authentication of a Series K Note, as well as its date of issue, shall be the
date on which both its Terms are entered in the Investment Note Register and
notice is given by an officer of the Company to the Trustee.
All payments of principal and interest shall be made in lawful
money of the United States of America at the office or agency of the Company
maintained for that purpose in the county of Clackamas, Oregon, provided that
the Company may pay the principal of and interest on Series K Notes by mailing a
check to the Holder at the Holder's last address as it appears in the Investment
Note Register.
A Series K Note shall be canceled by entering a notation to that
effect in the Investment Note Register and giving notice thereof to the Trustee.
SECTION 3.04. Registration of Transfer and Exchange of Series K
Notes.
Upon written request to the Company by the Holder for
registration of transfer of a Series K Note, the Investment Note Registrar shall
enter upon the Investment Note Register the Terms of a new Investment Note or
Notes bearing interest at the same rate and with the same Stated Maturities of
principal and interest of authorized denominations for the same aggregate
principal amount and issued in the name of the transferee. Notwithstanding any
provision in the Indenture to the contrary, the new Investment Note or Notes
will be
- 6 -
<PAGE>
issued as a noncertificated Series K Note or Notes. There shall be no service
charge for registration of transfer of Investment Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Upon written request to the Company by the Holder for exchange of
a Series K Note, the Investment Note Registrar shall enter upon the Investment
Note Register the Terms of a new Investment Note or Notes bearing interest at
the same rate and with the same Stated Maturities of principal and interest of
authorized denominations for the same aggregate principal amount.
Notwithstanding any provision in the Indenture to the contrary, the new
Investment Note or Notes will be issued as a noncertificated Series K Note or
Notes. There shall be no service charge for exchange of Investment Notes, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
The Company or the Investment Note Registrar may require the
written request for registration of transfer or exchange to be in form
satisfactory to the Company and the Investment Note Registrar and duly executed
by the Holder of the Series K Note or his attorney duly authorized in writing.
The office or agency maintained by the Company pursuant to
Section 7.02 of the Indenture shall be the place where Holders of Series K Notes
may submit written requests for registration of transfer or exchange.
SECTION 3.05. Persons Deemed Owners.
Prior to receipt by the Company of a written request from the
Holder of a Series K Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name
any Series K Note is registered as the owner of such Series K Note for the
purpose of receiving payment of principal of, and (subject to Section 3.06 of
the Indenture) interest on, such Series K Note and for all other purposes
whatsoever, whether or not such Series K Note be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Receipt by the Company of a written request for registration of
transfer from the Holder of a Series K Note shall be deemed the equivalent of
due presentment of a certificate for registration of transfer by the Holder.
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<PAGE>
ARTICLE FOUR
Designation and Entry in Investment
Note Register, Stated Maturity, and
Rate of Interest of Series K Notes
SECTION 4.01. Designation and Entry in Investment Note Register.
The series of Investment Notes designated in accordance with
Section 3.01 shall be "Series K Capital Investment Notes" (herein sometimes
referred to as the "Series K Notes").
The aggregate principal amount of Series K Notes which may be
issued is limited to $50,000,000, except for Series K Notes issued upon
registration of, transfer of, or in exchange for or in lieu of other Series K
Notes pursuant to Sections 3.04 of the Indenture or Sections 3.04 or 5.03
hereof.
Forthwith upon the execution and delivery of this Supplemental
Indenture, or from time to time thereafter, the Company may authorize the
issuance of Series K Notes up to such aggregate principal amount, and thereupon
and upon Company Order, without any further action by the Company, the Terms of
the Series K Notes shall be entered in the Investment Note Register and notice
thereof shall be given to the Trustee.
SECTION 4.02. Stated Maturity and Rate of Interest.
The Stated Maturity of principal of any Series K Note other than
a Series K Note issued upon registration of transfer of or in exchange for or in
lieu of another Series K Note pursuant to Sections 3.04 of the Indenture or
Sections 3.04 or 5.03 hereof, shall be the Interest Payment Date of such Series
K Note which is ten years from its date of issue as specified in the Investment
Note Register or, if the expiration of ten years from the date of issue shall
not fall on an Interest Payment Date, then the Stated Maturity of principal of
such Series K Note shall be the Interest Payment Date next following the
expiration of ten years from its date of issue. Each Series K Note shall bear
interest at the rate per annum specified in the Investment Note Register from
the date so specified or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be. Such interest
shall be payable quarterly on March 15, June 15, September 15, and December 15,
to the person in whose name such Series K Note is registered at the close of
business on the last Business Day of the calendar month next preceding the
calendar month in which an interest payment is due, except as otherwise provided
in the Indenture and this Supplemental Indenture, until the principal of such
Series K Note is paid or made available for payment. The interest rates on
Series K Notes shall be determined by Board Resolution and shall be subject to
change by Board Resolution from time to time, but no such change shall affect
any Series K Notes theretofore issued. The denominations, dates from which
interest is payable and Stated Maturities of principal and interest of Series K
Notes shall be subject to change by the Company from time to time by an
indenture supplemental hereto
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<PAGE>
executed as permitted by the Indenture and this Supplemental Indenture and
authorizing the change in such denominations, dates, and Stated Maturities, but
no such change shall affect any Series K Notes theretofore issued.
SECTION 4.03. Quarterly Statement of Series K Note Holdings.
The Company shall mail or cause to be mailed not earlier than 30
days before and not later than 30 days after each Interest Payment Date to each
Holder of a Series K Note to the Holder's address as it appears in the
Investment Note Register a statement which provides the following information
with regard to each Series K Note held by such Holder: number, date from which
interest is payable, date of issue, maturity date, principal sum, and annual
rate of interest.
ARTICLE FIVE
Prepayment and Redemption of Series K Notes
SECTION 5.01. Prepayment.
Subject to the provisions of Article Six, in the event of the
death of the registered Holder of any Series K Note or of any joint registered
Holder, the Company shall, at the option of the person legally entitled to
become the Holder of the Series K Note, prepay the principal amount of the
Series K Note together with all accrued interest to the date of payment. Any
request for prepayment shall be made to the Company in writing. The Company may,
as a condition precedent to the prepayment herein provided for, require the
submission of evidence satisfactory to the Company of the death of the
registered Holder or joint registered Holder and such additional documents or
other material as it may consider necessary to establish the Person entitled to
become the Holder of the Series K Note, or such other facts as it considers
relevant to the fulfillment of its obligations hereunder.
SECTION 5.02. Election to Redeem.
Subject to the provisions of Article Six, the Series K Notes may
be redeemed at the election of the Company evidenced by Board Resolution, as a
whole or from time to time in part, at any time during the seven-year period
prior to maturity at Redemption Prices equal to the principal amount of the
Series K Notes to be redeemed plus accrued interest thereon. The Company may for
the purpose of redeeming Series K Notes classify the Series K Notes then subject
to redemption into one or more classes on the basis of their maturity or their
annual rate of interest or any combination thereof and designate for redemption
a specified principal amount of any such class or classes of Series K Notes.
- 9 -
<PAGE>
SECTION 5.03. Procedure for Redemption.
In case the Company shall desire to exercise its right to redeem
Series K Notes which are subject to redemption, it shall give notice of such
redemption to Holders of the Series K Notes to be redeemed as hereinafter
provided in this Section.
In the event the principal amount of Series K Notes to be
redeemed shall not be equal to the principal amount of the class or classes of
Series K Notes designated by the Company for redemption, or in the event no such
class has been so designated and if less than all the Series K Notes subject to
redemption are to be redeemed, the Company shall, at least 45 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Series K Notes to be redeemed by class, if applicable.
Thereupon the Trustee shall select (giving effect to the designation, if any, of
a class or classes of Series K Notes to be redeemed), in such manner as it shall
deem appropriate and fair in its sole discretion and which may provide for the
selection of portions (equal to $100 or an integral multiple of $100) of the
principal of Series K Notes of a denomination larger than $100, the particular
Series K Notes to be redeemed in whole or in part and shall thereafter promptly
notify the Company and each Investment Note Registrar in writing, by designating
the numbers thereof or by any other method, which Series K Notes or portions
thereof are to be redeemed.
Notice of redemption shall be given to the Holders of Series K
Notes to be redeemed as a whole or in part by mailing by first class mail a
notice of such redemption not less than 30 nor more than 60 days prior to the
date fixed for redemption to their last addresses as they shall appear upon the
Investment Note Register, but failure to give such notice by mail to the Holder
of any Series K Note or any defect in such notice shall not affect the validity
of the proceedings for the redemption of any other Series K Note or portion
thereof. Any notice mailed in the manner provided in this paragraph shall be
conclusively presumed to have been duly given, whether or not the Holder
receives the notice.
Each notice to be mailed to the Holders of Series K Notes as
aforesaid shall state the following: (a) the Redemption Date; (b) if less than
all of the Series K Notes are to be redeemed, the distinguishing numbers (which
may be given by individual numbers of Series K Notes, by specifying all Series K
Notes ending in certain key numbers and/or by specifying all Series K Notes
between two stated numbers) or other characteristics of the Series K Notes to be
redeemed (indicating the extent of any partial redemption thereof), together
with such other description of the Series K Notes (and portions of Series K
Notes, if any) as may be necessary in order to identify the same, provided that
any such notice to be mailed need describe only the Series K Notes to be
redeemed from the Holder to whom such notice is mailed; (c) the Redemption
Price; (d) that interest on such Series K Notes (or on the portion to be
redeemed of any of such Series K Notes so designated for redemption in part)
shall cease on the Redemption Date; and (e) that on said date the Company will
mail a
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<PAGE>
check for the Redemption Price to each Holder of Series K Notes which are to be
redeemed to the last address of such Holder as it appears in the Investment Note
Register.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 7.03 of the Indenture)
an amount of money sufficient to pay the Redemption Price of, and (except with
respect to any Series K Note or portion thereof for which the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Series K Notes
or portions thereof which are to be redeemed on that date.
SECTION 5.04. Effect of Redemption.
If notice of redemption shall have been given as above provided,
the Series K Notes or portions of Series K Notes specified in such notice shall
become due and payable on the Redemption Date by mail at the applicable
Redemption Price, together with interest accrued to the Redemption Date, and on
and after such Redemption Date (unless the Company shall default in the payment
of such Series K Notes at the Redemption Price, together with interest accrued
to the Redemption Date) interest on the Series K Notes or portions thereof so
called for redemption shall cease to accrue. Without any action by the Holder of
a Series K Note, such Series K Note or portion thereof shall be paid and
redeemed by the Company at the applicable Redemption Price, together with
interest accrued to the Redemption Date by mailing a check to the Holder at such
Holder's last address as it appears in the Investment Note Register; provided
that installments of interest whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holder in whose name the Series K Note
(or Predecessor Series K Note) was registered at relevant record dates according
to its terms and the provisions of Section 3.06 of the Indenture, as amended by
this Supplemental Indenture.
In the case of a Series K Note which is redeemed in part only,
the Company shall request the Investment Note Registrar to reflect in the
Investment Note Register the principal amount of the unredeemed portion of the
Series K Note.
ARTICLE SIX
Subordination of Series K Notes
SECTION 6.01. Agreement of Subordination.
The Company agrees, and each Holder of a Series K Note, by his
purchase or acceptance thereof, likewise agrees, that the payment of the
principal of and interest on each and all of the Series K Notes is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all Senior Indebtedness.
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<PAGE>
SECTION 6.02. Distribution on Dissolution and Reorganization;
Subrogation of Series K Notes.
Upon any distribution of assets of the Company upon any
liquidation, dissolution, winding up or reorganization of the Company (whether
in bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or any other liquidation, dissolution, winding up, or
reorganization of the Company):
(1) The holders of all Senior Indebtedness shall first be
entitled to receive payment in full, or have provision made for payment in full,
of the principal thereof, and the premium, if any, and interest thereon, before
the Holders of the Series K Notes are entitled to receive any payment on account
of the principal of or interest on the Series K Notes;
(2) Any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to which the Holders
of the Series K Notes or the Trustee would be entitled except for the provisions
of this Article shall be paid by the liquidating trustee or agent or other
person making such payment or distribution, whether a trustee in bankruptcy, a
receiver or liquidating trustee or other trustee or agent, direct to the holders
of Senior Indebtedness or their representative or representatives or to the
trustee or trustees under any indenture under which any instruments evidencing
any of such Senior Indebtedness may have been issued, ratably (subject to any
subordination of any class of Senior Indebtedness, by the provisions thereof, to
any other class or classes of Senior Indebtedness) according to the aggregate
amounts remaining unpaid on account of the principal of, and the premium, if
any, and interest on, the Senior Indebtedness held or represented by each, to
the extent necessary to make payment in full of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or distribution,
or provision therefor, to the holders of such Senior Indebtedness; and
(3) In the event that, notwithstanding the foregoing, any such
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or the
Holders of the Series K Notes before all Senior Indebtedness is paid in full, or
provision made for its payment, such payment or distribution shall be paid over
to the holders of Senior Indebtedness remaining unpaid or unprovided for or
their representative or representatives or to the trustee or trustees under any
indenture under which any instrument evidencing any of such Senior Indebtedness
may have been issued, as provided in the foregoing subparagraph (2), for
application to the payment of such Senior Indebtedness until all such Senior
Indebtedness shall have been paid in full, after giving effect to any concurrent
payment or distribution, or provision therefor, to the holders of such Senior
Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the
Holders of the Series K Notes shall be subrogated pro rata (based on the
respective amounts paid over for the benefit of the holders of Senior
Indebtedness) with the holders of any other subordinated indebtedness of the
Company that by its terms ranks pari passu with the Series K Notes (such
subordinated indebtedness being hereafter in this Section referred to as "pari
passu
- 12 -
<PAGE>
indebtedness") to the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities of the Company
applicable to the Senior Indebtedness until the principal of and interest on the
Series K Notes shall be paid in full; and, for purposes of such subrogation, no
such payments or distributions to the holders of Senior Indebtedness, which, but
for the provisions of this Article, would have been payable or distributable to
Holders of the Series K Notes or the pari passu indebtedness, shall, as between
the Company, its creditors other than the holders of Senior Indebtedness and the
Holders of the Series K Notes and the pari passu indebtedness be deemed to be a
payment by the Company to or on account of the Senior Indebtedness. It is
understood that the provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders of the Series K Notes
and the holders of the pari passu indebtedness and the holders of the Senior
Indebtedness. Nothing contained in this Article, elsewhere in this Supplemental
Indenture, in the Indenture or in the Series K Notes is intended to or shall
impair, as between the Company, its creditors other than the holders of Senior
Indebtedness, and the Holders of the Series K Notes, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders of the
Series K Notes the principal of and interest on the Series K Notes as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders of the Series K
Notes and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
Holder of any Series K Note from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy. Upon any distribution of assets of the Company referred to in this
Article, the Trustee, subject to the provisions of Section 10.01 of the
Indenture, and the Holders of the Series K Notes shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which such
liquidation, dissolution, winding up or reorganization proceedings are pending
or a certificate of the liquidating trustee or agent or other person making any
distribution to the Trustee or to the Holders of the Series K Notes for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article.
In the event that the Trustee determines, in good faith, that
further evidence is required with respect to the right of any person as a holder
of Senior Indebtedness to participate in any payment or distribution pursuant to
this Section, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, as to the extent to which such person is entitled to
participate in such payment or distribution, and as to other facts pertinent to
the rights of such person under this Section, and, if such evidence is not
furnished, the Trustee may defer any payment to such person pending judicial
determination as to the right of such person to receive such payment.
- 13 -
<PAGE>
The Trustee, however, shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to Holders of Series K
Notes or the Company or any other Person, moneys or assets to which any holder
of Senior Indebtedness shall be entitled by virtue of this Article or otherwise.
The terms "paid in full" and "payment in full" as used in this
Section with respect to Senior Indebtedness mean the receipt, in cash or
securities (taken at their market value at the time of the receipt thereof), of
the principal amount of the Senior Indebtedness (and any premium due thereon)
and full interest thereon to the date of such payment of principal.
The Series K Notes shall not be superior in right of payment to
the Series A, Series B, Series C, Series D, Series E, Series F, Series G, Series
H or Series J Notes. The Series K Notes are hereby expressly declared to rank
pari passu with the Series A, Series B, Series C, Series D, Series E, Series F,
Series G, Series H and Series J Notes and to constitute "pari passu
indebtedness" with respect to the Series A, Series B, Series C, Series D, Series
E, Series F, Series G, Series H and Series J Notes. The Series K Notes shall not
constitute Senior Indebtedness as defined in the Indenture.
SECTION 6.03. Payments on Series K Notes.
In the event and during the continuation of any default under any
instrument constituting Senior Indebtedness or pursuant to which any Senior
Indebtedness is issued continuing beyond the period of grace, if any, specified
in such instrument, the Company shall not make any payment of principal of or
interest on the Series K Notes or purchase or redeem or set aside funds for the
redemption of Series K Notes or otherwise acquire any Series K Notes, and
neither the Trustee nor any Holder of Series K Notes shall be entitled to
receive any such payment. Nothing contained in this Article, elsewhere in this
Supplemental Indenture or in the Indenture shall, however, (a) affect the
obligation of the Company to make or prevent the Company from making, at any
time, except during the pendency of any such liquidation, dissolution, winding
up, or reorganization proceedings or during the continuation of any such
default, payments of principal of or interest on the Series K Notes or (b)
prevent the application by the Trustee or any Paying Agent of any moneys
deposited with it hereunder by the Company to the payment of or on account of
the principal of or interest on the Series K Notes if, not less than two
business days prior to such application, the Trustee or such Paying Agent, as
the case may be, did not have written notice from the Company or a holder of
Senior Indebtedness of any event prohibiting the making of such deposit by the
Company or such application by the Trustee. Prior to the receipt of any such
written notice, the Trustee shall be entitled to assume that no such event
exists and shall not be charged with knowledge of the existence of any such
event.
- 14 -
<PAGE>
SECTION 6.04. Trustee Authorized to Effectuate Subordination.
Each Holder of a Series K Note, by his purchase or acceptance
thereof, authorizes and directs the Trustee in his behalf to take such action as
may be necessary or appropriate to effectuate the subordination provided for in
this Article and appoints the Trustee his attorney in fact for such purpose.
SECTION 6.05. Rights of Trustee as a Holder of Senior
Indebtedness.
The Trustee shall be entitled to all rights set forth in this
Article with respect to any Senior Indebtedness which may at any time be held by
it, to the same extent as any other holder of Senior Indebtedness; and nothing
in Section 10.12 of the Indenture, or elsewhere in the Indenture or in this
Supplemental Indenture, shall deprive the Trustee of any of its rights as such
holder.
SECTION 6.06. Reliance by Holders of Senior Indebtedness.
Each Holder of any Series K Note, by his purchase or acceptance
thereof, agrees that the subordination provisions of this Article are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Series K Notes, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness, and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
SECTION 6.07. Subordination Not to Be Prejudiced by Certain Acts.
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part, of
the Company or by any act or failure to act, in good faith, by any such holder
or by any noncompliance by the Company with the terms, provisions, and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
ARTICLE SEVEN
Miscellaneous
SECTION 7.01. No Alteration of Prior Series of Investment Notes.
Nothing contained herein shall alter or amend any provision of
the Indenture insofar as it affects the rights and duties of the Company, the
Trustee, the Holders of Investment Notes or other Persons with respect to Series
A, Series B, Series C, Series D, Series E, Series F, Series G, Series H, or
Series J Notes.
- 15 -
<PAGE>
SECTION 7.02. Additional Supplemental Indentures.
Nothing contained herein shall alter or impair the rights of the
Company and the Trustee under the Indenture to enter into one or more additional
supplemental indentures in the manner provided in the Indenture which may be
either supplemental to the Indenture or supplemental to this Supplemental
Indenture and which may be for the purpose of authorizing one or more series of
Additional Investment Notes or for any other purpose provided by the Indenture.
SECTION 7.03. Amendment of Section 9.01 of Indenture.
For purposes of the Series K Notes, Sections 9.01(5) and (6) of
the Indenture are hereby amended to read, in full, as follows:
(5) The entry of a decree or order by a court having jurisdiction
in the premises for relief in respect of the Company under the United
States Bankruptcy Code or any other applicable federal or state law or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of or for the Company or any
substantial part of its property or ordering the winding up or
liquidation of its affairs and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
(6) the commencement by the Company of a voluntary case under the
United States Bankruptcy Code or any other applicable federal or state
law or the consent or acquiescence by it to the filing of any such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of or for the Company or any substantial part of its property
or the making by it of an assignment for the benefit of creditors or its
failure to pay its debts generally as they become due or the taking of
corporate action by the Company in furtherance of any such action.
SECTION 7.04. Satisfaction and Discharge of Indenture.
Notwithstanding the provisions of Section 11.01 of the Indenture,
the Indenture shall not be satisfied and discharged until (a) all Series K Notes
issued have been paid and canceled or (b) all Series K Notes issued which have
not been paid and canceled have become due and payable, will become due and
payable at their Stated Maturity within one year, or are to be called for
redemption within one year in accordance with Section 11.01(l)(B) of the
Indenture and the Company has provided for their payment pursuant to such
Section.
- 16 -
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
UNITED GROCERS, INC.
By /s/Alan C. Jones
Alan C. Jones
President
Attest:
/s/George R. Fleming
Assistant Secretary
FIRST TRUST NATIONAL
ASSOCIATION, as Trustee
By /s/Linda A. McConkey
Authorized Officer
Attest:
/s/Laurence J. Bell
Authorized Officer
- 17 -
<PAGE>
STATE OF OREGON )
) SS
COUNTY OF Clackamas )
The foregoing instrument was acknowledged before me this day of
January, 1997, by Alan C. Jones, President of United Grocers, Inc., an Oregon
corporation, on behalf of the corporation.
Notary Public for Oregon
My commission expires:
STATE OF OREGON )
) SS
COUNTY OF )
The foregoing instrument was acknowledged before me this day of
January, 1997, by , Authorized Officer of First Trust National Association, a
national banking association, on behalf of First Trust National Association.
Notary Public for Oregon
My commission expires:
- 18 -
AMENDED AND RESTATED
CREDIT AGREEMENT
By and Among
BANK OF AMERICA NW, N.A.
UNITED STATES NATIONAL BANK OF OREGON
THE HONGKONG AND SHANGHAI BANKING CORPORATION, LIMITED
as Lenders,
BANK OF AMERICA NW, N.A.
as Agent,
and
UNITED GROCERS, INC.
as Borrower
---------------------------------------------
May 31, 1996
---------------------------------------------
$115,000,000
- 1 -
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS............................................... 2
Section 1.1 Certain Defined Terms........................ 2
Section 1.2 Interest Rate Definitions.................... 8
Section 1.3 General Principles Applicable to
Definitions.................................................... 8
Section 1.4 Accounting Terms............................. 8
ARTICLE 2 THE LOANS................................................. 8
Section 2.1 Loans........................................ 8
(a) Revolving Line of Credit........................... 8
(b) Operating Line of Credit........................... 9
(c) Long-term Acquisition Line of Credit............... 9
(d) Short-term Acquisition Line of Credit.............. 10
(e) Overnight Line of Credit........................... 10
(f) Relationship to Prior Credit Agreement............. 11
Section 2.2 Manner of Borrowing.......................... 11
Section 2.3 Agent's Right to Fund........................ 12
Section 2.4 Repayment of Principal....................... 13
Section 2.5 Interest on Loans............................ 13
(a) Interest Definitions............................... 13
(b) General Provisions................................. 15
(c) Selection of Alternative Rates for Loans........... 16
(d) Selection of Applicable Interest Rate for
Overnight Loans.......................................... 17
(e) Applicable Days For Computation of Interest........ 18
(f) Unavailable Fixed Rate............................. 18
(g) Compensation for Increased Costs................... 19
Section 2.6 Prepayments.................................. 20
Section 2.7 Notes........................................ 20
Section 2.8 Manner of Payments........................... 21
Section 2.9 Application of Proceeds...................... 22
(a) Before Default..................................... 22
(b) Payments after Default............................. 24
(c) Setoffs............................................ 26
(d) General Provisions................................. 26
Section 2.10 Fees......................................... 27
(a) Agent's Fee........................................ 27
(b) Certain Commitment Fees............................ 27
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<PAGE>
(c) U.S. Bank Commitment Fees.......................... 28
(d) Seafirst Commitment Fees........................... 28
(e) Payment of Commitment Fees......................... 28
Section 2.11 Reduction in Commitments..................... 28
ARTICLE 3 BANKERS' ACCEPTANCES...................................... 29
Section 3.1 Bankers' Acceptances......................... 29
Section 3.2 Manner of Presenting Drafts.................. 29
Section 3.3 Discounting of Drafts........................ 31
Section 3.4 Indemnification; Increased Costs............. 32
Section 3.5 Payment of Drafts by Borrower................ 33
Section 3.6 Compliance With Governmental
Regulations; Insurance....................... 33
Section 3.7 Guaranty of Documents and Instruments........ 34
Section 3.8 Revocation by Operation of Law............... 34
Section 3.9 Relationship to Prior Credit Agreement....... 34
ARTICLE 4 LETTERS OF CREDIT......................................... 34
Section 4.1 Letters of Credit............................ 34
Section 4.2 Manner of Requesting Letters of Credit....... 35
Section 4.3 Indemnification; Increased Costs............. 36
Section 4.4 Payment by Borrower.......................... 37
Section 4.5 Relationship to Prior Credit Agreement....... 37
ARTICLE 5 CONDITIONS................................................ 37
Section 5.1 Notice of Borrowing, Promissory Notes,
Etc.......................................... 37
Section 5.2 Corporate Authority.......................... 38
Section 5.3 Legal Opinion................................ 38
Section 5.4 Defaults, Etc................................ 38
Section 5.5 Payment of All Accrued Interest and
Fees......................................... 38
Section 5.6 Other Information............................ 38
ARTICLE 6 REPRESENTATIONS AND WARRANTIES............................ 39
Section 6.1 Corporate Existence and Power................ 39
Section 6.2 Corporate Authorization...................... 39
Section 6.3 Government Approvals, Etc.................... 39
Section 6.4 Binding Obligations, Etc..................... 39
Section 6.5 Litigation................................... 40
Section 6.6 Indebtedness................................. 40
Section 6.7 Financial Condition.......................... 40
Section 6.8 Title and Liens.............................. 40
Section 6.9 Taxes........................................ 40
Section 6.10 Laws, Orders, Other Agreements............... 41
Section 6.11 Federal Reserve Regulations.................. 41
Section 6.12 ERISA........................................ 41
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<PAGE>
Section 6.13 Security Offerings........................... 42
Section 6.14 Warranties with Respect to Drafts............ 42
Section 6.15 Further Warranties with Respect to
Drafts....................................... 42
Section 6.16 Acceptances.................................. 42
Section 6.17 Patents, Licenses, Franchises................ 43
Section 6.18 Investment Company; Public Utility
Holding Company.............................. 43
Section 6.19 Environmental and Safety Health Matters...... 43
Section 6.20 Reaffirmation................................ 43
Section 6.21 Representations as a Whole................... 43
ARTICLE 7 AFFIRMATIVE COVENANTS..................................... 44
Section 7.1 Preservation of Corporate Existence,
Etc.......................................... 44
Section 7.2 Keeping of Books and Records; Visitation
Rights....................................... 44
Section 7.3 Maintenance of Property, Etc................. 44
Section 7.4 Compliance with Laws, Etc.................... 44
Section 7.5 Other Obligations............................ 44
Section 7.6 Insurance.................................... 45
Section 7.7 Financial Information........................ 45
(a) Annual Audited Financial Statements................ 45
(b) Quarterly Unaudited Financial Statements........... 45
(c) Quarterly Compliance Certificates.................. 46
(d) Other.............................................. 46
Section 7.8 Notification................................. 46
Section 7.9 Additional Payments; Additional Acts......... 47
Section 7.10 Use of Proceeds from Acceptances............. 47
Section 7.11 Funded Debt.................................. 47
Section 7.12 Working Capital.............................. 48
Section 7.13 Fixed Charge Coverage........................ 48
Section 7.14 Minimum Capital and Subordinated Debt........ 48
Section 7.15 Member Notes Receivable Ratio................ 48
Section 7.16 Relocation of Offices........................ 49
Section 7.17 Use of Proceeds.............................. 49
Section 7.18 Amendments to Private Placement;
Prepayments of Private Placement............. 49
Section 7.19 Insurance Company............................ 49
ARTICLE 8 NEGATIVE COVENANTS........................................ 50
Section 8.1 Liquidation, Merger, Sale of Assets.......... 50
Section 8.2 Contingent Indebtedness...................... 51
Section 8.3 Liens........................................ 51
Section 8.4 ERISA Compliance............................. 51
Section 8.5 No Name Change, Etc.......................... 52
Section 8.6 Transactions With or by Affiliates........... 52
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ARTICLE 9 EVENTS OF DEFAULT......................................... 52
Section 9.1 Events of Default............................ 52
(a) Payment Default.................................... 52
(b) Breach of Warranty................................. 53
(c) Breach of Certain Covenants........................ 53
(d) Breach of Other Covenant........................... 53
(e) Cross-default...................................... 53
(f) Voluntary Bankruptcy, Etc.......................... 54
(g) Involuntary Bankruptcy, Etc........................ 54
(h) Insolvency, Etc.................................... 54
(i) Judgment........................................... 54
(j) ERISA.............................................. 55
(k) Government Action.................................. 55
(l) Change in Control.................................. 55
(m) Validity Contest................................... 55
(n) Insurance Claim.................................... 55
Section 9.2 Consequences of Default...................... 55
ARTICLE 10 THE AGENT................................................ 56
Section 10.1 Authorization and Action..................... 56
Section 10.2 Duties and Obligations....................... 57
Section 10.3 Dealings Between Seafirst and Borrower....... 59
Section 10.4 Lender Credit Decision....................... 59
Section 10.5 Indemnification.............................. 59
Section 10.6 Successor Agent.............................. 59
ARTICLE 11 MISCELLANEOUS............................................ 60
Section 11.1 No Waiver; Remedies Cumulative............... 60
Section 11.2 Right of Setoff.............................. 61
Section 11.3 Governing Law................................ 61
Section 11.4 Consent to Jurisdiction; Waiver of
Immunities; Attorneys' Fees.................. 61
Section 11.5 Notices...................................... 61
Section 11.6 Mandatory Arbitration........................ 62
Section 11.7 Assignment and Participations................ 62
Section 11.8 Severability................................. 63
Section 11.9 Survival..................................... 63
Section 11.10 Conditions Not Fulfilled..................... 63
Section 11.11 Entire Agreement; Amendment, Etc............. 64
Section 11.12 Other Debt................................... 64
Section 11.13 Authorized Officers.......................... 64
Section 11.14 Headings..................................... 64
Section 11.15 Counterparts................................. 64
Section 11.16 Oral Agreements Not Enforceable.............. 64
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SCHEDULES
Schedule 1 Prepayment Fee Calculations
Schedule 2 Authorized Officers
EXHIBITS
Exhibit A-1 - Revolving Note (Seafirst)
Exhibit A-2 - Revolving Note (U.S. Bank)
Exhibit A-3 - Revolving Note (Hong Kong Bank)
Exhibit B-1 - Operating Note (Seafirst)
Exhibit B-2 - Operating Note (U.S. Bank)
Exhibit B-3 - Operating Note (Hong Kong Bank)
Exhibit C-1 - Long-Term Acquisition Note (Seafirst)
Exhibit C-2 - Long-Term Acquisition Note (U.S. Bank)
Exhibit D-1 - Short-Term Acquisition Note (Seafirst)
Exhibit D-2 - Short-Term Acquisition Note (U.S. Bank)
Exhibit E - Overnight Note (U.S. Bank)
Exhibit F - Form of Legal Opinion
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AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT ("Agreement") is made as of May
31, 1996, by and among BANK OF AMERICA NW, N.A., successor by name change to
Seattle-First National Bank, a national banking association ("Seafirst"), UNITED
STATES NATIONAL BANK OF OREGON, a national banking association ("U.S. Bank"),
THE HONGKONG AND SHANGHAI BANKING CORPORATION, LIMITED, an extra national
banking institution ("Hong Kong Bank") (each individually a "Lender" and
collectively the "Lenders"), SEAFIRST, as agent for the Lenders (the "Agent")
and UNITED GROCERS, INC., an Oregon corporation (the "Borrower").
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. As of May 31, 1995, Seafirst, U.S. Bank, Borrower and Agent executed an
Amended and Restated Credit Agreement (the "Restated Credit Agreement").
Pursuant to the terms of the Restated Credit Agreement, Seafirst and U.S. Bank
agreed to make certain revolving credit facilities available to Borrower.
C. As of November 30, 1995, Seafirst and U.S. Bank agreed to assign a
portion of their respective interests in and to all Operating Loans and
Revolving Loans together with a corresponding assignment of related interests in
the Restated Credit Agreement and related loan documents to Hong Kong Bank all
pursuant to that certain Loan Purchase Agreement executed as of November 30,
1995 by and among Lenders. In connection therewith the parties hereto executed
Amendment Number One to the Amended and Restated Credit Agreement as of November
30, 1995. As of April 30 1996, the parties hereto executed Amendment Number Two
to the Amended and Restated Credit Agreement. The Restated Credit Agreement as
amended by such Amendment Number One and Amendment Number Two is referred to
herein as 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.
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NOW THEREFORE, the parties hereto hereby agree to amend and restate the
Prior Credit Agreement as follows:
AGREEMENT
ARTICLE 1
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms have the following meanings:
"Acceptance Advances" means, as of any date of determination, the
sum of (a) the aggregate face amount of all outstanding unmatured Drafts plus
(b) the aggregate face amount of all matured Drafts for which the Borrower has
not yet paid.
"Acceptance Request" has the meaning given in Section 3.2(a).
"Agent" means Seafirst and any successor agent selected pursuant to
Section 10.6 hereof.
"Borrower" means United Grocers, Inc., an Oregon corporation, and
any Successor or permitted assign.
"Business Day" means any day other than Saturday, Sunday or another
day on which banks are authorized or obligated to close in Seattle, Washington,
except in the context of the selection of a LIBOR Loan or the calculation of the
LIBOR Rate for any Applicable Interest Period, in which event "Business Day"
means any day other than Saturday or Sunday on which dealings in foreign
currencies and exchange between banks may be carried on in London, England and
Seattle, Washington.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Consolidated Tangible Net Worth" has the meaning given 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
common control which, together with the Borrower, are treated as a single
employer under Section 414(b) or 414(c) of the Code.
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"Default" means any event which but for the passage of time, the
giving of notice, or both would be an Event of Default.
"Draft" has the meaning given in Section 3.2(d).
"Eligible Draft" means a draft that is eligible for discount under
the Federal Reserve Act (12 U.S.C. ss. 372), and is eligible for purchase under
the rules and regulations established from time to time by the Federal Reserve
Bank of New York.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Event of Default" has the meaning given in Section 9.1.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on
transactions received by the Agent from three federal funds brokers of
recognized standing selected by the Agent.
"Funded Debt" has the meaning given in Section 7.11.
"GIC" has the meaning given in Section 7.19.
"Government Approval" means an approval, permit, license, franchise,
right, privilege, 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.
"Incipient Payment Default" means any event which but for the
passage of time, the giving of notice or both would be an Event of Default
described in subsection 9.1(a) hereof.
"Indebtedness" means for any person (a) all items of indebtedness or
liability (except capital, surplus, deferred
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credits and reserves, as such) which would be included in determining total
liabilities as shown on the liability side of a balance sheet as of the date as
of which indebtedness is determined, (b) indebtedness secured by any Lien,
whether or not such indebtedness shall have been assumed, (c) any other
indebtedness or liability for borrowed money or for the deferred purchase price
of property or services for which such person is directly or contingently liable
as obligor, guarantor, or otherwise, or in respect of which such person
otherwise assures a creditor against loss, and (d) any other obligations of such
person under leases which shall have been or should be recorded as capital
leases.
"Lenders" means Seafirst, U.S. Bank and Hong Kong Bank and any
Successors thereto or permitted assigns thereof.
"Letter of Credit" means a stand-by letter of credit issued by
Seafirst or a Seafirst Affiliate pursuant to Section 4.2 hereof for the account
of Borrower.
"Letter of Credit Commitment" has the meaning given in Section
4.2(b).
"Letter of Credit Usage" means as of any date of determination, the
sum of (i) the aggregate face amount of all outstanding unmatured Letters of
Credit, plus (ii) the aggregate amount of all payments made by Seafirst and any
Seafirst Affiliates under Letters of Credit and not yet reimbursed by Borrower
pursuant to Section 4.4.
"Lien" means, for any person, any security interest, pledge,
mortgage, charge, assignment, hypothecation, encumbrance, attachment,
garnishment, execution or other voluntary or involuntary lien upon or affecting
the revenues of such person or any real or personal property in which such
person has or hereafter acquires any interest, except (a) liens for Taxes which
are not delinquent or which remain payable without penalty or the validity or
amount of which is being contested in good faith by appropriate proceedings upon
stay of execution of the enforcement thereof; (b) liens imposed by law (such as
mechanics' 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 is being contested in good faith by appropriate proceedings
upon stay of execution of the enforcement thereof with, in the case of liens on
property of the Borrower, provision having been made to the satisfaction of the
Agent for the payment thereof in the event the contest is determined adversely
to the Borrower; and (c) deposits or pledges under worker's compensation,
unemployment insurance, social security or
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other similar laws or made to secure the performance of bids, tenders, contracts
(except for 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.
"Loans" shall mean the Revolving Loans, the Operating Loans, the
Short-term Acquisition Loans, the Long-term Acquisition Loans and the Overnight
Loans.
"Loan Documents" means this Agreement, the Notes, the Drafts, the
Letters of Credit, the Reimbursement Agreements, and all other certificates,
instruments and other documents executed by or on behalf of the Borrower in
connection with this Agreement or the transactions contemplated hereby.
"Long-term Acquisition Commitment" has the meaning given in Section
2.1(c).
"Long-term Acquisition Line Maturity Date" means July 31, 1997.
"Long-term Acquisition Loan" has the meaning given in Section
2.1(c).
"Long-term Acquisition Note" has the meaning given in Section
2.7(c).
"Long-term Maturity Date" means April 30, 1998.
"Majority Lenders" means at any time Lenders having at least
sixty-six 2/3% of the Total Commitment.
"Maturity Date" means the Long-term Maturity Date, the Long-term
Acquisition Line Maturity Date, the Short-term Maturity Date, or the Short-term
Acquisition Line Maturity Date, as applicable.
"Members' Equity" has the meaning given in Section 7.11.
"Notes" has the meaning given in Section 2.7.
"Notice of Borrowing" means a written or oral request for a Loan
(other than an Overnight Loan) from the Borrower delivered to the Agent in the
manner, at the time, and containing the information required by the terms of
Section 2.2(a) or a written or oral request for an Overnight Loan from the
Borrower
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delivered to U.S. Bank in the manner, at the time, and containing the
information required by the terms of Section 2.2(b).
"Operating Commitment" has the meaning given in Section 2.1(b).
"Operating Loan" has the meaning given in Section 2.1(b).
"Operating Note" has the meaning given in Section 2.7(b).
"Overnight Commitment" has the meaning given in Section 2.1(e).
"Overnight Loan" has the meaning given in Section 2.1(e).
"Overnight Note" has the meaning given in Section 2.7(e).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means an "employee pension benefit plan" (as such
term is defined in ERISA) from time to time maintained by the Borrower or a
member of the Controlled Group.
"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 (a) maintained by the
Borrower or any member of the Controlled Group for employees of the Borrower or
any member of the Controlled Group or (b) maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one employer
makes contributions and to which the Borrower or any member of the Controlled
Group is then making or accruing an obligation to make contributions or has
within the preceding five (5) plan years made contributions.
"Prime Rate" means, on any day, the Agent's publicly announced prime
rate of interest at its principal office (which prime rate is a reference rate
and not necessarily the lowest rate of interest charged by the Agent to its
prime customers), changing as such prime rate changes.
"Prior Credit Agreement" shall have the meaning given in the
Recitals.
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"Private Placement Agreement" means any agreement currently existing
or hereafter entered into by Borrower for the private placement of debt
securities issued by Borrower.
"Reimbursement Agreements" has the meaning given in Section 4.2(c).
"Revolving Commitment" has the meaning given in Section 2.1(a).
"Revolving Loan" means a Loan made pursuant to Section 2.1(a).
"Revolving Note" has the meaning given in Section 2.7(a).
"Seafirst Affiliate" means any person that directly or indirectly
controls or is controlled by or under common control with Seafirst.
"Short-term Acquisition Commitment" has the meaning given in Section
2.1(d).
"Short-term Acquisition Line Maturity Date" means July 31, 1996.
"Short-term Acquisition Loan" has the meaning given in Section
2.1(d).
"Short-term Acquisition Note" has the meaning given in Section
2.7(d).
"Short-term Maturity Date" means April 30, 1997.
"Subordinated Debt" has the meaning given in Section 7.11.
"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.
"Tax" means, for any person, any tax, assessment, duty, levy, impost
or other charge imposed by any Governmental Authority on such person or on any
property, revenue, income, or franchise of such person and any interest or
penalty with respect to any of the foregoing.
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"Total Commitment" means the total of U.S. Bank's Overnight
Commitment, Seafirst's Letter of Credit Commitment, Seafirst's and U.S. Bank's
Short-term Acquisition Commitment and Long-term Acquisition Commitment and each
Lender's Revolving Commitment and Operating Commitment.
"Unfunded Vested Liabilities" means, with respect to 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 the Borrower or any member of the Controlled
Group to the PBGC or the Plan under Title IV of ERISA.
SECTION 1.2 INTEREST RATE DEFINITIONS. Certain definitions related to the
provisions governing the calculation and payment of interest are set forth in
Section 2.5(a).
SECTION 1.3 GENERAL PRINCIPLES APPLICABLE TO DEFINITIONS. Definitions
given in Sections 1.1 and 2.5(a) 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, but without limitation, this
Agreement, shall be deemed a reference to such document as it now exists, and
as, from time to time hereafter, the same may be amended. Reference herein to a
"person" or "persons" shall be deemed to be a reference to an individual,
corporation, partnership, trust, unincorporated association, joint venture,
joint-stock company, government (including political subdivisions), Governmental
Authority or agency or any other entity. 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."
SECTION 1.4 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 consistently applied.
ARTICLE 2
THE LOANS
SECTION 2.1 LOANS.
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(A) REVOLVING LINE OF CREDIT. Subject to the terms and conditions of
this Agreement, each Lender hereby severally agrees to make loans ("Revolving
Loans") to the Borrower from time to time on Business Days during the period
beginning on the date hereof and ending on the Long-term Maturity Date in
amounts equal to such Lender's pro rata share (as set forth below) of each
requested loan provided that, after giving effect to any requested loan the
aggregate of all Revolving Loans from such Lender will not exceed at any one
time outstanding the sum set forth opposite its name below (such Lender's
"Revolving Commitment").
Lender Commitment Pro Rata Share
------ ---------- --------------
Seafirst $18,750,000 44.1176%
U.S. Bank $18,750,000 44.1176%
Hong Kong Bank $ 5,000,000 11.7648%
----------- ---------
Total Revolving $42,500,000 100.00%
Commitment
The Revolving Loans described in this Section 2.1(a) constitute a revolving
credit and within the amount and time specified, the Borrower may pay, prepay
and reborrow.
(B) OPERATING LINE OF CREDIT. Subject to the terms and conditions of
this Agreement, each Lender hereby severally agrees to make loans ("Operating
Loans") to the Borrower from time to time on Business Days during the period
beginning on the date hereof and ending on the Short-term Maturity Date in
amounts equal to such Lender's pro rata share (as set forth below) of each
requested loan provided that, after giving effect to any requested loan the
aggregate of all Operating Loans from such Lender will not exceed at any one
time outstanding an amount equal to (a) the sum set forth opposite such Lender's
name below (such Lender's "Operating Commitment"); less (b) the Acceptance
Advances in respect of Drafts accepted and discounted by such Lender in
accordance with the terms of Article 3 hereof.
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Lender Commitment Pro Rata Share
------ ---------- --------------
Seafirst $18,750,000 44.1176%
U.S. Bank $18,750,000 44.1176%
Hong Kong Bank $ 5,000,000 11.7648%
----------- ---------
Total Operating $42,500,000 100.00%
Commitment
The Operating Loans described in this Section 2.1(b) constitute a revolving
credit and within the amount and time specified, the Borrower may pay, prepay
and reborrow.
(C) LONG-TERM ACQUISITION LINE OF CREDIT. Subject to the terms and
conditions of this Agreement, each of Seafirst and U.S. Bank hereby severally
agrees to make loans ("Long-term Acquisition Loans") to the Borrower from time
to time on Business Days during the period beginning on the date hereof and
ending on the Long-term Acquisition Line Maturity Date in amounts equal to such
Lender's pro rata share (as set forth below) of each requested loan provided
that, after giving effect to any requested loan the aggregate of all Long-term
Acquisition Loans from such Lender will not exceed at any one time outstanding
the sum set forth opposite its name below (such Lender's "Long-term Acquisition
Commitment").
Lender Commitment Pro Rata Share
------ ---------- --------------
Seafirst $4,000,000 44.44%
U.S. Bank $5,000,000 55.56%
----------- -------
Total Long-term $9,000,000 100.00%
Acquisition
Commitment
The Long-term Acquisition Loans described in this Section 2.1(c) constitute a
revolving credit and within the amount and time specified, the Borrower may pay,
prepay and reborrow.
(D) SHORT-TERM ACQUISITION LINE OF CREDIT. Subject to the terms and
conditions of this Agreement, each of Seafirst and U.S. Bank hereby severally
agrees to make loans ("Short-term Acquisition Loans") to the Borrower from time
to time on Business Days during the period beginning on the date hereof and
ending on the Short-term Acquisition Line Maturity Date in amounts equal to
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such Lender's pro rata share (as set forth below) of each requested loan
provided that, after giving effect to any requested loan the aggregate of all
Short-term Acquisition Loans from such Lender will not exceed at any one time
outstanding the sum set forth opposite its name below (such Lender's "Short-term
Acquisition Commitment").
Lender Commitment Pro Rata Share
------ ---------- --------------
Seafirst $5,000,000 50.00%
U.S. Bank $5,000,000 50.00%
----------- -------
Total Short-term $10,000,000 100.00%
Acquisition
Commitment
The Short-term Acquisition Loans described in this Section 2.1(d) constitute a
revolving credit and within the amount and time specified, the Borrower may pay,
prepay and reborrow.
(E) OVERNIGHT LINE OF CREDIT. Subject to the terms and conditions of
this Agreement, U.S. Bank hereby agrees to make loans ("Overnight Loans") to the
Borrower from time to time on Business Days during the period beginning on the
date hereof and ending on the Short-term Maturity Date provided that, after
giving effect to any requested loan the aggregate of all Overnight Loans will
not exceed at any one time outstanding the sum of Ten Million Dollars
($10,000,000) (U.S. Bank's "Overnight Commitment"). The Overnight Loans
described in this Section 2.1(e) constitute a revolving credit and within the
amount and time specified, the Borrower may pay, prepay and reborrow.
(F) RELATIONSHIP TO PRIOR CREDIT AGREEMENT. The Revolving Loans, the
Operating Loans, the Long-Term Acquisition Loans, the Short-Term Acquisition
Loans and the Overnight Loans outstanding under the Prior Credit Agreement as of
the effective date of this Agreement, shall be deemed to have been advanced
under Sections 2.1(a), (b), (c), (d) and (e) hereof, respectively.
SECTION 2.2 MANNER OF BORROWING.
(a) For each requested Loan other than an Overnight Loan, the
Borrower shall give the Agent a Notice of Borrowing specifying the date of a
requested borrowing and the amount thereof. The Borrower may give a written or
oral Notice of Borrowing on the same day it wishes a Loan to be made if said
Notice of Borrowing is received by the Agent no later than
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<PAGE>
10:00 a.m. (Seattle time) on the date of the requested borrowing, provided that
if the Borrower shall simultaneously elect to have interest accrue on a Loan at
a rate other than the Prime Rate by giving an Interest Rate Notice (as defined
in Section 2.5(c)(1)) in respect of such borrowing, the Notice of Borrowing
shall be given prior to 10:00 a.m. (Seattle time) on a Business Day at least
three (3) Business Days prior to the requested date of borrowing. Requests for
borrowing, or confirmations thereof, received after the designated hour will be
deemed received on the next succeeding Business Day. Each such Notice of
Borrowing shall be irrevocable and shall be deemed to constitute a
representation and warranty by the Borrower that as of the date of such notice
the statements set forth in Article 6 hereof are true and correct and that no
Default or Event of Default has occurred and is continuing. On receipt of a
Notice of Borrowing, the Agent shall promptly notify each Lender by telephone,
telex or facsimile of the date of the requested borrowing and the amount
thereof. Each Lender shall before 12:00 noon (Seattle time) on the date of the
requested borrowing, pay such Lender's pro rata share of the aggregate principal
amount of the requested borrowing in immediately available funds to the Agent at
its Commercial Loan Processing Center, Seattle, Washington. Upon fulfillment to
the Agent's satisfaction of the applicable conditions set forth in Article 5,
and after receipt by the Agent of such funds, the Agent will promptly make such
funds available to the Borrower at Borrower's general checking account
maintained at the Main Branch of U.S. Bank in Portland, Oregon or at such other
place as may be designated by Borrower in a writing delivered to Agent.
(b) For each requested Overnight Loan, the Borrower shall give U.S.
Bank a Notice of Borrowing specifying the date of the requested borrowing and
the amount thereof. The Borrower may give a written or oral Notice of Borrowing
on the same day it wishes an Overnight Loan to be made if said Notice of
Borrowing is received by U.S. Bank not later than 10:00 a.m. (Portland time) on
the date of the requested borrowing provided, that, any Notice of Borrowing
given orally shall be confirmed by the Borrower in a writing delivered to U.S.
Bank not later than 1:00 p.m. (Portland time) on the date such oral notice is
given. Requests for borrowing or confirmations thereof received after the
designated hour will be deemed received on the next succeeding Business Day.
Each such Notice of Borrowing shall be irrevocable and shall be deemed to
constitute a representation and warranty by the Borrower that as of the date of
such notice the statements set forth in Article 6 hereof are true and correct
and that no Default or Event of Default has occurred and is continuing. Upon
fulfillment to U.S. Bank's satisfaction of the applicable conditions set forth
in Article 5, U.S. Bank will
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<PAGE>
promptly make such funds available to the Borrower at Borrower's general
checking account maintained at the Main Branch of U.S. Bank in Portland, Oregon
or at such other place as may designated by Borrower in a writing delivered to
U.S. Bank. Promptly upon request, U.S. Bank shall provide Agent with information
regarding Overnight Loans made to Borrower, including without limitation
information regarding the date, amount, interest rate, and payments made by
Borrower in respect of any such Loans.
SECTION 2.3 AGENT'S RIGHT TO FUND. Unless the Agent shall have received
notice from a Lender prior to 12:00 noon (Seattle time) on the date of any
requested borrowing that such Lender will not make available to the Agent its
pro rata share of the requested borrowing, the Agent may assume that such Lender
has made such funds available to the Agent on the date such Loan is to be made
in accordance with Section 2.2(a) hereof and the Agent may, in reliance upon
such assumption, make available to the Borrower on such date a corresponding
amount. If and to the extent that such Lender shall not have so made such
portion available to the Agent, such Lender and the Borrower, jointly and
severally, agree to pay to the Agent forthwith on demand such corresponding
amount, together with interest thereon for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the
Agent, at (a) in the case of the Borrower, the Prime Rate and (b) in the case of
such Lender, the Federal Funds Rate. Any such repayment by the Borrower shall be
without prejudice to any rights it may have against the Lender that has failed
to make available its funds for any requested borrowing.
SECTION 2.4 REPAYMENT OF PRINCIPAL.
(a) The Borrower shall repay to the Lenders the principal amount of each
Revolving Loan on the Long-term Maturity Date, the principal amount of each
Long-term Acquisition Loan on the Long-term Acquisition Line Maturity Date, the
principal amount of each Operating Loan on the Short-term Maturity Date, the
principal amount of each Short-term Acquisition Loan on the Short-term
Acquisition Line Maturity Date, and the principal amount of each Overnight Loan
on demand made by U.S. Bank; provided, however, if U.S. Bank makes no such
demand, then on the Short-term Maturity Date.
(b) Borrower agrees to pay to Agent for the account of Seafirst and U.S.
Bank immediately upon the receipt thereof, as a mandatory prepayment, an amount
equal to the net proceeds received by Borrower from the sale of any trade
receivables (other than sales made in the ordinary course of Borrower's
business). Any such payment shall be applied by Agent as
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<PAGE>
provided in Section 2.9(a)(iii) and upon Borrower's making of any such payment,
(A) the aggregate Long-term Acquisition Commitments for both Lenders shall be
immediately, permanently and irrevocably reduced by an amount equal to one-half
of such payment and (B) the aggregate Short-term Acquisition Commitments for
both Lenders shall be immediately, permanently and irrevocably reduced by an
amount equal to one-half of such payment.
SECTION 2.5 INTEREST ON LOANS.
(a) INTEREST DEFINITIONS. As used in this Section 2.5 and elsewhere
in the Agreement the following terms have the following meanings:
"Applicable Interest Period" means, with respect to any Loan
accruing interest at a LIBOR Rate, the period commencing on the first date the
Borrower elects to have such LIBOR Rate apply to such Loan pursuant to Section
2.5(c) and ending one, two, three or six months thereafter as specified in the
Interest Rate Notice given in respect of such Loan; provided, however, that
Borrower may not select a six-month interest period for an Operating Loan and
provided further, that no Applicable Interest Period may be selected for any
LIBOR Loan if it extends beyond such Loan's Maturity Date.
"Applicable Interest Rate" means (i) for each Loan other than an
Overnight Loan, the Prime Rate or the LIBOR Rate, as designated by the Borrower
in an Interest Rate Notice given with respect to such Loan (or portion thereof)
or otherwise determined pursuant to Section 2.5(c); and (ii) for each Overnight
Loan, the U.S. Bank Prime Rate or the Interim Rate, as designated by the
Borrower in an Interest Rate Notice given with respect to such Loan or otherwise
determined pursuant to Section 2.5(d).
"Interest Rate Notice" has the meaning given in Section 2.5(c) and
(d).
"Interim Rate" means, a per annum rate of interest equal to the sum
of (a) the per annum rate of interest established from time to time by U.S. Bank
as its "overnight money market rate" for loans of comparable amounts; and (b)
seventy-five (75) basis points (three-fourths of one percent) changing as such
"overnight money market rate" changes from time to time.
"LIBOR Loan" means any Loan or portion thereof bearing interest at
the LIBOR Rate.
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"LIBOR Rate" means, with respect to any LIBOR Loan for any
Applicable Interest Period, an interest rate per annum equal to the sum of (a)
seventy-five (75) basis points (three-fourths of one percent) and (b) the
product of (i) the Euro-dollar Rate in effect for such Applicable Interest
Period and (ii) the Euro-dollar Reserves in effect on the first day of such
Applicable Interest Period.
As used herein the "Euro-dollar Rate" will be determined by reference to
that rate (rounded upward, if necessary, to the next one-hundredth of one
percent (.01%)) which appears on the Reuters Screen LIBO Page as of 11:00 a.m.
(London time) on the day that is two (2) Business Days prior to the first date
of the proposed Applicable Interest Period. If more than one such rate appears
on the Reuters Screen LIBO Page, the rate will be the arithmetic mean of such
rates. If there are no applicable quotes on such Reuters Screen LIBO Page, the
Euro-dollar Rate will be determined by reference to that rate (rounded upward,
if necessary, to the next one-hundredth of one percent (.01%)) appearing on the
display designated as "Page 3750" on the Telerate Service (or on such other page
on that service or such other service designated by the British Banker's
Association for the display of that Association's Interest Settlement Rates for
U.S. Dollar deposits) as of 11:00 a.m. (London time) on the day that is two (2)
Business Days prior to the first date of the proposed Applicable Interest
Period. If there are no applicable quotes on the Reuters Screen LIBO Page or
available through Telerate Service, then the LIBOR Rate shall be deemed
unavailable as provided in Section 2.5(f) hereof.
As used herein, the term "Euro-dollar Reserves" means a fraction
(expressed as a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of the maximum
reserve percentages (including, without limitation, any special, supplemental,
marginal or emergency reserves) expressed as a decimal established by the Board
of Governors of the Federal Reserve System or any other banking authority to
which the Agent is subject for Eurocurrency Liability (as defined in Regulation
D of such Board of Governors). It is agreed that for purposes hereof, each LIBOR
Loan shall be deemed to constitute a Eurocurrency Liability and to be subject to
the reserve requirements of Regulation D, without benefit of credit or
proration, exemptions or offsets which might otherwise be available to any
Lender from time to time under such Regulation D. Euro-dollar Reserves shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage and shall apply to Applicable Interest Periods commencing
after the effective date of such change.
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"U.S. Bank Prime Rate" means, on any day, U.S. Bank's publicly
announced prime rate of interest at its principal office (which prime rate is a
reference rate and not necessarily the lowest rate of interest charged by U.S.
Bank to its prime customers), changing as such prime rate changes.
(b) GENERAL PROVISIONS. The Borrower agrees to pay interest to
Lenders on the unpaid principal amount of each Loan from the date of such Loan
until such Loan shall be due and payable at a per annum rate equal to the
Applicable Interest Rate, and, if default shall occur in the payment when due of
any such Loan (or portion thereof), from the maturity of that Loan until it is
paid in full at a per annum rate equal to two percentage points (2%) above the
Prime Rate (changing as the Prime Rate changes) provided, however, that if
default shall occur in the payment when due of any Overnight Loan (or portion
thereof), Borrower agrees to pay to U.S. Bank interest on the unpaid principal
amount of such Loan from the maturity thereof until it is paid in full at a per
annum rate equal to two percentage points (2%) above the U.S. Bank Prime Rate
(changing as the U.S. Bank Prime Rate changes). Accrued but unpaid interest on
each LIBOR Loan shall be paid on the last day of each Applicable Interest
Period, on the applicable Maturity Date and, additionally, in the case of a
LIBOR Loan for which the Applicable Interest Period is six months, on the day
that is three months after the commencement of such Applicable Interest Period.
Accrued but unpaid interest on each Loan accruing interest at the Prime Rate,
the U.S. Bank Prime Rate or the Interim Rate shall be paid on the last Business
Day of each calendar month commencing May 31, 1996 and on the applicable
Maturity Date. Unpaid interest accruing on amounts in default shall be payable
on demand.
(c) SELECTION OF ALTERNATIVE RATES FOR LOANS.
(1) The Borrower may, subject to the requirements of this
Section 2.5(c), on at least three (3) Business Days' prior oral or written
notice elect to have interest accrue on any Loan (other than an Overnight Loan)
or any portion thereof at a LIBOR Rate for an Applicable Interest Period. Such
notice (herein, an "Interest Rate Notice") shall be deemed delivered when
communicated to the Agent (in the case of an oral notice) or when received by
the Agent (in the case of a written notice) except that an Interest Rate Notice
communicated to or received by the Agent after 10:00 a.m. (Seattle time) on any
Business Day, shall be deemed to have been delivered or received on the
immediately succeeding Business Day. Such Interest Rate Notice shall identify,
subject to the conditions of this Section 2.5(c), the Loan or portions thereof
and the Applicable Interest Period
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which the Borrower selects. Any such Interest Rate Notice shall be irrevocable
and shall constitute a representation and warranty by the Borrower that as of
the date of such Interest Rate Notice, the statements set forth in Article 6 are
true and correct and that no Event of Default or Default has occurred and is
continuing. If the Interest Rate Notice is given orally, the Borrower agrees to
promptly confirm such notice in a writing delivered to the Agent.
(2) The Borrower's right to select a LIBOR Rate to apply to a
Loan (other than an Overnight Loan) or any portion thereof shall be subject to
the following conditions: (i) the aggregate of all Loans or portions thereof to
accrue interest at a particular LIBOR Rate for the same Applicable Interest
Period shall be an integral multiple of One Hundred Thousand Dollars ($100,000)
and not less than One Million Dollars ($1,000,000); (ii) a LIBOR Rate may not be
selected for any Loan or portion thereof which is already accruing interest at a
LIBOR Rate unless such selection is only to become effective at the maturity of
the Applicable Interest Period then in effect; (iii) the LIBOR Rate shall not be
unavailable pursuant to Section 2.5(f); (iv) no Default or Event of Default
shall have occurred and be continuing; and (v) if the Borrower elects to have
some portion (but less than all) of the Loans accrue interest at the LIBOR Rate,
the Borrower shall select a portion of each Lender's outstanding Loans of the
same type (e.g. Revolving Loans, Operating Loans) to accrue interest at such
rate in proportion to their respective pro rata shares.
(3) In the absence of an effective request for the application
of a LIBOR Rate, the Loans (other than the Overnight Loans) or remaining
portions thereof shall accrue interest at the Prime Rate. Any Interest Rate
Notice which specifies a LIBOR Rate but fails to identify an Applicable Interest
Period shall be deemed to be a request for the LIBOR Rate for an Applicable
Interest Period of one (1) month. The Interest Rate Notice may be given with and
contained in any Notice of Borrowing provided that the requisite number of days
for prior notice for both the borrowing and the selection of a LIBOR Rate shall
be satisfied.
(4) If the Borrower delivers an Interest Rate Notice with any
Notice of Borrowing for a Loan and the Borrower thereafter declines to take such
Loan or a condition precedent to the making of such Loan is not satisfied or
waived, the Borrower shall indemnify the Agent and each Lender for all losses
and any costs which the Agent or any Lender may sustain as a consequence thereof
including, without limitation, the costs of re-employment of funds at rates
lower than the cost to the Lenders of such
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funds. A certificate from the Agent or any Lender setting forth the amount due
to it pursuant to this subparagraph (c) and the basis for, and the calculation
of, such amount shall be conclusive evidence of the amount due to it hereunder.
Payment of the amount owed shall be due within fifteen (15) days after the
Borrower's receipt of such certificate.
(d) SELECTION OF APPLICABLE INTEREST RATE FOR OVERNIGHT LOANS.
(1) The Borrower may, subject to the requirements of this
Section 2.5(d), on at least three (3) Business Days' prior oral or written
notice elect to have interest accrue on an Overnight Loan at the Interim Rate.
Such Interest Rate Notice shall be deemed delivered when communicated to U.S.
Bank (in the case of oral notice) or when received by U.S. Bank (in the case of
written notice) except that an Interest Rate Notice communicated to or received
by U.S. Bank after 10:00 a.m. (Portland time) on any Business Day, shall be
deemed to have been delivered or received on the immediately succeeding Business
Day. Such Interest Rate Notice shall identify, subject to the conditions of this
Section 2.5(d), the Loan which the Borrower selects. Any such Interest Rate
Notice shall be irrevocable and shall constitute a representation and warranty
by the Borrower that as of the date of such Interest Rate Notice, the statements
set forth in Article 6 are true and correct and that no Event of Default or
Default has occurred and is continuing. If the Interest Rate Notice is given
orally, the Borrower agrees to promptly confirm such notice in a writing
delivered to U.S. Bank.
(2) The Borrower's right to select an Interim Rate to apply to
an Overnight Loan or any portion thereof shall be subject to the following
conditions: (i) the aggregate of all Overnight Loans or portions thereof to
accrue interest at a particular Interim Rate shall be an integral multiple of
One Hundred Thousand Dollars ($100,000) and not less than One Million Dollars
($1,000,000); and (ii) no Default or Event of Default shall have occurred and be
continuing.
(3) In the absence of an effective request for the application
of an Interim Rate, the Overnight Loans or remaining portions thereof shall
accrue interest at the U.S. Bank Prime Rate.
(4) If the Borrower delivers an Interest Rate Notice with any
Notice of Borrowing for an Overnight Loan and the Borrower thereafter declines
to take such Loan or a condition precedent to the making of such Loan is not
satisfied or waived, the Borrower shall indemnify U.S. Bank for all losses and
any
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costs which U.S. Bank may sustain as a consequence thereof including, without
limitation, the costs of reemployment of funds at rates lower than the cost to
U.S. Bank of such funds. A certificate from U.S. Bank setting forth the amount
due to it pursuant to this subparagraph (d) and the basis for, and the
calculation of, such amount shall be conclusive evidence of the amount due to it
hereunder. Payment of the amount owed shall be due within fifteen (15) days
after the Borrower's receipt of such certificate.
(e) APPLICABLE DAYS FOR COMPUTATION OF INTEREST. Computations of
interest shall be made on the basis of a year of three hundred sixty (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 is payable.
(f) UNAVAILABLE FIXED RATE. If any Lender determines that for any
reason, fair and adequate means do not exist for establishing a particular LIBOR
Rate or that a LIBOR Rate will not adequately and fairly reflect the cost to it
of making or maintaining the principal amount of a particular LIBOR Loan or that
accruing interest on any LIBOR Loan has become unlawful or is contrary to any
internal policies (of general application), such Lender may give notice of that
fact to the Agent and the Borrower and such determination shall be conclusive
and binding absent manifest error. After such notice has been given and until
the Lender notifies the Agent and the Borrower that the circumstances giving
rise to such notice no longer exist, the interest rate or rates so identified in
such notice shall no longer be available. Any subsequent request by the Borrower
to have interest accrue at such a LIBOR Rate shall be deemed to be a request for
interest to accrue at the Prime Rate. If the circumstances giving rise to the
notice described herein no longer exist, the Lender who had previously given
notice of the unavailability of rate(s) shall notify the Agent and the Borrower
in writing of that fact, and the Borrower shall then once again become entitled
to request that such LIBOR Rates apply to the Loans in accordance with Section
2.5(c) hereof.
(g) COMPENSATION FOR INCREASED COSTS. In the event that after the
date hereof any change occurs in any applicable law, regulation, treaty or
directive or interpretation thereof by any authority charged with the
administration or interpretation thereof, or any condition is imposed by any
authority after the date hereof or any change occurs in any condition imposed by
any authority on or prior to the date hereof which:
(1) subjects any Lender to any Tax, (other than any Tax
measured by such Lender's net income) or changes the
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basis of taxation of any payments to any Lender on account of principal of or
interest on any LIBOR Loan, the Note (to the extent the Note evidences a LIBOR
Loan) or fees in respect of such Lender's obligation to make LIBOR Loans or
other amounts payable with respect to its LIBOR Loans; or
(2) imposes, modifies or determines applicable any reserve,
deposit or similar requirements against any assets held by, deposits with or for
the account of, or loans or commitments by, any office of any Lender in
connection with its LIBOR Loans to the extent the amount of which is in excess
of, or was not applicable at the time of computation of, the amounts provided
for in the definition of such LIBOR Rate; or
(3) affects the amount of capital required or expected to be
maintained by banks generally or corporations controlling banks and any Lender
determines that the amount by which it or any corporation controlling it is
required or expected to maintain or increase its capital is increased by, or
based upon, the existence of this Agreement or of any Lender's Loans or
Commitment hereunder;
(4) imposes upon any Lender any other condition with respect
to its LIBOR Loans or its obligation to make LIBOR Loans;
which, as a result thereof, (A) increases the cost to any Lender of making or
maintaining its Loans or any of its Commitments hereunder, or (B) reduces the
net amount of any payment received by any Lender in respect of its LIBOR Loans
(whether of principal, interest, commitment fees or otherwise), or (C) requires
any Lender to make any payment on or calculated by reference to the gross amount
of any sum received by it in respect of its LIBOR Loans, in each case by an
amount which such Lender in its sole judgment deems material, then and in any
such case the Borrower shall pay to such Lender on demand such amount or amounts
as will compensate such Lender for any increased cost, deduction or payment
actually incurred or made by such Lender. The demand for payment by any Lender
shall be delivered to the Agent and the Borrower and shall state the subjection
or change which occurred or the reserve or deposit requirements or other
conditions which have been imposed upon such Lender or the request, direction or
requirement with which it has complied, together with the date thereof, the
amount of such cost, reduction or payment and the manner in which such amount
has been calculated. The statement of any Lender as to the additional amounts
payable pursuant to this Section 2.5(g) shall be conclusive evidence of the
amounts due hereunder absent manifest error.
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The protection of this Section 2.5(g) shall be available to the Lenders
regardless of any possible contention of invalidity or inapplicability of the
relevant law, regulation, treaty, directive, condition or interpretation
thereof. In the event that the Borrower pays any Lender the amount necessary to
compensate such Lender for any charge, deduction or payment incurred or made by
such Lender as provided in this Section 2.5(g), and such charge, deduction or
payment or any part thereof is subsequently returned to such Lender as a result
of the final determination of the invalidity or inapplicability of the relevant
law, regulation, treaty, directive or condition, then such Lender shall remit to
the Borrower the amount paid by the Borrower which has actually been returned to
such Lender (together with any interest actually paid to such Lender on such
returned amount), less such Lender's costs and expenses incurred in connection
with such governmental regulation or any challenge made by such Lender with
respect to its validity or applicability.
SECTION 2.6 PREPAYMENTS. Loans accruing interest at the Prime Rate, the
U.S. Bank Prime Rate and the Interim Rate may be repaid at any time without
penalty or premium. If a LIBOR Loan is paid prior to the end of the Applicable
Interest Period, a fee computed in the manner set out in Schedule 1 shall be
assessed and paid at the time of such payment. Such fee shall apply in all
circumstances where a LIBOR Loan is paid prior to the end of the Applicable
Interest Period, regardless of whether such payment is voluntary, mandatory,
required by Section 2.4(b) or the result of the Agent's or any Lender's
collection efforts.
SECTION 2.7 NOTES.
(a) The Revolving Loans shall be evidenced by amended and
restated promissory notes in the form of Exhibits A- 1, A-2 and A-3 hereto, each
payable to the order of a Lender, dated the date of this Agreement, and in the
principal amount of such Lender's Revolving Commitment (the "Revolving Notes").
(b) The Operating Loans shall be evidenced by amended and
restated promissory notes in the form of Exhibits B- 1, B-2 and B-3 hereto, each
payable to the order of a Lender, dated the date of this Agreement, and in the
principal amount of such Lender's Operating Commitment (the "Operating Notes").
(c) The Long-term Acquisition Loans shall be evidenced by
amended and restated promissory notes in the form of Exhibits C-1 and C-2
hereto, payable to the order of Seafirst and U.S. Bank, respectively, dated the
date of this Agreement, and in
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the principal amount of each such Lender's Long-term Acquisition Commitment (the
"Long-term Acquisition Notes").
(d) The Short-term Acquisition Loans shall be evidenced by
amended and restated promissory notes in the form of Exhibits D-1 and D-2
hereto, payable to the order of Seafirst and U.S. Bank, respectively, dated the
date of this Agreement and in the principal amount of each such Lender's
Short-term Acquisition Commitment (the "Short-term Acquisition Notes").
(e) The Overnight Loans shall be evidenced by 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
U.S. Bank's Overnight Commitment (the "Overnight Note").
Each Lender shall record in its records, or at its option on a schedule
attached to its Note, the date and amount of each Loan, the interest rate
applicable to such Loan and, in the case of LIBOR Loans, the Applicable Interest
Period. The aggregate unpaid principal amount so recorded shall be presumptive
evidence of the principal amount owing and unpaid on the Note. 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 Loans together with all interest
accruing thereon.
SECTION 2.8 MANNER OF PAYMENTS.
(a) All payments and prepayments of principal and interest on any
Loan (other than an Overnight Loan) and all other amounts payable hereunder
(other than commitment fees payable under Section 2.10(c) hereof) or under any
other Loan Document due from the Borrower to the Agent or any Lender shall be
made by paying the same in United States Dollars and in immediately available
funds to the Agent at its Commercial Loan Service Center, Seattle, Washington
not later than 12:00 noon (Seattle time) on the date on which such payment or
prepayment shall become due. Any payment made after 12:00 noon (Seattle time) on
any Business Day shall be deemed to have been received on the next Business Day.
All payments and prepayments of principal and interest on any Overnight Loan and
all payments of commitment fees payable under Section 2.10(c) hereof shall be
made by the Borrower by paying the same in United States Dollars and in
immediately available funds to U.S. Bank at its Commercial Loan Service Center,
Portland, Oregon not later than 3:00 p.m. (Portland time) on the date on which
such payment or prepayment shall become due. Any payment made after 3:00 p.m.
(Portland
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time) on any Business Day shall be deemed to have been received on the next
Business Day.
(b) The Borrower hereby authorizes the Agent and each Lender, if and
to the extent any payment is not promptly made pursuant to this Agreement or any
other Loan Document, to charge from time to time against any or all of the
accounts of the Borrower with any Lender or any affiliate of any Lender any
amount due hereunder or under such other Loan Document.
(c) Whenever any payment hereunder or under any other Loan Document
shall be stated to be due or whenever the last day of any interest period would
otherwise occur on a day other than a Business Day, such payment shall be made
and the last day of such interest period shall occur on the next succeeding
Business Day and such extension of time shall in such case be included in the
computation and payment of interest or commitment fees, as the case may be,
unless such extension would cause such payment to be made or the last day of
such interest period to occur in the next following calendar month, in which
case such payment shall be due and the last day of such interest period shall
occur on the next preceding Business Day.
SECTION 2.9 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
Event of 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
Loans 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
2.10(c) hereof;
(C) Third, to interest due on any Overnight Loans;
(D) Fourth, to repay principal then due in respect of
Overnight Loans;
(E) Fifth, to prepay principal of such of the Overnight
Loans as may be designated by Borrower if such
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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 Loans have been paid in full and such Loans have been fully
repaid, U.S. Bank shall immediately transfer amounts remaining, if any, to Agent
for application pursuant to Section 2.9(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 Loans,
Operating Loans, Short-term Acquisition Loans, Long-term Acquisition Loans,
Drafts, and Letters of Credit in accordance with the following priorities:
(A) First, to expenses and indemnities due to Agent and
the Lenders hereunder or under any other Loan Documents;
(B) Second, to fees due to Agent and Lenders under
Sections 2.10(a), (b) and (d) hereof;
(C) Third, to interest due on any Operating, Revolving,
Short-term Acquisition and Long-term Acquisition Loans;
(D) Fourth, to repay principal then due in respect of
the Operating, Revolving, Short-term Acquisition and Long-term Acquisition
Loans;
(E) Fifth, to pay all amounts due in respect of any
Draft;
(F) Sixth, to pay all amounts due in respect of any
Letter of Credit;
(G) Seventh, to prepay principal of such of the
Revolving, Operating, Short-term Acquisition and Long-term Acquisition Loans and
to fund a cash collateral account to be held by Agent to secure Borrower's
payment obligations not yet due in respect of Letters of Credit, all as may be
designated by Borrower, provided, however, that any designation by Borrower
under this Section 2.9(a)(ii)(G) shall be communicated in a notice provided
contemporaneously with any such payment and, provided further, that if Borrower
elects to prepay the Long-term Acquisition Loans or to fund a cash collateral
account to secure its payment obligations not yet due in respect of Letters of
Credit, Borrower must elect both to prepay the Long-term
24
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Acquisition Loans and to fund such cash collateral account in the same
proportion that the then outstanding principal balance of the Long-term
Acquisition Loans bears to the Letter of Credit Usage; in the absence of any
designation by Borrower under this Section 2.9(a)(ii)(G), such payments shall be
applied to prepay the Revolving, Operating, Short-term Acquisition and Long-term
Acquisition Loans and to fund a cash collateral account to be held by Agent to
secure Borrower's payment obligations not yet due in respect of Letters of
Credit proportionally to the then outstanding principal balances of the
Revolving, Operating, Short-term Acquisition and Long-term Acquisition Loans and
the Letter of Credit Usage;
(H) Eighth, to fund a cash collateral account to be held
by Agent to secure Borrower's payment obligations not yet due in respect of
Drafts in proportion to the then outstanding Acceptance Advances; and
(I) Ninth, if all amounts due to Lenders, any Seafirst
Affiliate and Agent in respect of the Revolving Loans, Operating Loans,
Short-term Acquisition Loans, Long-term Acquisition Loans, Drafts, and Letters
of Credit have been paid in full, all such Loans have been fully repaid, and an
amount equal to the sum of the then-outstanding Acceptance Advances and Letter
of Credit Usage is held by Agent as cash collateral to secure Borrower's
obligations in respect of Drafts and Letters of Credit, Agent shall immediately
transfer amounts remaining, if any, to U.S. Bank for application pursuant to
Section 2.9(a)(i).
(iii) Notwithstanding anything herein to the contrary, if after
applying such payment no Event of Default or Incipient Payment Default shall
have occurred and be continuing, the net proceeds received by the Borrower from
the sale of any trade receivables (other than sales made in the ordinary course
of Borrower's business) shall be paid to Agent upon receipt and applied first as
if Section 2.9(a)(ii) (other than subsection I thereof) applied and as if there
were no expenses, fees, indemnities, interest, or principal due in respect of
the Operating or Revolving Loans, no outstanding principal balances of the
Operating or Revolving Loans, and no outstanding Acceptance Advances. The
balance of such proceeds, if any, shall then be applied in accordance with
Section 2.9(a)(ii).
(b) PAYMENTS AFTER DEFAULT. Any payment made by Borrower or received
or obtained for Borrower's account hereunder (whether received by any Lender or
Agent) shall be applied as follows if after applying such payment an Event of
Default or Incipient Payment Default shall have occurred and be continuing:
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(i) As used in this Section 2.9(b) the Revolving Commitments,
the Operating Commitments, the Short-term Acquisition Commitments, the Long-term
Commitments, the Overnight Commitment and the Letter of Credit Commitment shall
each be referred to as a "Line of Credit" and together may sometimes be referred
to as the "Commitments." Each Line of Credit will 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 but unpaid (whether or not then due)
under or in respect of such Line of Credit as of the date on which the payment
which is to be applied was first received and (B) (1) in the case of all Lines
of Credit other than the Operating Line of Credit and the Letter of Credit Line
of Credit, the then outstanding principal balance for all Loans made under such
Line of Credit; (2) in the case of the Operating Line of Credit, the sum of the
then outstanding principal balance for all Operating Loans and the then
outstanding Acceptance Advances; or (3) in the case of the Letter of Credit Line
of Credit, the then outstanding Letter of Credit Usage, and the denominator is
the sum of (A) all fees, expenses, indemnities and interest accrued but unpaid
(whether or not then due) under the Loan Documents through such date and (B) the
sum of the then outstanding principal balance for all Loans, the then
outstanding Acceptance Advances and the then outstanding Letter of Credit Usage.
For purposes of this Section 2.9(b)(i), fees, expenses, and indemnities which
are incurred in respect of the Drafts shall be deemed to have been incurred in
respect of the Operating Line of Credit. For purposes of this Section 2.9(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 incurred in respect of the Short-term Acquisition
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 Loans made thereunder;
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(D) Fourth, to repay the principal then due in respect
of any Loans made thereunder;
(E) Fifth, to pay all amounts due in respect of any
Draft or Letter of Credit;
(F) Sixth, to prepay principal of such of the Loans as
are made thereunder and as are selected by the Majority Lenders for payment or,
in the case of Overnight Loans, as are selected by U.S. Bank for payment; and
(G) Seventh, to fund a cash collateral account to be
held by Agent to secure such of Borrower's payment obligations not yet due in
respect of Drafts and Letters of Credit accepted or issued thereunder.
For purposes of this Section 2.9(b)(ii), Drafts shall be deemed to have been
accepted under the Operating Line of Credit.
(iii) Lenders each agree to immediately advise Agent as to any
payment received from Borrower or for Borrower's account and, if after applying
such payment an Event of Default or Incipient Payment Default shall have
occurred and be continuing, to immediately disburse such payment (or portions
thereof) to the other Lenders 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 Lender 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 2.9(a),
2.9(b), and 2.9(d) hereof, such Lender shall forthwith purchase from the other
Lenders such participations in the Loans (or where applicable, the Drafts and
Letters of Credit) made by them as shall be necessary to cause such purchasing
Lender 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 2.9(a) or (b) as the case may be. If
any of such excess payment is afterwards recovered from such purchasing Lender,
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 Lender so purchasing a
participation from another Lender may exercise all of its rights to payment
(including the right of setoff) with respect to such participation as fully as
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if such Lender were the direct creditor of Borrower in the amount of such
participation.
(d) GENERAL PROVISIONS. Where, pursuant to the Sections 2.9(a) and
2.9(b) hereof, amounts are to be applied to Borrower's obligations to pay fees,
interest, principal in respect of any particular Loan, or amounts outstanding in
respect of Drafts, the amount to be so applied shall be applied to Borrower's
obligations and disbursed to the Lenders 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 Lenders
promptly upon the receipt thereof. Amounts to be applied to Borrower's
obligations in respect of Letters of Credit, however, shall be disbursed to
Seafirst for application in accordance with Article 4 hereof. Whenever pursuant
to the terms of Section 2.9(a) or (b) hereof, the Agent or any Lender is
authorized to elect particular loans for prepayment, it shall, to the extent
consistent with the foregoing order of priority elect to cause Loans accruing
interest at the Prime Rate and the U.S. Bank Prime Rate to be prepaid prior to
the prepayment of any other Loans.
SECTION 2.10 FEES.
(a) 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 as of July 31, 1996 and upon each July 31 of each year
thereafter which fee shall be solely for Agent's account and shall not be shared
with the Lenders. All such fees shall be fully earned when due and
nonrefundable, in whole or in part, when paid.
(b) CERTAIN COMMITMENT FEES. The Borrower agrees to pay to the
Agent, for the account of the Lenders the following commitment fees:
(i) Revolving Line of Credit. From the date hereof until the
Long-term Maturity Date, a commitment fee shall be computed daily at the rate of
1/4 of 1% per annum on the unused portion of the Revolving Commitments;
(ii) Operating Line of Credit. From the date hereof until the
Short-term Maturity Date, a commitment fee shall be computed daily at the rate
of 1/4 of 1% per annum on an amount equal to the unused portion of the Operating
Commitments less the Acceptance Advances;
(iii) Short-term Acquisition Line of Credit. From the date
hereof until the Short-term Acquisition Line Maturity
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Date, a commitment fee shall be computed daily at the rate of 1/4 of 1% per
annum on the unused portion of the Short-term Acquisition Commitments; and
(iv) Long-term Acquisition Line of Credit. From the date
hereof until the Long-term Acquisition Line Maturity Date, a commitment fee
shall be computed daily at the rate of 1/4 of 1% per annum on the unused portion
of the Long-term Acquisition Commitments.
(c) U.S. BANK COMMITMENT FEES. From the date hereof until the
Short-term Maturity Date, a commitment fee shall be computed daily at the rate
of 1/4 of 1% per annum on the difference between the Overnight Commitment and
the then outstanding principal balance of the Overnight Loans and paid to U.S.
Bank.
(d) SEAFIRST COMMITMENT FEES. From the date hereof until the
Long-term Maturity Date, a commitment fee shall be computed daily at the rate of
1/4 of 1% per annum on the difference between the Letter of Credit Commitment
and the then outstanding Letter of Credit Usage and paid to Agent for the
account of Seafirst.
(e) PAYMENT OF COMMITMENT FEES. Commitment fees payable under
Section 2.10(b), (c) and (d) shall commence accruing as of the date hereof and
shall be payable in arrears at quarterly intervals commencing on July 1, 1996,
and payable on the first Business Day of each October, January, April and July
thereafter, except that accrued commitment fees shall be payable on any
applicable Maturity Date and on demand after the occurrence of an Event of
Default. Computations of commitment fees shall be made on the basis of a year of
three hundred sixty (360) days for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
fees are payable.
SECTION 2.11 REDUCTION IN COMMITMENTS.
(a) VOLUNTARY REDUCTION IN COMMITMENTS. Upon sixty (60) days'
advance written notice by Borrower to Agent and all of the Lenders, Borrower may
reduce the Lenders' Revolving Commitments, Operating Commitments, Short-term
Acquisition Commitments, Long-term Acquisition Commitments, Overnight Commitment
or Letter of Credit Commitment provided, that after giving effect to such
reduction, the outstanding principal balance of the corresponding Loans does not
exceed the Commitments being reduced and provided further that after giving
effect to such reduction, the sum of the outstanding principal
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balance of the Operating Loans and the Acceptance Advances does not exceed the
Operating Commitments and provided further that after giving effect to such
reduction, the then outstanding Letter of Credit Usage does not exceed the
Letter of Credit Commitment and provided further that neither the Long-term
Acquisition Commitment nor the Letter of Credit Commitment may be voluntarily
reduced under this Section 2.11(a) unless both such Commitments are fully and
simultaneously terminated. Any reduction in the Commitments for any line of
credit hereunder 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
Commitments then in effect, and shall permanently reduce each Lender's
corresponding Commitment, so that, after giving effect to such reduction, each
Lender's pro rata share of the Commitments for such line of credit will be
unchanged.
(b) AUTOMATIC REDUCTION IN COMMITMENTS. The Short-term and Long-term
Acquisition Commitments shall each be automatically reduced, on a
dollar-for-dollar basis, with each payment or prepayment of the outstanding
principal balance of the Short-term and Long-term Acquisition Loans,
respectively. Each reduction of the Long-term Acquisition Commitment under this
Section 2.11(b) shall also result in an automatic reduction of the Letter of
Credit Commitment on a nine dollar-to-one dollar basis. Any reduction in the
Commitments for any line of credit hereunder shall permanently reduce each
Lender's corresponding Commitment, so that, after giving effect to such
reduction, each Lender's pro rata share of the Commitments for such line of
credit will be unchanged.
ARTICLE 3
BANKERS' ACCEPTANCES
SECTION 3.1 BANKERS' ACCEPTANCES. The Borrower may present drafts drawn by
it on the Lenders to the Lenders for acceptance and discount in accordance with
the terms and conditions of this Article 3.
SECTION 3.2 MANNER OF PRESENTING DRAFTS.
(a) From time to time, the Borrower may request that the Lenders
accept and discount drafts which the Borrower proposes to present under this
Agreement. Such request will be made by delivering a written request or making
an oral request (an "Acceptance Request") to the Agent on a Business Day not
later than 9:00 a.m. (Seattle time) on the date on which the Borrower proposes
to present its draft for acceptance and discount, provided that, any Acceptance
Request given orally
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shall be confirmed by the Borrower in a writing delivered to the Agent not later
than 11:00 A.M. (Seattle time) on the date such oral Acceptance Request is made.
Each Acceptance Request shall be deemed to constitute a representation and
warranty by the Borrower that as of the date of such Request statements set
forth in Article 6 hereof are true and correct (and apply to the drafts and
underlying transactions described in such Request) and that no Default or Event
of Default has occurred and is continuing. Each Acceptance Request shall
identify the drafts for which a quote is requested by specifying the total face
amount for all such drafts, the proposed date of presentment and the maturity of
such drafts and the nature of the underlying transaction(s) relating to such
drafts. Each draft identified in an Acceptance Request shall (i) be scheduled
for presentment on a Business Day prior to the Short-term Maturity Date; (ii)
shall be in a face amount such that after giving effect to the acceptance of all
drafts identified in the Acceptance Request (and in any other Acceptance Request
given at the same time), the sum of the then-outstanding principal balance of
the Operating Loans and the then-outstanding Acceptance Advances will not exceed
the total of the Lenders' Operating Commitments; (iii) shall have a maturity of
not more than ninety-two (92) days and, in any event, shall mature not later
than the Short-term Maturity Date; and (iv) shall be an Eligible Draft. The
aggregate of all drafts identified in any one Acceptance Request shall be in a
face amount which is an integral multiple of One Million Dollars ($1,000,000)
and not less than Three Million Dollars ($3,000,000). Drafts identified in any
one Acceptance Request shall be related to the same transaction, shall have the
same maturity date and be shall be scheduled for presentment to each Lender in
the same proportion that such Lenders' Operating Commitment bears to the
aggregate Operating Commitment for all Lenders.
(b) On receipt of any Acceptance Request, the Agent shall promptly
notify each Lender by telephone, telex or facsimile of the scheduled date for
presentment of the drafts and the amount thereof. Upon fulfillment to each
Lender's satisfaction of the applicable conditions set forth in this Article 3
and Article 5 of this Agreement, each Lender shall before 12:00 noon (Seattle
time) on the date of the scheduled presentment accept each draft presented to it
which complies with the terms of Section 3.2(a) hereof, discount such draft in
the manner hereinafter provided for, and pay the net proceeds thereof in
immediately available funds to the Agent at its Commercial Loan Processing
Center, Seattle, Washington. Upon fulfillment to the Agent's satisfaction of the
applicable conditions set forth in this Article 3 and Article 5 of this
Agreement, and after receipt by the Agent of such funds, the Agent will promptly
make
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such funds available to the Borrower at Borrower's general checking account
maintained at the Main Branch of U. S. Bank in Portland, Oregon or at such other
place as may be designated by Borrower in a writing delivered to Agent.
(c) Unless the Agent shall have received notice from a Lender prior
to 12:00 noon (Seattle time) on the date of any scheduled presentment that such
Lender will not accept and discount the draft(s) presented to it or will not
make available to the Agent the discounted proceeds thereof, the Agent may
assume that such Lender has made such funds available to the Agent on the date
such draft is scheduled for presentment in accordance with Section 3.2(b) hereof
and the Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent that such
Lender shall not have so made such net proceeds available to the Agent, such
Lender and the Borrower, jointly and severally, agree to pay to the Agent
forthwith on demand such corresponding amount, together with interest thereon
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Agent, at (a) in the case of the Borrower,
the Prime Rate and (b) in the case of such Lender, the Federal Funds Rate. Any
such repayment by the Borrower shall be without prejudice to any rights it may
have against the Lender that has failed to accept and discount the presented
draft or that has failed to make the net proceeds thereof available to Agent.
(d) Any draft accepted and discounted by a Lender pursuant to the
terms hereof is referred to herein as a "Draft." Each Lender may retain or
rediscount any such Draft, at its sole election, and any amounts received by
such Lender upon rediscounting shall be solely for the account of such Lender.
(e) In order to facilitate the acceptance and discounting of drafts,
the Borrower may from time to time deliver to each Lender a supply of drafts
executed by the Borrower as drawer and designating the Lender as drawee and
payee, but with the face amount and the maturity left blank. Each Lender agrees
to hold the drafts delivered to it pursuant to the terms hereof and in so doing
give such drafts the same physical care and provide the same safeguards as it
affords other similar property. On each occasion on which the Borrower elects to
present a draft to a Lender for acceptance and discount pursuant to subsection
3.2(a) above, such Lender shall fill in the date, the face amount and the
maturity of such draft in accordance with the corresponding Acceptance Request
and such draft shall be deemed presented, accepted and discounted on such date.
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SECTION 3.3 DISCOUNTING OF DRAFTS. On the date scheduled for presentment
and acceptance of any draft hereunder, and upon fulfillment to each Lender's
satisfaction of the applicable conditions set forth in this Article 3 and
Article 5 of this Agreement, such Lender shall discount the presented draft as
follows: The amount of such discount shall be the product of (a) the face amount
of the presented draft; (b) the sum of (i) seventy-five (75) basis points
(three-fourths of one percent) and the Applicable Acceptance Rate; and (c) a
fraction, the numerator of which is the number of days (including the first day
but excluding the last day) in the period commencing on the date such draft is
to be accepted and the date on which such draft matures, and the denominator of
which is three hundred sixty (360). As used herein, "Applicable Acceptance Rate"
shall mean the per annum rate equal to the highest of the rates quoted by each
Lender to the Agent on the date such draft is to be accepted as such Lender's
rate for discounting an eligible banker's acceptance. After soliciting such
quotes from the Lenders, Agent shall promptly advise each Lender of the
"Applicable Acceptance Rate." Each Lender shall retain for its own account the
amount of the discount determined in accordance with the terms hereof and shall
pay an amount equal to the face amount of the presented draft less such discount
to the Agent for disbursal to the Borrower in accordance with the terms hereof.
SECTION 3.4 INDEMNIFICATION; INCREASED COSTS. In the event that any Draft
for any reason whatsoever is deemed by any Lender not to be an Eligible Draft,
the Borrower agrees to indemnify such Lender on demand for any and all
additional costs, expenses, or damages incurred by such Lender, directly or
indirectly, arising out of such ineligibility, including, without limitation,
any costs of maintaining reserves in respect of such Draft, any premium rates
imposed by the Federal Deposit Insurance Corporation and any costs or expenses
arising in any manner from the lack of liquidity of such Draft. A certificate as
to such additional amounts submitted to the Borrower by any Lender shall be
final, conclusive, and binding, absent manifest error.
If at any time after the date hereof the introduction of or any change in
applicable law, rule, or regulation or in the interpretation or the
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender with any
requests directed by any such Governmental Authority (whether or not having the
force of law) shall, with respect to any Draft subject such Lender to any Tax or
impose, modify, or deem applicable any reserve, special deposit, or similar
requirements against assets of, deposits with or for the account of, credit
extended by the Lender or shall impose on the Lender any other conditions
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affecting Drafts and the result of any of the foregoing is to increase the cost
to the Lender of accepting, discounting, rediscounting or holding Drafts or to
reduce the amount of any sum received or receivable by the Lender hereunder with
respect to the Drafts, then, upon demand by such Lender, the Borrower shall pay
to such Lender such additional amount or amounts as will compensate the Lender
for such increased cost or reduction. A certificate submitted to the Borrower by
the Lender setting forth the basis for the determination of such additional
amount or amounts necessary to compensate the Lender as aforesaid, shall be
conclusive evidence of the amounts due hereunder, absent manifest error.
The Borrower agrees to indemnify and hold the Agent and Lenders harmless
from and against any and all (a) Taxes and other fees payable in connection with
Drafts or the provisions of this Agreement relating to the acceptance and
discounting of drafts, and (b) any and all actions, claims, damages, losses,
liabilities, fines, penalties, costs, and expenses of every nature, including
reasonable attorney's fees, (i) suffered or incurred by the Agent or any Lender
by reason of any Lender's having accepted, discounted or rediscounted Drafts, or
(ii) suffered or incurred by the Agent or any Lender in connection with the
Agent's or Lender's exercising or preserving any of its rights hereunder, or
(iii) otherwise arising out of or relating to this Article 3 or any Drafts;
provided, however, said indemnification shall not apply to the extent that any
such action, claim, damage, loss, liability, fine, penalty, cost, or expense
arises out of or is based solely upon the willful misconduct or gross negligence
of the party seeking indemnity hereunder.
Any Lender requesting any indemnity or other payment from the Borrower
under this Section 3.4 shall simultaneously provide a copy of such request to
Agent.
SECTION 3.5 PAYMENT OF DRAFTS BY BORROWER. The Borrower agrees to pay to
the Agent, the face amount of each Draft in immediately available funds at the
Agent's Commercial Loan Processing Center not later than 10:30 a.m. (Seattle
time) on the date of such Draft's maturity; provided, that, pursuant to the
terms of Section 9.2, following the occurrence of an Event of Default, the face
amount of each Draft may become immediately due and payable. If prior to the
occurrence of an Event of Default, Borrower fails to pay any Drafts on their
maturity date, such failure shall be deemed to be a Notice of Borrowing for a
Operating Loans in the amount of all such Drafts. If the Borrower shall default
in its obligations to pay a Draft at maturity (or upon an earlier acceleration)
either directly or
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with the proceeds of Operating Loans deemed requested as of such maturity date,
interest shall accrue on the unpaid face amount thereof at a per annum rate
equal to two (2) percentage points above the Prime Rate changing as such Prime
Rate changes from the maturity date (or such earlier date as the face amount may
become due and payable) until payment in full by the Borrower. Interest on such
unpaid amounts shall be payable on demand.
SECTION 3.6 COMPLIANCE WITH GOVERNMENTAL REGULATIONS; INSURANCE. The
Borrower agrees to procure promptly any essential import, export or other
license and in all other material respects comply with all laws, statutes,
rules, regulations and orders of any Governmental Authority with respect to the
import, export, shipping, financing or warehousing of goods as part of any
transaction relating to any Draft. The Borrower furthermore agrees to pay all
Taxes, shipping, warehousing, cartage or other charges or expenses upon or with
regard to such goods involved in any such transaction and should the Agent, any
Lender or any of their respective correspondents pay for, or incur any liability
in connection with, any above-mentioned shipping or other license or any
insurance, tax, shipping, warehousing, cartage or other charges, the Borrower
will satisfy the same or reimburse the Agent, such Lender or their
correspondents, as the case may be, promptly therefor upon demand. From time to
time, upon request by the Agent or any Lender, the Borrower shall provide the
Agent with evidence reasonably satisfactory to the Agent of its compliance with
the terms of this Section 3.6.
SECTION 3.7 GUARANTY OF DOCUMENTS AND INSTRUMENTS. The Borrower agrees to
furnish the Agent and the Lenders with such documents and other information as
the Agent or any Lender may from time to time reasonably request relating to
drafts presented for acceptance and discount and the related underlying import,
export or distribution transactions. The Borrower guarantees the existence,
genuineness, validity, correctness and sufficiency of all documents and other
instruments (including but not limited to any documents of title and insurance
and governmental certificates) provided or exhibited to the Agent or any Lender
and represents that such documents and the property represented thereby are free
from all Liens. The Borrower agrees that it will take all necessary or proper
action to meet all legal and other conditions and will warrant and defend same
against the lawful claims and demands of all persons.
SECTION 3.8 REVOCATION BY OPERATION OF LAW. If this Agreement or any
provisions herein relating to the acceptance and discounting of drafts should be
terminated or revoked by operation of law, the Borrower will indemnify and hold
the Agent and each Lender harmless from any loss which may be suffered or
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incurred by the Agent or any Lender in accepting, discounting or rediscounting
any Draft or otherwise acting hereunder but nothing in this Section 3.8 shall
require any Lender to accept, discount or rediscount any draft contrary to any
applicable laws.
SECTION 3.9 RELATIONSHIP TO PRIOR CREDIT AGREEMENT. Any draft accepted by
a Lender under the Prior Credit Agreement which remains outstanding on the
effective date of this Agreement shall be deemed to be a "Draft" accepted and
discounted hereunder.
ARTICLE 4
LETTERS OF CREDIT
SECTION 4.1 LETTERS OF CREDIT. Upon Borrower's request, Seafirst shall
issue or shall cause a Seafirst Affiliate to issue one or more standby letters
of credit for the Borrower's account in accordance with the terms and conditions
of this Article 4.
SECTION 4.2 MANNER OF REQUESTING LETTERS OF CREDIT.
(a) From time to time, the Borrower may request that Seafirst issue
standby letters of credit for Borrower's account or extend or renew any existing
Letters of Credit. Such request will be made by delivering a written request for
the issuance, extension or renewal of such a letter of credit to Seafirst not
later than 12:00 noon (Seattle time) one Business Day prior to the date a new
letter of credit is to be issued or an existing Letter of Credit is scheduled to
be renewed. Each such request shall be deemed to constitute a representation and
warranty by the Borrower that as of the date of such request, statements set
forth in Article 6 hereof are true and correct and that no Default or Event of
Default has occurred and is continuing. Each such request shall specify the face
amount of the requested letter of credit, the proposed date of expiration for
such letter of credit, the name of the intended beneficiary thereof, and whether
such letter of credit is an extension or renewal of a Letter of Credit.
(b) Each letter of credit requested hereunder shall be in a face
amount such that after issuance of such letter of credit, the Letter of Credit
Usage does not exceed One Million Dollars ($1,000,000) or such lower amount as
is determined pursuant to Section 2.11 hereof (Seafirst's "Letter of Credit
Commitment"). In addition, each letter of credit requested hereunder (i) shall
be in a face amount which is an integral multiple of Fifty Thousand Dollars
($50,000) and not less than One Hundred Thousand Dollars ($100,000); and (ii)
and unless otherwise acceptable to Seafirst shall have an expiration date of
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not later than the earlier of the first anniversary of the date on which such
letter of credit is to be issued or the Long-term Acquisition Line Maturity
Date.
(c) At the request of Seafirst, the Borrower shall execute a letter
of credit application and reimbursement agreement ("Reimbursement Agreements"),
in the standard form then used by Seafirst or any Seafirst Affiliate, in respect
of each letter of credit requested hereunder.
(d) Subject to the satisfaction of the conditions precedent set
forth in Article 5 and the Borrower's compliance with the terms of this Section
4.2, Seafirst shall issue and deliver the requested letter of credit or shall
cause a Seafirst Affiliate to issue and deliver the requested letter of credit
to the Borrower or to the Borrower's designated beneficiary at such address as
the Borrower may specify. New Letters of Credit and extensions or renewals of
any existing Letters of Credit shall contain terms and conditions customarily
included in Seafirst's or any Seafirst Affiliate's letters of credit and shall
otherwise be in a form acceptable to Seafirst. For each such Letter of Credit,
Borrower shall pay to Seafirst a letter of credit fee on the date such Letter of
Credit is issued in an amount equal to three-fourths of one percent (.75%) of
the face amount thereof.
(e) In the event of any conflict between the terms of any
Reimbursement Agreement and the terms of this Agreement, the terms of this
Agreement shall control; provided, however, with respect to letters of credit
issued by any Seafirst Affiliate, the terms of the Reimbursement Agreement shall
control.
SECTION 4.3 INDEMNIFICATION; INCREASED COSTS. The Borrower agrees to
indemnify Seafirst and the Seafirst Affiliates on demand for any and all
additional costs, expenses, or damages incurred by Seafirst or any Seafirst
Affiliate, directly or indirectly, arising out of the issuance of any Letter of
Credit, including, without limitation, any costs of maintaining reserves in
respect thereof and any premium rates imposed by the Federal Deposit Insurance
Corporation in connection therewith. A certificate as to such additional amounts
submitted to the Borrower by Seafirst shall be final, conclusive, and binding,
absent manifest error.
If at any time after the date hereof the introduction of or any change in
applicable law, rule, or regulation or in the interpretation or the
administration thereof by any Government Authority charged with the
interpretation or administration thereof, or compliance by Seafirst or any
Seafirst Affiliate with any requests directed by any such Government Authority
(whether
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or not having the force of law) shall, with respect to any Letter of Credit
subject Seafirst or any Seafirst Affiliate to any Tax or impose, modify, or deem
applicable any reserve, special deposit, or similar requirements against assets
of, deposits with or for the account of, credit extended by Seafirst or any
Seafirst Affiliate or shall impose on Seafirst or any Seafirst Affiliate any
other conditions affecting the Letters of Credit and the result of any of the
foregoing is to increase the cost to Seafirst or any Seafirst Affiliate of
issuing a Letter of Credit or to reduce the amount of any sum received or
receivable by Seafirst or any Seafirst Affiliate hereunder with respect to the
Letters of Credit, then, upon demand by Seafirst, the Borrower shall pay to
Seafirst such additional amount or amounts as will compensate Seafirst or such
Seafirst Affiliate for such increased cost or reduction. A certificate submitted
to the Borrower by Seafirst setting forth the basis for the determination of
such additional amount or amounts shall be final, conclusive, and binding,
absent manifest error.
The Borrower agrees to indemnify and hold Seafirst and each Seafirst
Affiliate (an "Indemnitee") harmless from and against any and all (a) Taxes and
other fees payable in connection with Letters of Credit or the provisions of
this Agreement relating thereto, and (b) any and all actions, claims, damages,
losses, liabilities, fines, penalties, costs, and expenses of every nature,
including reasonable attorney's fees, suffered or incurred by the Indemnitee
otherwise arising out of or relating to this Article 4, or any Letter of Credit;
provided, however, said indemnification shall not apply to the extent that any
such action, claim, damage, loss, liability, fine, penalty, cost, or expense
arises solely out of or is based solely upon the Indemnitee's willful misconduct
or gross negligence.
SECTION 4.4 PAYMENT BY BORROWER. The Borrower agrees to fully
reimburse Seafirst and all Seafirst Affiliates for all amounts paid under any
Letter of Credit together with interest thereon at the Prime Rate from the date
such payment is made until the date Seafirst notifies the Borrower that such
payment was made. Such reimbursement shall be made in immediately available
funds at Seafirst's Commercial Loan Processing Center not later than 12:00 noon
(Seattle time) on the date the Borrower is first notified by Seafirst that
payment has been made under the Letter of Credit; provided, that, if Seafirst so
elects pursuant to the terms of Section 9.2, following the occurrence of an
Event of Default, the face amount of each Letter of Credit shall become
immediately due and payable. If the Borrower shall default in its obligations to
reimburse Seafirst or any Seafirst Affiliate or to make any other payment
required hereunder, interest shall accrue on the unpaid amount thereof at
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the Default Rate from the date such amount becomes due and payable until payment
in full by the Borrower. Interest on unpaid amounts shall be calculated on the
basis of a year of three hundred sixty (360) days and shall be payable on
demand.
SECTION 4.5 RELATIONSHIP TO PRIOR CREDIT AGREEMENT. All letters of
credit issued by Seafirst or any Seafirst Affiliate in response to requests for
such issuance received under the Prior Credit Agreement which are issued and
outstanding as of the effective date of this Agreement, shall be deemed to be
Letters of Credit issued hereunder.
ARTICLE 5
CONDITIONS
The obligation of any Lender to make any Loan or accept and discount any
draft presented by the Borrower, the obligation of the Agent to disburse the
Loan proceeds and the obligation of Seafirst to issue or to cause a Seafirst
Affiliate to issue a Letter of Credit are subject to the fulfillment of the
following conditions:
SECTION 5.1 NOTICE OF BORROWING, PROMISSORY NOTES, ETC. In respect of any
Loan (other than an Overnight Loan), the Agent shall have received the Notice of
Borrowing and Lenders shall have received their respective Notes each duly
executed and delivered by the Borrower; in respect of any Overnight Loan, U.S.
Bank shall have received the Notice of Borrowing and the Overnight Note each
duly executed and delivered by the Borrower; in respect of any request for
acceptance of a draft, the Agent shall have received an Acceptance Request duly
executed and delivered by the Borrower, and each Lender shall have received a
duly executed draft complying with the terms of Section 3.2; and in respect of
any request for the issuance of a letter of credit, Seafirst shall have received
a written request for the issuance thereof complying with the terms of Section
4.2.
SECTION 5.2 CORPORATE AUTHORITY. The Agent shall have received in form and
substance satisfactory to it certificates of good standing and a certified copy
of a resolution adopted by the Board of Directors of the Borrower authorizing
the execution, delivery and performance of this Agreement and the other Loan
Documents, together with evidence of the authority and specimen signatures of
the persons who have signed this Agreement and such other Loan Documents and
such other evidence of corporate authority as the Agent shall reasonably
require.
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SECTION 5.3 LEGAL OPINION. The Agent shall have received a written legal
opinion addressed to the Agent and the Lenders substantially in the form
attached hereto as Exhibit F, of counsel for the Borrower, who shall be selected
by the Borrower and approved by the Agent.
SECTION 5.4 DEFAULTS, ETC. No Default or Event of Default shall have
occurred and be continuing or will have occurred as a result of the making of
the requested Loan, the acceptance and discount of the presented draft or the
issuance of the requested letter of credit; and the representations and
warranties of the Borrower in Article 6 shall be true on and as of the date such
Loan is made, such draft is presented, or such Letter of Credit is issued with
the same force and effect as if made on and as of such date.
SECTION 5.5 PAYMENT OF ALL ACCRUED INTEREST AND FEES. On the date of this
Agreement, the Borrower shall have paid all interest and commitment fees which
accrued prior to the date hereof pursuant to the terms of the Prior Credit
Agreement.
SECTION 5.6 OTHER INFORMATION. Agent and Lenders shall have received such
other statements, opinions, certificates, documents and information with respect
to matters contemplated by this Agreement as Agent or any Lender may reasonably
request.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and the Lenders as
follows:
SECTION 6.1 CORPORATE EXISTENCE AND POWER. The Borrower is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Oregon. The Borrower is duly qualified to do business in each other
jurisdiction where the nature of its activities or the ownership of its
properties requires such qualification, except to the extent that failure to be
so qualified does not have a material adverse effect on its business, operations
or financial condition. The Borrower has full corporate power, authority and
legal right to carry on its business as presently conducted, to own and operate
its properties and assets, and to execute, deliver and perform this Agreement
and the other Loan Documents.
SECTION 6.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by the Borrower of this Agreement and the other Loan Documents, any
borrowing hereunder or thereunder,
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the presentment of any drafts for acceptance hereunder, and the request for
issuance of letters of credit hereunder have been duly authorized by all
necessary corporate action of the Borrower, do not require any shareholder
approval or the approval or consent of any trustee or the holders of any
Indebtedness of the Borrower, except such as have been obtained (certified
copies thereof having been delivered to the Agent), 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 the
Borrower is a party or by which the Borrower or any of its properties may be
bound or affected.
SECTION 6.3 GOVERNMENT APPROVALS, ETC. No Government Approval or filing or
registration with any Governmental Authority is required for the making and
performance by the Borrower of this Agreement or the other Loan Documents or in
connection with any of the transactions contemplated hereby or thereby, except
such as have been heretofore obtained and are in full force and effect
(certified copies thereof having been delivered to the Agent).
SECTION 6.4 BINDING OBLIGATIONS, ETC. This Agreement has been duly
executed and delivered by the Borrower and constitutes, and the other Loan
Documents when duly executed and delivered will constitute, the legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally.
SECTION 6.5 LITIGATION. Except as reflected in the financial statements
referred to in Section 6.7 or otherwise disclosed to the Agent in writing prior
to the date of this Agreement, there are no actions, proceedings,
investigations, or claims against or affecting the Borrower now pending before
any court, arbitrator or Governmental Authority (nor to the knowledge of the
Borrower has any thereof been threatened nor does any basis exist therefor)
which if determined adversely to the Borrower would be likely to have a material
adverse effect on the business, operations or financial condition of the
Borrower, or which if determined adversely to the Borrower would be likely to
result in a judgment or order against the Borrower for more than One Million
Dollars ($1,000,000) in the aggregate.
SECTION 6.6 INDEBTEDNESS. Borrower is not now in default in the payment of
any Indebtedness in an aggregate amount exceeding One Million Dollars
($1,000,000).
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SECTION 6.7 FINANCIAL CONDITION. The balance sheet of the Borrower as at
September 29, 1995 and as at December 29, 1995, and the related statements of
income and retained earnings of the Borrower for the fiscal year and fiscal
quarter then ended, copies of which have been furnished to the Lenders, fairly
present the financial condition of the Borrower as at such date and the results
of operations of the Borrower for the period then ended, all in accordance with
generally accepted accounting principles consistently applied. The Borrower did
not have on such date any material contingent liabilities, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in that balance
sheet and in the notes to those financial statements and since December 29, 1995
there has been no material adverse change in the business, operations or
financial condition of the Borrower.
SECTION 6.8 TITLE AND LIENS. The Borrower has good and marketable title to
each of the properties and assets reflected in its balance sheet referred to in
Section 6.7 (except such as have been since sold or otherwise disposed of in the
ordinary course of business). No assets or revenues of the Borrower are subject
to any Lien except as permitted by this Agreement. All properties of the
Borrower and its use thereof comply with applicable zoning and use restrictions.
SECTION 6.9 TAXES. The Borrower has filed all tax returns and reports
required of it, has paid all Taxes which are shown to be due and payable on such
returns and reports, and has provided adequate reserves for payment of any Tax
whose payment is being contested. The charges, accruals and reserves on the
books of the Borrower in respect of Taxes for all fiscal periods to date are
accurate in all material respects and there are no material questions or
disputes between the Borrower and any Governmental Authority with respect to any
Taxes except as disclosed in the balance sheet referred to in Section 6.7 or
otherwise disclosed to the Agent in writing prior to the date of this Agreement.
SECTION 6.10 LAWS, ORDERS, OTHER AGREEMENTS. The Borrower is not in
violation of or subject to any contingent liability on account of any laws,
statutes, rules, regulations or orders of any Governmental Authority, except for
violations which in the aggregate do not and will not have a material adverse
effect on the business, operations or financial condition of the Borrower. The
Borrower is not in material breach of or default under any agreement to which it
is a party or which is binding on it or any of its assets.
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SECTION 6.11 FEDERAL RESERVE REGULATIONS. The 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
Loan or the proceeds received from the acceptance of any Draft will be used to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock or for any other purpose
that violates the applicable provisions of any Federal Reserve Regulation. The
Borrower will furnish to any Lender on request a statement conforming with the
requirements of Regulation U.
SECTION 6.12 ERISA.
(a) 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 the Borrower or
affect materially the ability of the Borrower to perform this Agreement.
(b) 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 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 any material tax or penalty on
prohibited transactions imposed by Section 502 or Section 2003(a) of ERISA.
(c) No Pension Plan or trust 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.
(d) 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.
(e) The required allocations and contributions to Pension Plans will
not violate Section 415 of the Code in any material respect.
SECTION 6.13 SECURITY OFFERINGS. Neither the Borrower nor anyone acting on
its behalf has directly or indirectly offered any Note or any Draft or similar
instrument or security for sale
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to any person or solicited from any person any offer to buy any such instrument
or security or approached or negotiated with any person concerning any such
instrument or security in any manner which would violate any applicable state or
federal securities laws, including without limitation, the Securities Act of
1933, as amended.
SECTION 6.14 WARRANTIES WITH RESPECT TO DRAFTS. Each draft which the
Borrower has identified in an Acceptance Request (a) will grow out of one or
more transactions involving the importation or exportation of goods; or (b) will
grow out of one or more transactions involving the domestic shipment of goods.
SECTION 6.15 FURTHER WARRANTIES WITH RESPECT TO DRAFTS. In respect of each
draft which the Borrower has identified in an Acceptance Request (a) completion
of each transaction related to such draft is anticipated to occur on or before
the maturity date of such draft, (b) the maturity of such draft will be
consistent with the period usually and reasonably necessary to finance
transactions of such kind, (c) any amounts received by the Borrower from the
Agent in connection with the acceptance and discount of such draft will be used
by the Borrower to finance the related import, export or distribution
transaction, (d) the proceeds of the related import, export or distribution
transaction will be used by the Borrower to liquidate its obligations to repay
the face amount of the draft on its maturity date, and (e) such draft is an
Eligible Draft.
SECTION 6.16 ACCEPTANCES. No acceptances other than an acceptance of a
Draft by a Lender hereunder have been or shall be outstanding with respect to
the goods covered by or relating to such Draft.
SECTION 6.17 PATENTS, LICENSES, FRANCHISES. The Borrower owns or possesses
all the patents, trademarks, service marks, trade names, copyrights, licenses,
franchises, permits and rights with respect to the foregoing necessary to own
and operate its properties and to carry on its business as presently conducted
and presently planned to be conducted without conflict with the rights of others
except as disclosed in writing to the Agent prior to the date hereof.
SECTION 6.18 INVESTMENT COMPANY; PUBLIC UTILITY HOLDING COMPANY. The
Borrower is not (a) an "investment company" or a company "controlled" by an
investment company within the meaning of the Investment Company Act of 1940, as
amended; or (b) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of either a "holding company" or a
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"subsidiary company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
SECTION 6.19 ENVIRONMENTAL AND SAFETY HEALTH MATTERS. To the best of
Borrower's knowledge, 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 or on the business, operations, or financial condition of the
Borrower. 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 or on the business, operations, or financial
condition of the Borrower.
SECTION 6.20 REAFFIRMATION. 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 as of the moment immediately prior to this Agreement becoming
effective, no "Default" or "Incipient Default" (as such words were defined in
the Prior Credit Agreement) had occurred and was continuing.
SECTION 6.21 REPRESENTATIONS AS A WHOLE. This Agreement, the other Loan
Documents, the financial statements referred to in Section 6.7, and all other
instruments, documents, certificates and statements furnished to the Agent or
the Lenders by the Borrower, 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.
ARTICLE 7
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder or there shall
be any outstanding Acceptance Advances or Letter or Credit Usage and, until
payment in full of each Loan and performance of all other obligations of the
Borrower under this Agreement and the other Loan Documents, the Borrower agrees
to do all of the following unless the Agent shall otherwise consent in writing.
SECTION 7.1 PRESERVATION OF CORPORATE EXISTENCE, ETC. The Borrower will
preserve and maintain its corporate existence, rights, franchises and privileges
in the jurisdiction of its
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incorporation and will qualify and remain qualified as a foreign corporation in
each jurisdiction where such qualification is necessary or advisable in view of
its business and operations or the ownership of its properties.
SECTION 7.2 KEEPING OF BOOKS AND RECORDS; VISITATION RIGHTS. The Borrower
will keep adequate records and books of account in which complete entries will
be made, in accordance with generally accepted accounting principles
consistently applied, reflecting all financial transactions of the Borrower. At
any reasonable time and from time to time Borrower will permit the Agent or any
Lender 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 or directors.
SECTION 7.3 MAINTENANCE OF PROPERTY, ETC. The 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.
SECTION 7.4 COMPLIANCE WITH LAWS, ETC. The Borrower will comply in all
material respects with all laws, regulations, rules, and orders of Governmental
Authorities applicable to the 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, with provision
having been made to the satisfaction of the Agent for the payment thereof in the
event the contest is determined adversely to the Borrower.
SECTION 7.5 OTHER OBLIGATIONS. The 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 the 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
assets of the Borrower, except any thereof whose validity or amount is being
contested in good faith by the Borrower in appropriate proceedings upon stay of
execution of the enforcement thereof, with provision having been made to the
satisfaction of the Agent for the payment thereof in the event the contest is
determined adversely to the Borrower; and except
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other Indebtedness, Taxes, and other obligations which, in the aggregate do not
exceed One Million Dollars ($1,000,000), provided, however, that the foregoing
exceptions to this covenant shall not extend to any obligation of Borrower
identified in Section 8.4 or 9.1(j).
SECTION 7.6 INSURANCE. The 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. The Borrower will on request furnish to the Agent or any Lender
certificates of insurance or duplicate policies evidencing such coverage.
SECTION 7.7 FINANCIAL INFORMATION. The Borrower will deliver to the Agent
and to each Lender:
(a) ANNUAL AUDITED FINANCIAL STATEMENTS. As soon as available and in
any event within one hundred twenty (120) days after the end of each fiscal year
of the Borrower, the consolidated balance sheet of the Borrower as of the end of
such fiscal year and the related consolidated statement of income and retained
earnings and statement of changes in financial position of the Borrower for such
year, accompanied by the audit report thereon by independent certified public
accountants selected by the Borrower and reasonably satisfactory to the Agent
(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 the Borrower's
records and shall contain no disclaimer of opinion or adverse opinion);
(b) QUARTERLY UNAUDITED FINANCIAL STATEMENTS. As soon as available
and in any event within sixty (60) days after the end of each of the Borrower's
first three fiscal quarters, the unaudited consolidated and consolidating
balance sheet and statement of income and retained earnings of the Borrower as
of the end of such fiscal quarter (including the fiscal year to the end of such
fiscal quarter) accompanied by an officer's certificate of the chief financial
officer of the 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 the
Borrower as of the end of and for such fiscal quarter and that since the fiscal
year-end report referred to in subsection (a) there has been no material adverse
change in the financial condition or operations of the Borrower as shown on the
balance sheet as of said date;
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(c) QUARTERLY COMPLIANCE CERTIFICATES. Within sixty (60) days after
the close of each of the Borrower's first three fiscal quarters and within
ninety (90) days after the close of the Borrower's fourth fiscal quarter, an
officer's certificate signed by the chief financial officer of the Borrower
stating that as of the close of such fiscal year no Default or Event of Default
had occurred and was continuing and setting forth calculations evidencing
compliance with Sections 7.11, 7.12, 7.13, 7.14, 7.15, 8.2 and 8.3 hereof;
(d) OTHER. All other statements, reports and other information as
the Agent or any Lender may reasonably request concerning the financial
condition, operations or business affairs of the Borrower.
SECTION 7.8 NOTIFICATION. Promptly after learning thereof, the Borrower
shall notify the Lenders and the Agent of (a) any action, proceeding,
investigation or claim against or affecting the Borrower instituted before any
court, arbitrator or Governmental Authority or, to the Borrower's knowledge
threatened to be instituted, which if determined adversely to the Borrower would
be likely to have a material adverse effect on the business, operations or
financial condition of the Borrower, or to result in a judgment or order against
the Borrower for more than One Million Dollars ($1,000,000); (b) any substantial
dispute between the Borrower and any Governmental Authority; (c) any labor
controversy which has resulted in or, to the Borrower's knowledge, threatens to
result in a strike which would materially affect the business operations of the
Borrower; (d) if the 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) or (6) of Section 4043 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 Borrower obtains knowledge thereof), which might constitute grounds for a
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; and (e) the occurrence of any Default or Event
of Default. In the case of the occurrence of a Default or Event of Default, the
Borrower will deliver to the Agent and the Lenders an officer's certificate
specifying the nature thereof, the period of existence thereof, and what action
the Borrower proposes to take with respect thereto.
SECTION 7.9 ADDITIONAL PAYMENTS; ADDITIONAL ACTS. From time to time, the
Borrower will (a) pay or reimburse the Agent
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and the Lenders on request for all Taxes (other than Taxes on or measured by
Agent's or a Lender's net income) imposed on any Loan Document and for all
reasonable expenses, including legal fees, actually incurred by the Agent or any
Lender in connection with the preparation or modification of the Loan Documents,
the making of the Loans, the acceptance and discounting of any Draft, the
issuance of any Letter of Credit and the enforcement by judicial proceedings
(including appeals) or otherwise of any of the rights of the Agent or the
Lenders under the Loan Documents; and (b) obtain and promptly furnish to the
Lenders and the Agent evidence of all such Government Approvals as may be
required to enable the Borrower to comply with its obligations under the Loan
Documents.
SECTION 7.10 USE OF PROCEEDS FROM ACCEPTANCES. The proceeds of all Drafts
shall be used by the Borrower solely for the purpose of financing the
transactions to which such Drafts relate, all as specified by the Borrower in
its corresponding Acceptance Request.
SECTION 7.11 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. As used in this Agreement, "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
Borrower 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 and includes the
current portion of such Indebtedness. As used in this Agreement, "Total
Capitalization" means the sum of Members' Equity and Funded Debt. As used in
this Agreement, "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. As used in
this Agreement, "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.
SECTION 7.12 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
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7.12 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 7.12, 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.
SECTION 7.13 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. As used in this Agreement, "Fixed
Charge Coverage" means for any period the ratio derived by 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. As used in this
Agreement, "Fixed Charges" means the sum of (a) interest expense on all of
Borrower's 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.
SECTION 7.14 MINIMUM CAPITAL AND SUBORDINATED DEBT. Borrower shall
maintain the sum of Subordinated Debt and Members' Equity at a total of not less
than Eighty-five Million Dollars ($85,000,000).
SECTION 7.15 MEMBER NOTES RECEIVABLE RATIO. Borrower shall maintain, on a
consolidated basis, a Member Portfolio of not more than one hundred fifty
percent (150%) of Consolidated Tangible Net Worth. As used in this Agreement,
"Member Portfolio" means the sum of (i) all Indebtedness of members owing 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 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,
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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; provided, however, that, if and to the
extent Buyer consents thereto, for the purpose of determining the recourse
classification of Loans, an Obligor Group's Consolidated Tangible Net Worth
shall be determined without deducting from its Consolidated Net Worth that
portion of the value assigned to covenants not to compete relating to the
purchase of any facilities located in the States of Washington and California,
as shown on such Obligor Group Financial Statements.
SECTION 7.16 RELOCATION OF OFFICES. Borrower shall give Agent at least
sixty (60) days' prior written notice of any relocation of its chief executive
offices or the offices where Borrower's books and records are kept.
SECTION 7.17 USE OF PROCEEDS. Borrower shall use the proceeds of Loans
only for working capital needs provided, however, that the proceeds of
Short-term and Long-term Acquisition Loans may be used as bridge financing for
the acquisition of the wholesale related assets of Bay Area Foods, Inc.
SECTION 7.18 AMENDMENTS TO PRIVATE PLACEMENT; PREPAYMENTS OF PRIVATE
PLACEMENT. Borrower shall promptly provide to Lenders a copy of each Private
Placement Agreement now or hereafter executed by Borrower and, as to any Private
Placement Agreement not executed as of the date hereof, Borrower shall notify
the Lenders 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 an amendment or waiver
pertains to an increase in the commitment amounts thereunder or to the terms of
repayment thereof or to the terms of any promissory notes issued thereunder.
Borrower shall deliver to Agent and the Lenders, 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 any Private
Placement Agreement, and shall deliver to Agent and Lenders 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.
SECTION 7.19 INSURANCE COMPANY. Borrower shall cause Grocers Insurance
Company or any successor thereto ("GIC") to (a) comply in all material respects
with all laws, regulations, rules
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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.
GIC is a wholly-owned Oregon subsidiary corporation of Grocers Insurance Group,
which in turn is a wholly-owned subsidiary of Borrower.
ARTICLE 8
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder or there shall
be any outstanding Acceptance Advances or Letter of Credit Usage and until
payment in full of each Loan and performance of all other obligations of the
Borrower under this Agreement and the other Loan Documents, the Borrower agrees
that it will not do any of the following unless the Agent shall otherwise
consent in writing.
SECTION 8.1 LIQUIDATION, MERGER, SALE OF ASSETS. The Borrower shall not
liquidate, dissolve or enter into any merger, consolidation, joint venture,
partnership or other combination or sell, lease, or dispose of all or any
substantial 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 Event of 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
of the United States and provided further that such surviving corporation
expressly assumes Borrower's obligations under this Agreement in a writing
delivered to the Agent and the Lenders. Without limiting the foregoing,
Borrower, and its consolidated subsidiaries, shall not in any fiscal year sell
any portion of their business or assets having a value in excess of ten percent
(10%) of their Consolidated Tangible Net Worth unless the proceeds of such sale
or sales are reinvested within twelve (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 Two Hundred Fifty Thousand Dollars ($250,000), not to exceed in the
aggregate One Million Five Hundred Thousand Dollars ($1,500,000)
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in any fiscal year, and (b) Indebtedness of Borrower's members owing to Borrower
and incurred in connection with equipment, store or inventory financing provided
by Borrower to such members.
SECTION 8.2 CONTINGENT INDEBTEDNESS. Borrower shall not, at any time, have
outstanding Contingent Indebtedness in an amount exceeding the sum of (a) Six
Million Dollars ($6,000,000) and (b) fifty percent (50%) 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 (including 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 (5) times the average for the three (3) most recently ended
fiscal years of Borrower of the actual losses incurred during 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) three percent (3%).
SECTION 8.3 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 mortgage indebtedness outstanding immediately prior
to such extension, refinancing or renewal; (ii) capital lease obligations; and
(iii) Liens to secure indebtedness for the deferred purchase price of property
acquired after the date hereof, but only if such Liens are limited to such
property and its proceeds. Without limiting the generality of the foregoing,
Borrower shall not pledge, grant a security interest in, or otherwise permit or
suffer a lien to encumber all or any portion of its accounts receivables,
chattel paper, documents, instruments, general intangibles or inventory.
Notwithstanding the foregoing to contrary, the total amount of Indebtedness
secured by (a) all Liens (excluding the Liens described in clause (iii) above;
and (b) all liens described in subclauses (a), (b) and (c) of the definition of
"Liens" set forth in Section 1.1 hereof, shall not at any time exceed fifteen
percent (15%) of Borrower's Consolidated Tangible Net Worth.
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SECTION 8.4 ERISA COMPLIANCE. Neither the Borrower nor any member of the
Controlled Group nor any Plan will:
(a) engage in any "prohibited transaction" (as such term is defined
in Section 406 or Section 2003(a) of ERISA) which could result in a material
liability to the Borrower;
(b) incur any "accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA) whether or not waived which could result in a
material liability to the Borrower;
(c) terminate any Pension Plan in a manner which could result in the
imposition of a Lien on any property of the Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA; or
(d) violate state or federal securities laws applicable to any Plan
in any material respect.
SECTION 8.5 NO NAME CHANGE, ETC. Borrower shall not change its name,
identity, or corporate structure in any manner.
SECTION 8.6 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
Borrower Affiliate on terms that are less favorable to Borrower than those which
might be obtained at the time from persons who are not Borrower Affiliates.
Borrower will not permit the sale or other disposition of, or suffer any
Borrower Affiliate which Borrower directly or indirectly controls to sell or
otherwise dispose of substantially all the assets of such Borrower Affiliate,
except in the ordinary course of such Affiliate's business; and Borrower will
not permit or suffer the sale or issuance by any Borrower Affiliate of any of
its stock of any class, except stock issued to Borrower. A "Borrower 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 five percent (5%) of Borrower's voting stock, or (c) is a director or
officer of Borrower.
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" hereunder.
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(a) PAYMENT DEFAULT. The Borrower shall fail to pay for a period of
five (5) Business Days after such payment becomes due any amount of principal of
or interest on any Loan or any other amount payable by it hereunder or under any
other Loan Document; or
(b) BREACH OF WARRANTY. Any representation or warranty made or
deemed made by the Borrower under or in connection with this Agreement or any
other Loan Document shall prove to have been incorrect in any material respect
when made; or
(c) BREACH OF CERTAIN COVENANTS. The Borrower shall fail to comply
with any of the provisions of Sections 7.8(e), 7.11, 7.12, 7.13, 7.14, 7.15,
8.1, 8.2, 8.3 or 8.4 of this Agreement; or
(d) BREACH OF OTHER COVENANT. The Borrower shall fail to perform or
observe any other covenant, obligation or term of any Loan Document and such
failure continues for thirty (30) days after written notice thereof shall have
been given to Borrower by the Agent or, if the failure cannot be remedied either
by the payment of money or with diligent efforts during such 30-day period then,
so long as Borrower has commenced and diligently proceeded to remedy such
failure during such 30-day period, for such longer period as is necessary to
remedy the failure, provided that Borrower continues to use diligent efforts to
remedy the failure within such longer period; or
(e) CROSS-DEFAULT. (i) The Borrower shall fail (A) to pay when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) any Indebtedness which in the aggregate exceeds One Million Dollars
($1,000,000) (except any Loans or Drafts) or any interest or premium thereon and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Indebtedness, or (B) to perform
any term or covenant on its part to be performed under any agreement or
instrument relating to any such Indebtedness and required to be performed and
such failure shall continue after the applicable grace period, if any, specified
in such agreement or instrument, if the effect of such failure to perform is to
accelerate or to permit the acceleration of the maturity of such Indebtedness;
or (ii) any Indebtedness which in the aggregate exceeds One Million Dollars
($1,000,000) (except any Loans or Drafts) shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof; or (iii) a "Termination Event"
as such term is defined in any note purchase agreement or any other event which
would
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entitle any party committed to purchase notes under a note purchase agreement to
terminate such commitment prior to its scheduled expiration shall have occurred;
or
(f) VOLUNTARY BANKRUPTCY, ETC. The 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 controverting, or fail timely to
controvert a petition filed against it seeking relief under Title 11 of the
United State Code, as now constituted or hereafter amended; or (ii) 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
(g) INVOLUNTARY BANKRUPTCY, ETC. An order for relief shall be
entered against the Borrower 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 Borrower or of any substantial part of its property, or
ordering the reorganization, winding-up or liquidation of its affairs; or upon
the expiration of sixty (60) days after the filing of any involuntary petition
against it seeking any of the relief specified in Section 9.1(f) or this Section
9.1(g) without the petition being dismissed prior to that time; or
(h) INSOLVENCY, ETC. The Borrower 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 the Borrower, 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
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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 the
Borrower; or
(i) JUDGMENT. A final judgment or order for the payment of money in
excess of One Million Dollars ($1,000,000), shall be rendered against the
Borrower and such judgment or order (a) is not covered by insurance and (b)
shall continue unsatisfied and in effect for a period of thirty (30) consecutive
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; or
(j) ERISA. The Borrower 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) of 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 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 Plan or Plans which could result in any
liability of the Borrower in excess of One Million Dollars ($1,000,000); or
(k) GOVERNMENT ACTION. Borrower is enjoined or restrained or in any
way prevented by order of a court or other Governmental Authority from
conducting all or a substantial part of its business affairs or operations; or
(l) CHANGE IN CONTROL. Any person, or group of persons directly or
indirectly under common control, shall obtain in excess of fifty percent (50%)
of the outstanding voting stock of Borrower; or
(m) VALIDITY CONTEST. The validity or enforceability of this
Agreement, the Notes, or any other Loan Document is contested by Borrower or
Borrower denies liability in respect of its obligations hereunder or thereunder;
or
(n) INSURANCE CLAIM. A claim or claims that would normally be
covered by insurance according to industry practices is made against GIC for the
payment of more than One Million Dollars ($1,000,000) individually or in the
aggregate and is not
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covered by reinsurance; or all or a material part of GIC's reinsurance policies
shall be terminated for any reason.
SECTION 9.2 CONSEQUENCES OF DEFAULT. If an Event of Default described in
Section 9.1(f) or 9.1(g) shall occur and be continuing, then in any such case,
the Commitments shall be immediately terminated and, if any Loans shall have
been made, the principal of and interest on the Loans shall become immediately
due and payable, if any Drafts have been accepted, all outstanding Acceptance
Advances shall become immediately due and payable, and if any Letter of Credit
has been issued, an amount equal to the Letter of Credit Usage shall become
immediately due and payable all without notice or demand of any kind. If any
other Event of Default shall occur and be continuing, then in any such case and
at any time thereafter so long as any such Event of Default shall be continuing,
the Agent may, and shall upon the request of Majority Lenders, immediately
terminate the Commitments, and if Loans shall have been made, the Agent may, and
shall upon the request of Majority Lenders, declare the principal of and the
interest on the Loans and all other sums payable by the Borrower hereunder or
under any other Loan Document to be immediately due and payable, if any Drafts
have been accepted, the Agent may, and shall upon the request of Majority
Lenders, declare the outstanding Acceptance Advances immediately due and
payable, and if any Letter of Credit has been issued the Agent may, and on the
request of Seafirst, shall declare an amount equal to the Letter of Credit Usage
immediately due and payable whereupon the same shall become immediately due and
payable all without protest, presentment, notice, or demand, all of which the
Borrower expressly waives. Amounts paid or received hereunder in respect of
issued and outstanding Letters of Credit which exceed amounts paid by Seafirst
or a Seafirst Affiliate under such Letters of Credit shall be held (and applied)
as cash collateral to secure the performance of all obligations of the Borrower
owing to Seafirst and any Seafirst Affiliate in respect of Letter of Credits.
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 Lenders hereunder. The Agent and Lenders may
exercise or pursue any remedy or cause of action permitted by this Agreement,
the Notes, any other 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 hereunder or thereunder shall not preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
ARTICLE 10
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THE AGENT
SECTION 10.1 AUTHORIZATION AND ACTION. Each Lender hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no duties or responsibilities except those expressly set forth
in this Agreement. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender; and nothing in this Agreement
or the other Loan Documents, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of this
Agreement or the other Loan Documents except as expressly set forth herein. As
to any matters not expressly provided for by this Agreement, including
enforcement or collection of the Loans and Drafts, the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining) upon the instructions of the Majority Lenders, and such instructions
shall be binding upon all the Lenders, provided that the Agent shall not be
required to take any action which exposes the Agent to personal liability or
which is contrary to the Loan Documents or applicable law and provided, further,
that without the consent of all Lenders, the Agent shall not change or modify
any Lender's Commitment, the definition of "Majority Lenders", the timing or
rates of interest payments, the timing or amounts of principal payments due in
respect of Loans and Drafts, and provided, further, that the terms of Article 4
shall not be amended without the consent of Seafirst, and provided, further,
that the terms of Sections 2.3 and 2.10(a), and this Article 10 shall not be
amended without the prior written consent of the Agent (acting for its own
account). In the absence of instructions from the Majority Lenders, the Agent
shall have authority (but no obligation), in its sole discretion, to take or not
to take any action, unless this Agreement specifically requires the consent of
the Lenders or the consent of the Majority Lenders and any such action or
failure to act shall be binding on all the Lenders. Each Lender and each holder
of any Note shall execute and deliver such additional instruments, including
powers of attorney in favor of the Agent, as may be necessary or desirable to
enable the Agent to exercise its powers hereunder.
SECTION 10.2 DUTIES AND OBLIGATIONS.
(a) Neither the Agent nor any of its directors, officers, agents or
employees shall be liable for any action
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taken or omitted to be taken by it or any of them under or in connection with
this Agreement or any other Loan Document except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, the Agent (i) may treat each Lender which is a party hereto as the
party entitled to receive payments hereunder until the Agent receives written
notice of the assignment of such Lender's interest herein signed by such Lender
and made in accordance with the terms hereof and a written agreement of the
assignee that it is bound hereby to the same extent as it would have been had it
been an original party hereto, in each case in form satisfactory to the Agent;
(ii) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement, any other Loan Document, or in any instrument or document furnished
pursuant hereto or thereto; (iv) shall not have any duty to ascertain or to
inquire as to the performance of any of the terms, covenants, or conditions of
the Loan Documents, or of any instrument or document furnished pursuant thereto
on the part of the Borrower or as to the use of the proceeds of any Loan or the
proceeds received in respect of any Draft; (v) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability, genuineness,
effectiveness, or value of this Agreement, of any other Loan Document, or of any
instrument or document furnished pursuant hereto or thereto; and (vi) shall
incur no liability under or in respect to this Agreement or any other Loan
Document by acting upon any oral or written notice, consent, certificate or
other instrument or writing (which may be by telex, facsimile transmission,
telegram or cable) believed by it to be genuine and signed, sent or made by the
proper party or parties or by acting upon any representation or warranty of the
Borrower made or deemed to be made in this Agreement or any other Loan Document.
The Agent may execute any of its duties under this Agreement or any other Loan
Document by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any agent
or attorney-in-fact that it selects with reasonable care.
(b) The Agent will promptly transmit to each Lender copies of all
documents received from the Borrower pursuant to the requirements of this
Agreement other than documents which by the terms of this Agreement, the
Borrower is obligated to deliver directly to Lenders.
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(c) Each Lender or its assignee shall furnish to the Agent in a
timely fashion such documentation (including, but not by way of limitation, IRS
Forms Nos. W-8, 1001 and 4224) as may be reasonably requested by the Agent to
establish such Lender's status for tax withholding purposes.
(d) The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default under any of the Loan Documents
unless the Agent has received written notice from a Lender or the Borrower
referring to one or more of the Loan Documents, describing such Default or Event
of Default and stating that such notice is a "notice of default." In the event
that the Agent receives such a notice, the Agent shall promptly notify each of
the Lenders.
SECTION 10.3 DEALINGS BETWEEN SEAFIRST AND BORROWER. With respect to its
Commitment, the Loans made by it, the Drafts accepted by it, and the Letters of
Credit issued by it, Seafirst shall have the same rights and powers under this
Agreement and the other Loan Documents as any other Lender and may exercise the
same as though it were not the Agent, and the term "Lender" as used herein and
in the other Loan Documents shall unless otherwise expressly indicated include
Seafirst in its individual capacity. Seafirst may accept deposits from, lend
money to, act and generally engage in any kind of business with the Borrower and
any person which may do business with the Borrower, all as if Seafirst were not
the Agent hereunder and without any duty to account therefor to the Lenders.
SECTION 10.4 LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or the other Lenders and based
upon such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent or the other Lenders and based upon such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Loan Documents.
SECTION 10.5 INDEMNIFICATION. Each Lender agrees to indemnify the Agent
(to the extent not reimbursed by the Borrower) ratably, in the same proportion
that its aggregate Commitments bear to the Total Commitment, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
any way relating to or
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arising out of this Agreement or any other Loan Document or any action taken or
omitted by the Agent under this Agreement or any other Loan Document, except any
such as result from the Agent's gross negligence or willful misconduct. Without
limiting the foregoing, each Lender agrees to reimburse the Agent promptly on
demand ratably, in the same proportion that its aggregate Commitments bear to
the Total Commitment, for any out-of-pocket expenses, including legal fees,
incurred by the Agent in connection with the administration or enforcement or
preservation of any rights under any Loan Document (to the extent that the Agent
is not reimbursed for such expenses by the Borrower).
SECTION 10.6 SUCCESSOR AGENT. The Agent may give written notice of
resignation at any time to the Lenders and may be removed at any time with cause
by the Majority Lenders. The Majority Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Lenders and shall have accepted such appointment within thirty (30) days after
the retiring Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Agent, then the retiring Agent may on behalf of the
Lenders, appoint a successor Agent, which shall be one of the Lenders or 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 Agreement shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under this
Agreement. Any person into which the Agent may be merged or converted or with
which it may be consolidated or any person resulting from any merger, conversion
or consolidation to which it shall be a party or any person to which the Agent
may sell or transfer all or substantially all of its agency relationships shall
be the successor to the Agent hereunder without the execution or filing of any
paper or further act, anything herein to the contrary notwithstanding.
ARTICLE 11
MISCELLANEOUS
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SECTION 11.1 NO WAIVER; REMEDIES CUMULATIVE. No failure by the Agent or
any Lender to exercise, and no delay in exercising, any right, power or remedy
under this Agreement or any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or remedy
under this Agreement or any other Loan Document preclude any other or further
exercise thereof or the exercise of any other right, power, or remedy. The
exercise of any right, power, or remedy shall in no event constitute a cure or
waiver of any Event of Default under this Agreement or any other Loan Document
or prejudice the rights of the Agent and the Lenders in the exercise of any
right hereunder or thereunder. The rights and remedies provided herein and
therein are cumulative and not exclusive of any right or remedy provided by law.
SECTION 11.2 RIGHT OF SETOFF. Upon the occurrence of an Event of Default,
the Lenders shall have the right, but not the obligation, to setoff and apply
all deposits of every kind held by the Lenders and their affiliates or
obligations owed by the Lenders and their affiliates to Borrower against the
Indebtedness and obligations of Borrower evidenced by this Agreement, the Notes
and the other Loan Documents.
SECTION 11.3 GOVERNING LAW. This Agreement and the other Loan Documents
shall be governed by and construed in accordance with the internal laws of the
State of Washington, U.S.A.
SECTION 11.4 CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES; ATTORNEYS'
FEES. The Borrower hereby irrevocably submits to the nonexclusive 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 this Agreement or any other 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. The Borrower agrees 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. Nothing in this
Section 11.4 shall impair the right of the Agent, any Lender or the holder of
any Note to bring any action or proceeding against the Borrower or its property
in the courts of any other jurisdiction, and the Borrower irrevocably submits to
the nonexclusive jurisdiction of the appropriate courts of the jurisdiction in
which the Borrower is incorporated or sitting or of any place where property or
an office of the Borrower is located.
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SECTION 11.5 NOTICES. All notices and other communications provided for in
this Agreement shall be in writing or (unless otherwise specified) by telex,
facsimile transmission, telegram or cable and shall be mailed (with first class
postage prepaid) or sent or delivered 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 notices sent by mail, if duly given, shall be effective
three (3) Business Days after deposit into the mails, all notices sent by a
nationally recognized overnight courier service, if duly given, shall be
effective one (1) Business Day after delivery to such courier service, and all
other notices and communications if duly given or made shall be effective upon
receipt.
SECTION 11.6 MANDATORY ARBITRATION. Any controversy or claim between or
among the parties, including those arising out of or relating to this Agreement
or Loan Documents and any claim based on or arising from an alleged tort, shall
at the request of any party be determined by arbitration. The arbitration shall
be conducted in accordance with the United States Arbitration Act (Title 9, U.S.
Code), notwithstanding any choice of law provision in this Agreement, and under
the Commercial Rules of the AAA. The arbitrator(s) shall give effect to statutes
of limitation in determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the
arbitration award may be entered in any court having jurisdiction. No provision
of this Section 11.6 shall limit the right of any party to this Agreement to
exercise self-help remedies such as setoff, foreclosure against or sale of any
collateral or security, or to obtain provisional or ancillary remedies from a
court of competent jurisdiction before, after, or during the pendency of any
arbitration or other proceeding. The exercise of any such remedy does not waive
the right of either party to resort to arbitration.
SECTION 11.7 ASSIGNMENT AND PARTICIPATIONS. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
Successors and assigns, provided that the Borrower may not assign or otherwise
transfer all or any part of its rights or obligations hereunder or under any
other Loan Document without the prior written consent of the Agent, and any such
assignment or transfer purported to be made without such consent shall be
ineffective. Any Lender may at any time sell participation interests in its
Loans and Commitments to another bank or financial institution. Such sales may
be made without the consent of the Agent, the Borrower or any other Lender
provided, however, that (a) the selling Lender shall have provided the Borrower
and the Agent with prior written notice of
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<PAGE>
the proposed sale of any participation interest in any Loan or in such Lender's
Commitment; and (b) that the selling Lender retains the right to vote as a
Lender hereunder in respect of the interest sold without being bound to obtain
the consent of its participant or to exercise its rights in accordance with
instructions received from its participant (except that the participant's
consent can be required for proposed changes to the timing or amount of
principal payments or changes to the timing, rate or amount of payments of
interest or fees). Any Lender may assign or otherwise transfer all or any part
of its interest under the Loan Documents to another bank or financial
institution with the prior written consent of the Agent which consent will not
be unreasonably withheld or delayed. The assignee of any permitted sale or
assignment (including assignments for security and sales of participations)
shall have the same rights and benefits against the Borrower and otherwise under
the Loan Documents (excepting however, in the case of sales of participations,
the right to grant or withhold consents or otherwise vote in respect thereof)
including the right of setoff, and in the case of any outright assignment (as
distinguished from an assignment for security or the sale of a participation)
the same obligations in respect thereof, as if such assignee were an original
Lender. Except to the extent otherwise required by the context of this
Agreement, the word "Lender" where used in this Agreement shall mean and include
any holder of a Note originally issued to a Lender hereunder, and subject to the
terms of this Section 11.7, each such holder shall be bound by and have the
benefits of this Agreement the same as if such holder had been a signatory
hereto. Any outright assignment of a Lender's interest hereunder to another
Lender made in conformance with the terms of this Section 11.7 shall result in a
corresponding adjustment to the selling and purchasing Lenders' Commitments.
SECTION 11.8 SEVERABILITY. Any provision of this Agreement or any other
Loan Document 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 11.9 SURVIVAL. The representations, warranties and indemnities of
the Borrower in favor of the Agent and Lenders shall survive indefinitely and,
without limiting the foregoing, shall survive the execution and delivery of this
Agreement and the other Loan Documents, the making of any Loan, the acceptance
65
<PAGE>
and discount of any Draft, the issuance of any Letter of Credit, the expiration
of the Commitments and the repayment of all Loans, Acceptance Advances, Letters
of Credit and other amounts due hereunder or under the other Loan Documents.
SECTION 11.10 CONDITIONS NOT FULFILLED. If any Commitment is not borrowed,
any drafts presented are not accepted, or any requested letter of credit is not
issued owing to nonfulfillment of any condition precedent specified in Article 5
or, in the case of drafts, any additional conditions specified in Article 3, or,
in the case of letters of credit, any additional conditions specified in Article
4, no party hereto shall be responsible to any other party for any damage or
loss by reason thereof, except that the Borrower shall in any event be liable to
pay the fees, Taxes, and expenses for which it is obligated hereunder. If for
any other reason the Commitment of any Lender is not borrowed, any presented
draft is not accepted or any requested letter of credit is not issued, neither
the Agent nor any other Lender shall be responsible to the Borrower for any
damage or loss by reason thereof, nor shall any other Lender or the Borrower be
excused from its performance hereunder.
SECTION 11.11 ENTIRE AGREEMENT; AMENDMENT, ETC. This Agreement together
with the exhibits hereto comprises the entire agreement of the parties and may
not be amended or modified except by written agreement of the Borrower and the
Agent. 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 11.12 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 and
permitted under Section 8.3 hereof.
SECTION 11.13 AUTHORIZED OFFICERS. A list of officers and employees
initially authorized to request Loans, present drafts, or request letters of
credit is attached hereto as Schedule 2. Borrower may amend that list from time
to time by supplements executed by the Borrower's president and chief financial
officer. The Agent and Lenders may act in reliance upon any oral, telephonic, or
written request believed in good faith to have been received from or authorized
by any of the persons identified on the list attached hereto as Schedule 2 (as
the same may be supplemented from time to time).
66
<PAGE>
SECTION 11.14 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 11.15 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which when taken together shall be deemed a single
original.
SECTION 11.16 ORAL AGREEMENTS NOT ENFORCEABLE.
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers or agents thereunto duly authorized as of
the date first above written.
BORROWER: UNITED GROCERS, INC.
By /s/ John W. White
Its Vice President
Address:
Facsimile Number:
LENDERS: BANK OF AMERICA NW, N.A.
d/b/a SEAFIRST BANK
By /s/ Gordon A. Gray
Its Vice President
Address: 701 Fifth Ave., Floor 12
Seattle, WA 98104
Facsimile Number: (206) 358-3113
67
<PAGE>
UNITED STATES NATIONAL BANK OF
OREGON
By /s/ William H. Long
Its Vice President
Address: 111 S.W. Fifth, Suite 400
P.O. Box 4412
Portland, Oregon 97208
Facsimile Number: (503) 275-7290
THE HONGKONG AND SHANGHAI BANKING
CORPORATION, LIMITED
By /s/ Randy Todd
Its Senior Vice President
Address: L. Randolph Todd
The Hong Kong and Shanghai
Banking Corporation
900 S.W. Fifth Avenue, Suite 1550
Portland, Oregon 97204
Facsimile Number: (503) 242-2413
AGENT: BANK OF AMERICA NW, N.A.
d/b/a SEAFIRST BANK
By /s/ Dora A. Brown
Its Assistant Vice President
Address: 701 Fifth Ave., Floor 16
Seattle, WA 98104
Facsimile Number: (206) 358-0971
68
AMENDMENT NUMBER ONE TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER ONE TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") is made as of this 25th day of July, 1996 by and among BANK OF
AMERICA NW, N.A., successor by name change to Seattle-First National Bank, a
national banking association ("Seafirst"), UNITED STATES NATIONAL BANK OF
OREGON, a national banking association ("U.S. Bank"), THE HONGKONG AND SHANGHAI
BANKING CORPORATION, LIMITED, an extra national banking institution ("Hong Kong
Bank") (each individually a "Lender" and collectively the "Lenders"), SEAFIRST,
as agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon
corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996 (as the same has
been or may be amended, modified or extended from time to time the "Credit
Agreement"). Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
B. Subject to the terms and conditions of the Credit Agreement, Seafirst
and U.S. Bank have agreed to make Short-term Acquisition Loans to the Borrower
during the period beginning on the date of the Credit Agreement and ending on
the Short-term Acquisition Line Maturity Date.
C. The Borrower has requested that the Agent and the Lenders extend the
Short-term Acquisition Line Maturity Date until September 30, 1996. The Agent
and the Lenders are prepared extend the Short-term Acquisition Line Maturity
Date on the terms and conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. DEFINITIONS. Capitalized terms not otherwise defined in this Amendment
shall have the meanings given in the Credit Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT. In Section 1.1 of the Credit Agreement,
the definition of "Short-term Acquisition Line Maturity Date" is amended and
restated to read as follows:
"Short-term Acquisition Line Maturity
Date" means September 30, 1996.
- 1 -
<PAGE>
3. PROMISSORY NOTES. All references to the "Short-term Acquisition Line
Maturity Date" contained in the Short-term Acquisition Notes shall mean the
Short-term Acquisition Line Maturity Date as defined in the Credit Agreement, as
hereby amended.
4. CONDITIONS TO EFFECTIVENESS. Notwithstanding anything contained herein
to the contrary, this Amendment shall not become effective until each of the
following conditions is fully and simultaneously satisfied on or before July 31,
1996:
4.1 DELIVERY OF AMENDMENT. The Borrower, the Agent and each Lender
shall have executed and delivered counterparts of this Amendment to Agent.
4.2 REIMBURSEMENT FOR EXPENSES. The Borrower shall have reimbursed
the Agent for all expenses actually incurred by the Agent in connection with the
preparation of the Credit Agreement and the other Loan Documents and shall have
paid all other amounts due and owing under the Loan Documents.
4.3 BORROWER CORPORATE AUTHORITY. The Agent shall have received such
evidence of corporate authority as the Agent shall request.
4.4 REPRESENTATIONS TRUE; NO DEFAULT. The representations of the
Borrower as set forth in Article 6 of the Credit Agreement shall be true on and
as of the date of this Amendment with the same force and effect as if made on
and as of this date. No Event of Default and no event which, with notice or
lapse of time or both, would constitute a Event of Default, shall have occurred
and be continuing or will occur as a result of the execution of this Amendment.
5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Lenders and the Agent that each of the representations and
warranties set forth in Article 6 of the Credit Agreement is true and correct in
each case as if made on and as of the date of this Amendment and the Borrower
expressly agrees that it shall be an additional Event of Default under the
Credit Agreement if any representation or warranty made hereunder shall prove to
have been incorrect in any material respect when made.
6. NO FURTHER AMENDMENT. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
- 2 -
<PAGE>
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same agreement.
9. ORAL AGREEMENTS NOT ENFORCEABLE.
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.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment Number
One to Amended and Restated Credit Agreement as of the date first above written.
BORROWER: UNITED GROCERS, INC.
By /s/ John W. White
Its Vice President
LENDERS: BANK OF AMERICA NW, N.A.
By /s/ Gorgon A. Gray
Its Vice President
UNITED STATES NATIONAL BANK OF
OREGON
By /s/ William H. Long
Its Vice President
THE HONGKONG AND SHANGHAI BANKING
CORPORATION, LIMITED
By /s/ Randy Todd
Its Senior Vice President
- 3 -
<PAGE>
AGENT: BANK OF AMERICA NW, N.A.
By /s/
Its Assistant Vice President
- 4 -
AMENDMENT NUMBER TWO TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER TWO TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") is made as of this 27th day of September, 1996 by and among BANK OF
AMERICA NW, N.A., successor by name change to Seattle-First National Bank, a
national banking association ("Seafirst"), UNITED STATES NATIONAL BANK OF
OREGON, a national banking association ("U.S. Bank"), THE HONGKONG AND SHANGHAI
BANKING CORPORATION, LIMITED, an extra national banking institution ("Hong Kong
Bank") (each individually a "Lender" and collectively the "Lenders"), SEAFIRST,
as agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon
corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number Two to Amended and Restated Credit Agreement dated
as of July 25, 1996 (as the same has been or may be amended, modified or
extended from time to time the "Credit Agreement"). Capitalized terms not
otherwise defined in this Amendment shall have the meanings given in the Credit
Agreement.
B. Subject to the terms and conditions of the Credit Agreement, Seafirst
and U.S. Bank have agreed to make Short-term Acquisition Loans to the Borrower
during the period beginning on the date of the Credit Agreement and ending on
the Short-term Acquisition Line Maturity Date.
C. The Borrower has requested that the Agent and the Lenders extend the
Short-term Acquisition Line Maturity Date until October 31, 1996 and extend the
Long-term Acquisition Line Maturity Date until October 31, 1997. The Agent and
the Lenders are prepared to extend the Short-term Acquisition Line Maturity Date
and extend the Long-term Acquisition Line Maturity Date on the terms and
conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. DEFINITIONS. Capitalized terms not otherwise defined in this Amendment
shall have the meanings given in the Credit Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT. In Section 1.1 of the Credit Agreement,
amendments are made to the definitions, as follows:
- 1 -
<PAGE>
2.1 SHORT-TERM ACQUISITION LINE MATURITY DATE. The definition of
"Short-term Acquisition Line Maturity Date" is amended and restated to read as
follows:
"Short-term Acquisition Line Maturity
Date" means October 31, 1996.
2.2 LONG-TERM ACQUISITION LINE MATURITY DATE. The definition of
"Long-term Acquisition Line Maturity Date" is amended and restated to read as
follows:
"Long-term Acquisition Line Maturity
Date" means October 31, 1997.
3. PROMISSORY NOTES.
3.1 SHORT-TERM ACQUISITION NOTES. All references to the "Short-term
Acquisition Line Maturity Date" contained in the Short-term Acquisition Notes
shall mean the Short-term Acquisition Line Maturity Date as defined in the
Credit Agreement, as hereby amended.
3.2 LONG-TERM ACQUISITION NOTES. All references to the "Long-term
Acquisition Line Maturity Date" contained in the Long-term Acquisition Notes
shall mean the Long-term Acquisition Line Maturity Date as defined in the Credit
Agreement, as hereby amended.
4. CONDITIONS TO EFFECTIVENESS. Notwithstanding anything contained herein
to the contrary, this Amendment shall not become effective until each of the
following conditions is fully and simultaneously satisfied on or before
September 30, 1996:
4.1 DELIVERY OF AMENDMENT. The Borrower, the Agent and each Lender
shall have executed and delivered counterparts of this Amendment to Agent.
4.2 REIMBURSEMENT FOR EXPENSES. The Borrower shall have reimbursed
the Agent for all expenses actually incurred by the Agent in connection with the
preparation of the Credit Agreement and the other Loan Documents and shall have
paid all other amounts due and owing under the Loan Documents.
4.3 BORROWER CORPORATE AUTHORITY. The Agent shall have received such
evidence of corporate authority as the Agent shall request.
4.4 REPRESENTATIONS TRUE; NO DEFAULT. The representations of the
Borrower as set forth in Article 6 of the Credit Agreement shall be true on and
as of the date of this Amendment with the same force and effect as if made on
and as of this date. No Event of Default and no event which, with notice or
lapse of time or both, would constitute a Event of Default,
- 2 -
<PAGE>
shall have occurred and be continuing or will occur as a result of the execution
of this Amendment.
5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Lenders and the Agent that each of the representations and
warranties set forth in Article 6 of the Credit Agreement is true and correct in
each case as if made on and as of the date of this Amendment and the Borrower
expressly agrees that it shall be an additional Event of Default under the
Credit Agreement if any representation or warranty made hereunder shall prove to
have been incorrect in any material respect when made.
6. NO FURTHER AMENDMENT. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same agreement.
9. ORAL AGREEMENTS NOT ENFORCEABLE.
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.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment Number
Two to Amended and Restated Credit Agreement as of the date first above written.
BORROWER: UNITED GROCERS, INC.
By /s/ John W. White
Its Vice President
LENDERS: BANK OF AMERICA NW, N.A.
By /s/ Gordon A. Gray
Its Vice President
- 3 -
<PAGE>
UNITED STATES NATIONAL BANK OF
OREGON
By /s/ William H. Long
Its Vice President
THE HONGKONG AND SHANGHAI BANKING
CORPORATION, LIMITED
By /s/ Randy Todd
Its Senior Vice President
AGENT: BANK OF AMERICA NW, N.A.
By /s/ Dora A. Brown
Its Assistant Vice President
- 4 -
AMENDMENT NUMBER THREE TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER THREE TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") is made as of this 28th day of October, 1996 by and among BANK OF
AMERICA NW, N.A., successor by name change to Seattle-First National Bank, a
national banking association ("Seafirst"), UNITED STATES NATIONAL BANK OF
OREGON, a national banking association ("U.S. Bank"), THE HONGKONG AND SHANGHAI
BANKING CORPORATION, LIMITED, an extra national banking institution ("Hong Kong
Bank") (each individually a "Lender" and collectively the "Lenders"), SEAFIRST,
as agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon
corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996 and by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996 (as the same has been
or may be amended, modified or extended from time to time the "Credit
Agreement"). Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Credit Agreement.
B. Subject to the terms and conditions of the Credit Agreement, Seafirst
and U.S. Bank have agreed to make Short-term Acquisition Loans to the Borrower
during the period beginning on the date of the Credit Agreement and ending on
the Short-term Acquisition Line Maturity Date.
C. The Borrower has requested that the Agent and the Lenders extend the
Short-term Acquisition Line Maturity Date until December 31, 1996 and extend the
Long-term Acquisition Line Maturity Date until December 31, 1997. The Agent and
the Lenders are prepared to extend the Short-term Acquisition Line Maturity Date
and extend the Long-term Acquisition Line Maturity Date on the terms and
conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. DEFINITIONS. Capitalized terms not otherwise defined in this Amendment
shall have the meanings given in the Credit Agreement.
- 1 -
<PAGE>
2. AMENDMENTS TO CREDIT AGREEMENT. In Section 1.1 of the Credit Agreement,
amendments are made to the definitions, as follows:
2.1 SHORT-TERM ACQUISITION LINE MATURITY DATE. The definition of
"Short-term Acquisition Line Maturity Date" is amended and restated to read as
follows:
"Short-term Acquisition Line Maturity
Date" means December 31, 1996.
2.2 LONG-TERM ACQUISITION LINE MATURITY DATE. The definition of
"Long-term Acquisition Line Maturity Date" is amended and restated to read as
follows:
"Long-term Acquisition Line Maturity
Date" means December 31, 1997.
3. PROMISSORY NOTES.
3.1 SHORT-TERM ACQUISITION NOTES. All references to the "Short-term
Acquisition Line Maturity Date" contained in the Short-term Acquisition Notes
shall mean the Short-term Acquisition Line Maturity Date as defined in the
Credit Agreement, as hereby amended.
3.2 LONG-TERM ACQUISITION NOTES. All references to the "Long-term
Acquisition Line Maturity Date" contained in the Long-term Acquisition Notes
shall mean the Long-term Acquisition Line Maturity Date as defined in the Credit
Agreement, as hereby amended.
4. CONDITIONS TO EFFECTIVENESS. Notwithstanding anything contained herein
to the contrary, this Amendment shall not become effective until each of the
following conditions is fully and simultaneously satisfied on or before October
31, 1996:
4.1 DELIVERY OF AMENDMENT. The Borrower, the Agent and each Lender
shall have executed and delivered counterparts of this Amendment to Agent.
4.2 REIMBURSEMENT FOR EXPENSES. The Borrower shall have reimbursed
the Agent for all expenses actually incurred by the Agent in connection with the
preparation of the Credit Agreement and the other Loan Documents and shall have
paid all other amounts due and owing under the Loan Documents.
4.3 BORROWER CORPORATE AUTHORITY. The Agent shall have received such
evidence of corporate authority as the Agent shall request.
- 2 -
<PAGE>
4.4 REPRESENTATIONS TRUE; NO DEFAULT. The representations of the
Borrower as set forth in Article 6 of the Credit Agreement shall be true on and
as of the date of this Amendment with the same force and effect as if made on
and as of this date. No Event of Default and no event which, with notice or
lapse of time or both, would constitute a Event of Default, shall have occurred
and be continuing or will occur as a result of the execution of this Amendment.
5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Lenders and the Agent that each of the representations and
warranties set forth in Article 6 of the Credit Agreement is true and correct in
each case as if made on and as of the date of this Amendment and the Borrower
expressly agrees that it shall be an additional Event of Default under the
Credit Agreement if any representation or warranty made hereunder shall prove to
have been incorrect in any material respect when made.
6. NO FURTHER AMENDMENT. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same agreement.
9. ORAL AGREEMENTS NOT ENFORCEABLE.
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.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment Number
Three to Amended and Restated Credit Agreement as of the date first above
written.
BORROWER: UNITED GROCERS, INC.
By /s/ John W. White
Its Vice President
- 3 -
<PAGE>
LENDERS: BANK OF AMERICA NW, N.A.
By /s/ Gordon A. Gray
Its Vice President
UNITED STATES NATIONAL BANK OF
OREGON
By /s/ William H. Long
Its Vice President
THE HONGKONG AND SHANGHAI BANKING
CORPORATION, LIMITED
By /s/ Randy Todd
Its Senior Vice President
AGENT: BANK OF AMERICA NW, N.A.
By /s/ Dora A. Brown
Its Assistant Vice President
- 4 -
SEAFIRST
Dora A. Brown
Assistant Vice President
Seafirst Agency Services
November 29, 1996
Gordon Gray, V.P. William Long, V.P.
Seafirst Bank U.S. National Bank of Oregon
701 Fifth Avenue, Floor 12 111 SW 5th Avenue, Suite 400
Seattle, WA 98104 Portland, OR 97208
Randy Todd, S.V.P. John White, V.P. & C.F.O.
The Hongkong & Shanghai Banking Corp. Ltd. United Grocers, Inc.
900 SW Fifth Avenue, Suite 1550 6433 SE Lake Road
Portland, OR 97204 Portland, OR 97222-2198
RE: United Grocers, Inc. (the "Borrower")
Amended and Restated Credit Agreement dated May 31, 1996
Gentlemen:
This letter, if agreed to by all parties, shall be deemed Amendment Number Four
to the above referenced Amended and Restated Credit Agreement.
Pursuant to Section 2.2 Manner of Borrowing of the credit agreement, the
Borrower is to deliver to the Agent a Notice of Borrowing no later than 10:00
a.m., Seattle time for same day Prime Rate advances or, in the case of LIBOR
advances, no later than 10:00 a.m., Seattle time three days prior to the
requested date of borrowing. Notices received after the designated hour will be
deemed received on the next succeeding Business Day.
The Borrower has notified the Agent that due to its new lock box service, the
earliest it can deliver its Notice of Borrowing to the Agent is 12:00 p.m. Each
Lender's operations department have confirmed to the Agent that the later
designated hour would not be a problem for meeting wire transfer deadlines.
Your signature below is evidence of your agreement to the above amendment.
Please fax (206-358-0971) your signature to me by Thursday, December 5, 1996,
and return your original by mail.
- 1 -
<PAGE>
Please call me (206-358-0101) if I can be of further assistance.
Sincerely,
Seafirst Bank, as Agent AGREED TO
/s/ Dora Brown U. S. National Bank of Oregon
Dora Brown Name of Institution
A.V.P./Senior Agency Services
By /s/ William H. Long
Its Vice President
The Hongkong & Shanghai Banking Corp. Ltd.
Name of Institution
By /s/ Randy Todd
Its Senior Vice President
United Grocers, Inc.
Name of Institution
By /s/ John W. White
Its Vice President
Seafirst Bank
Name of Institution
By /s/ Gordon Gray
Its Vice President
cc: Brenda Little, Seafirst Agency Services
Seafirst Bank Post Office Box 34620/Seattle, Washington 98124-1620
701 Fifth Avenue/Floor 16/Seattle, Washington 98104
Telephone (206)358-0101 FAX (206)368-0971
- 2 -
AMENDMENT NUMBER FIVE TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER FIVE TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") is made as of this 26th day of December, 1996 by and among BANK OF
AMERICA NW, N.A., successor by name change to Seattle-First National Bank, a
national banking association ("Seafirst"), UNITED STATES NATIONAL BANK OF
OREGON, a national banking association ("U.S. Bank"), HONGKONG BANK OF CANADA,
assignee in interest to the Hongkong and Shanghai Banking Corporation, Limited,
an extra national banking institution ("Hongkong Bank") (each individually a
"Lender" and collectively the "Lenders"), SEAFIRST, as agent for the Lenders
(the "Agent") and UNITED GROCERS, INC., an Oregon corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996, by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996 , by that certain
Amendment Number Three to Amended and Restated Credit Agreement dated as of
October 28, 1996 and by that certain Amendment Number Four to Amended and
Restated Credit Agreement dated as of November 29, 1996 (as the same has been or
may be amended, modified or extended from time to time the "Credit Agreement").
Capitalized terms not otherwise defined in this Amendment shall have the
meanings given in the Credit Agreement.
B. Subject to the terms and conditions of the Credit Agreement, Seafirst
and U.S. Bank have agreed to make Short-term Acquisition Loans to the Borrower
during the period beginning on the date of the Credit Agreement and ending on
the Short-term Acquisition Line Maturity Date.
C. The Borrower has requested that the Agent and the Lenders extend the
Short-term Acquisition Line Maturity Date until January 31, 1997 and extend the
Long-term Acquisition Line Maturity Date until January 31, 1998. The Agent and
the Lenders are prepared to extend the Short-term Acquisition Line Maturity Date
and extend the Long-term Acquisition Line Maturity Date on the terms and
conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
- 1 -
<PAGE>
AGREEMENT
1. DEFINITIONS. Capitalized terms not otherwise defined in this Amendment
shall have the meanings given in the Credit Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT. In Section 1.1 of the Credit Agreement,
amendments are made to the definitions, as follows:
2.1 SHORT-TERM ACQUISITION LINE MATURITY DATE. The definition of
"Short-term Acquisition Line Maturity Date" is amended and restated to read as
follows:
"Short-term Acquisition Line Maturity
Date" means January 31, 1997.
2.2 LONG-TERM ACQUISITION LINE MATURITY DATE. The definition of
"Long-term Acquisition Line Maturity Date" is amended and restated to read as
follows:
"Long-term Acquisition Line Maturity
Date" means January 31, 1998.
3. PROMISSORY NOTES.
3.1 SHORT-TERM ACQUISITION NOTES. All references to the "Short-term
Acquisition Line Maturity Date" contained in the Short-term Acquisition Notes
shall mean the Short-term Acquisition Line Maturity Date as defined in the
Credit Agreement, as hereby amended.
3.2 LONG-TERM ACQUISITION NOTES. All references to the "Long-term
Acquisition Line Maturity Date" contained in the Long-term Acquisition Notes
shall mean the Long-term Acquisition Line Maturity Date as defined in the Credit
Agreement, as hereby amended.
4. CONDITIONS TO EFFECTIVENESS. Notwithstanding anything contained herein
to the contrary, this Amendment shall not become effective until each of the
following conditions is fully and simultaneously satisfied on or before December
31, 1996:
4.1 DELIVERY OF AMENDMENT. The Borrower, the Agent and each Lender
shall have executed and delivered counterparts of this Amendment to Agent.
4.2 REIMBURSEMENT FOR EXPENSES. The Borrower shall have reimbursed
the Agent for all expenses actually incurred by the Agent in connection with the
preparation of the Credit Agreement and the other Loan Documents and shall have
paid all other amounts due and owing under the Loan Documents.
- 2 -
<PAGE>
4.3 BORROWER CORPORATE AUTHORITY. The Agent shall have received such
evidence of corporate authority as the Agent shall request.
4.4 REPRESENTATIONS TRUE; NO DEFAULT. The representations of the
Borrower as set forth in Article 6 of the
Credit Agreement shall be true on and as of the date of this Amendment with the
same force and effect as if made on and as of this date. No Event of Default and
no event which, with notice or lapse of time or both, would constitute a Event
of Default, shall have occurred and be continuing or will occur as a result of
the execution of this Amendment.
5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Lenders and the Agent that each of the representations and
warranties set forth in Article 6 of the Credit Agreement is true and correct in
each case as if made on and as of the date of this Amendment and the Borrower
expressly agrees that it shall be an additional Event of Default under the
Credit Agreement if any representation or warranty made hereunder shall prove to
have been incorrect in any material respect when made.
6. NO FURTHER AMENDMENT. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
7. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same agreement.
9. ORAL AGREEMENTS NOT ENFORCEABLE.
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.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment Number
Five to Amended and Restated Credit Agreement as of the date first above
written.
- 3 -
<PAGE>
BORROWER: UNITED GROCERS, INC.
By /s/ John W. White*
Its Vice President
* Except for noncompliance of fixed charges as of 9/27/96
LENDERS: BANK OF AMERICA NW, N.A.
By /s/ Gordon A. Gray
Its Vice President
UNITED STATES NATIONAL BANK OF
OREGON
By /s/ William H. Long
Its Vice President
HONGKONG BANK OF CANADA
By /s/ Randy Todd
Its Senior Vice President
AGENT: BANK OF AMERICA NW, N.A.
By /s/ Dora A. Brown
Its Assistant Vice President
- 4 -
WAIVER AND AMENDMENT NUMBER SIX TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS WAIVER AND AMENDMENT NUMBER SIX TO AMENDED AND RESTATED CREDIT
AGREEMENT (this "Amendment") is made as of this 31st day of January, 1997 by and
among BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION d/b/a SEAFIRST
BANK, successor by merger to Bank of America NW, N.A., successor by name change
to Seattle-First National Bank, a national banking association ("Seafirst"),
UNITED STATES NATIONAL BANK OF OREGON, a national banking association ("U.S.
Bank"), HONGKONG BANK OF CANADA, assignee in interest to The Hongkong and
Shanghai Banking Corporation, Limited, an extra national banking institution
("Hongkong Bank") (each individually a "Lender" and collectively the "Lenders"),
SEAFIRST, as agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an
Oregon corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996, by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996 , by that certain
Amendment Number Three to Amended and Restated Credit Agreement dated as of
October 28, 1996, by that certain Amendment Number Four to Amended and Restated
Credit Agreement dated as of November 29, 1996 ("Amendment Four") and by that
certain Amendment Number Five to Amended and Restated Credit Agreement dated as
of December 26, 1996 (as the same has been or may be amended, modified or
extended from time to time the "Credit Agreement"). Capitalized terms not
otherwise defined in this Amendment shall have the meanings given in the Credit
Agreement.
B. Subject to the terms and conditions of the Credit Agreement, Seafirst
and U.S. Bank have agreed to make Short-term Acquisition Loans to the Borrower
during the period beginning on the date of the Credit Agreement and ending on
the Short-term Acquisition Line Maturity Date.
C. The Credit Agreement contains certain financial covenants binding upon
the Borrower. It is known that the Borrower was in breach of the fixed charge
coverage ratio set forth in the Loan Agreement as of its fiscal year ended
September 27, 1996 and based on operating experience it is anticipated that the
Borrower's financial statements will disclose that the Borrower will be in
breach of such fixed charge coverage ratio as of its fiscal quarter ended
December 27, 1996.
- 1 -
<PAGE>
D. The Borrower has requested that the Agent and the Lenders waive their
rights to exercise remedies in respect of such defaults and has requested the
Lenders to extend the Short-term Acquisition Line Maturity Date until April 30,
1997 and extend the Long-term Acquisition Line Maturity Date until April 30,
1998. The Agent and the Lenders are prepared to grant such waivers and extend
the Short-term Acquisition Line Maturity Date and extend the Long-term
Acquisition Line Maturity Date on the terms and conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. DEFINITIONS. Capitalized terms not otherwise defined in this Amendment
shall have the meanings given in the Credit Agreement.
2. WAIVER OF DEFAULTS.
2.1 ON OR BEFORE SEPTEMBER 27, 1996. Subject to the terms and
conditions of this Amendment, the Agent and the Lenders hereby waive their
respective rights to exercise remedies under the Credit Agreement in respect of
a breach occurring on or before September 27, 1996 of the Borrower's obligations
under Section 7.13 of the Credit Agreement.
2.2 ON OR BEFORE DECEMBER 27, 1996. Subject to the terms and
conditions of this Amendment, the Agent and the Lenders hereby waive their
respective rights to exercise remedies under the Credit Agreement in respect of
a breach occurring on or before December 27, 1996 of the Borrower's obligations
under Section 7.13 of the Credit Agreement provided, however, that the waiver
provided for in this Section 2.2 shall not become effective unless Borrower
shall have maintained, on a consolidated basis for the four consecutive fiscal
quarters ended December 27, 1996, a ratio of Fixed Charge Coverage of at least
1.0 to 1.0.
3. AMENDMENTS TO CREDIT AGREEMENT.
3.1 AMENDMENTS TO SECTION 1.1. In Section 1.1 of the Credit
Agreement, amendments are made to the definitions, as follows:
(a) INTERIM RATE. The definition of "Interim Rate" is amended
and restated to read as follows:
"Interim Rate" means, a per annum rate of interest equal to
the sum of (a) the per annum rate of interest established from time
to time by U.S. Bank as its "overnight money
- 2 -
<PAGE>
market rate" for loans of comparable amounts; and (b) one hundred
twenty-five (125) basis points (one and one-quarter percent)
changing as such "overnight money market rate" changes from time to
time.
(b) SHORT-TERM ACQUISITION LINE MATURITY DATE. The definition
of "Short-term Acquisition Line Maturity Date" is amended and restated to read
as follows:
"Short-term Acquisition Line Maturity
Date" means April 30, 1997.
(c) LONG-TERM ACQUISITION LINE MATURITY DATE. The definition
of "Long-term Acquisition Line Maturity Date" is amended and restated to read as
follows:
"Long-term Acquisition Line Maturity
Date" means April 30, 1998.
3.2 AMENDMENT TO SECTION 2.5. In Section 2.5(a) of the Credit
Agreement, the definition of "LIBOR Rate" is amended and restated to read as
follows:
"LIBOR Rate" means, with respect to any LIBOR Loan for any
Applicable Interest Period, an interest rate per annum equal to the
sum of (a) one hundred twenty-five (125) basis points (one and
one-quarter percent) and (b) the product of (i) the Euro-dollar Rate
in effect for such Applicable Interest Period and (ii) the
Euro-dollar Reserves in effect on the first day of such Applicable
Interest Period.
3.3 AMENDMENT TO SECTION 3.3. In Section 3.3 of the Credit
Agreement, clause (b)(i) is hereby deleted and the following substituted in its
stead:
(i) one hundred twenty-five (125) basis
points (one and one-quarter percent) and the
Applicable Acceptance Rate; and
4. PROMISSORY NOTES.
4.1 SHORT-TERM ACQUISITION NOTES. All references to the "Short-term
Acquisition Line Maturity Date" contained in the Short-term Acquisition Notes
shall mean the Short-term Acquisition Line Maturity Date as defined in the
Credit Agreement, as hereby amended.
- 3 -
<PAGE>
4.2 LONG-TERM ACQUISITION NOTES. All references to the "Long-term
Acquisition Line Maturity Date" contained in the Long-term Acquisition Notes
shall mean the Long-term Acquisition Line Maturity Date as defined in the Credit
Agreement, as hereby amended.
5. CONDITIONS TO EFFECTIVENESS. Notwithstanding anything contained herein
to the contrary, this Amendment shall not become effective until each of the
following conditions is fully and simultaneously satisfied on or before January
31, 1997:
5.1 DELIVERY OF AMENDMENTS. The Borrower, the Agent and each Lender
shall have executed and delivered counterparts of this Amendment and Amendment
Four to Agent.
5.2 REIMBURSEMENT FOR EXPENSES. The Borrower shall have reimbursed
the Agent for all expenses actually incurred by the Agent in connection with the
preparation of the Credit Agreement and the other Loan Documents and shall have
paid all other amounts due and owing under the Loan Documents.
5.3 BORROWER CORPORATE AUTHORITY. The Agent shall have received such
evidence of corporate authority as the Agent shall request.
5.4 REPRESENTATIONS TRUE; NO DEFAULT. The representations of the
Borrower as set forth in Article 6 of the Credit Agreement shall be true on and
as of the date of this Amendment with the same force and effect as if made on
and as of this date. No Event of Default and no event which, with notice or
lapse of time or both, would constitute a Event of Default, shall have occurred
and be continuing or will occur as a result of the execution of this Amendment.
6. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Lenders and the Agent that each of the representations and
warranties set forth in Article 6 of the Credit Agreement is true and correct in
each case as if made on and as of the date of this Amendment and the Borrower
expressly agrees that it shall be an additional Event of Default under the
Credit Agreement if any representation or warranty made hereunder shall prove to
have been incorrect in any material respect when made.
7. NO FURTHER AMENDMENT. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
8. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of Washington.
- 4 -
<PAGE>
9. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same agreement.
10. ORAL AGREEMENTS NOT ENFORCEABLE.
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.
IN WITNESS WHEREOF, the parties hereto have executed this Waiver and
Amendment Number Six to Amended and Restated Credit Agreement as of the date
first above written.
BORROWER: UNITED GROCERS, INC.
By /s/ John W. White
Its Vice President
LENDERS: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ Gordon A. Gray
Its Vice President
UNITED STATES NATIONAL BANK OF
OREGON
By /s/ William H. Long
Its Vice President
HONGKONG BANK OF CANADA
By /s/ Randy Todd
Its Senior Vice President
- 5 -
<PAGE>
AGENT: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ Dora A. Brown
Its Assistant Vice President
By /s/ Ronald A. Parsons
Its Vice President
- 6 -
AMENDMENT NUMBER SEVEN TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NUMBER SEVEN TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") is made as of this 28th day of February, 1997 by and among BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION d/b/a SEAFIRST BANK, successor by
merger to Bank of America NW, N.A., successor by name change to Seattle-First
National Bank, a national banking association ("Seafirst"), UNITED STATES
NATIONAL BANK OF OREGON, a national banking association ("U.S. Bank"), HONGKONG
BANK OF CANADA, assignee in interest to The Hongkong and Shanghai Banking
Corporation, Limited, an extra national banking institution ("Hongkong Bank")
(each individually a "Lender" and collectively the "Lenders"), SEAFIRST, as
agent for the Lenders (the "Agent") and UNITED GROCERS, INC., an Oregon
corporation (the "Borrower").
RECITALS
A. The Lenders, the Borrower and the Agent are parties to that certain
Amended and Restated Credit Agreement dated as of May 31, 1996, as amended by
that certain Amendment Number One to Amended and Restated Credit Agreement dated
as of July 25, 1996, by that certain Amendment Number Two to Amended and
Restated Credit Agreement dated as of September 27, 1996 , by that certain
Amendment Number Three to Amended and Restated Credit Agreement dated as of
October 28, 1996, by that certain Amendment Number Four to Amended and Restated
Credit Agreement dated as of November 29, 1996, by that certain Amendment Number
Five to Amended and Restated Credit Agreement dated as of December 26, 1996 and
by that certain Waiver and Amendment Number Six to Amended and Restated Credit
Agreement dated as of January 31, 1997 (as the same has been or may be amended,
modified or extended from time to time the "Credit Agreement"). Capitalized
terms not otherwise defined in this Amendment shall have the meanings given in
the Credit Agreement.
B. The Credit Agreement contains certain financial covenants binding upon
the Borrower. The Borrower has requested that the Agent and the Lenders modify
the required fixed charge coverage ratio set forth in Section 7.13 of the Credit
Agreement through its fiscal quarter ending March 25, 1998. The Agent and the
Lenders are prepared to modify the fixed charge coverage ratio on the terms and
conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
- 1 -
<PAGE>
AGREEMENT
1. DEFINITIONS. Capitalized terms not otherwise defined in this Amendment
shall have the meanings given in the Credit Agreement.
2. AMENDMENT TO CREDIT AGREEMENT. Section 7.13 of the Credit Agreement is
hereby deleted and the following substituted in its stead:
SECTION 7.13 FIXED CHARGE COVERAGE. Borrower shall maintain on a
consolidated basis a Fixed Charge Coverage ratio (for the four most recent
fiscal quarters) as follows:
PERIOD RATIO
December 28, 1996 through at least 1.0 to 1.0
June 27, 1997
June 28, 1997 through at least 1.15 to 1.0
September 26, 1997
September 27, 1997 through at least 1.2 to 1.0
December 26, 1997
December 27, 1997 through at least 1.25 to 1.0
March 25, 1998
As used in this Agreement, "Fixed Charge Coverage" means for any period
the ratio derived by 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. As used in this Agreement, "Fixed
Charges" means the sum of (a) interest expense on all of Borrower's
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.
3. CONDITIONS TO EFFECTIVENESS. Notwithstanding anything contained herein
to the contrary, this Amendment shall not become effective until each of the
following conditions is fully and simultaneously satisfied on or before February
28, 1997:
3.1 DELIVERY OF AMENDMENT. The Borrower, the Agent and each Lender
shall have executed and delivered counterparts of this Amendment to Agent.
3.2 REIMBURSEMENT FOR EXPENSES. The Borrower shall have reimbursed
the Agent for all expenses actually incurred by
- 2 -
<PAGE>
the Agent in connection with the preparation of the Credit Agreement and the
other Loan Documents and shall have paid all other amounts due and owing under
the Loan Documents.
3.3 BORROWER CORPORATE AUTHORITY. The Agent shall have received such
evidence of corporate authority as the Agent shall request.
3.4 REPRESENTATIONS TRUE; NO DEFAULT. The representations of the
Borrower as set forth in Article 6 of the Credit Agreement shall be true on and
as of the date of this Amendment with the same force and effect as if made on
and as of this date. No Event of Default and no event which, with notice or
lapse of time or both, would constitute a Event of Default, shall have occurred
and be continuing or will occur as a result of the execution of this Amendment.
4. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Lenders and the Agent that each of the representations and
warranties set forth in Article 6 of the Credit Agreement is true and correct in
each case as if made on and as of the date of this Amendment and the Borrower
expressly agrees that it shall be an additional Event of Default under the
Credit Agreement if any representation or warranty made hereunder shall prove to
have been incorrect in any material respect when made.
5. NO FURTHER AMENDMENT. Except as expressly modified by the terms of this
Amendment, all of the terms and conditions of the Credit Agreement and the other
Loan Documents shall remain in full force and effect and the parties hereto
expressly reaffirm and ratify their respective obligations thereunder.
6. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Washington.
7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same agreement.
8. ORAL AGREEMENTS NOT ENFORCEABLE.
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.
- 3 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment Number
Seven to Amended and Restated Credit Agreement as of the date first above
written.
BORROWER: UNITED GROCERS, INC.
By /s/ John W. white
Its Vice President
LENDERS: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ Gordon A. Gray
Its Vice President
UNITED STATES NATIONAL BANK OF
OREGON
By /s/ William H. Long
Its Vice President
HONGKONG BANK OF CANADA
By /s/ Randy Todd
Its Senior Vice President
AGENT: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ Ronald R. Parsons
Its Vice President
By /s/ Dora A. Brown
Its Assistant Vice President
- 4 -
$------------ -----------------------, ----------------------, 19---
I (or if more than one maker) we, jointly and severally, promise to pay
to the order of-----------------------------------------------------------------
at------------------------------------------------------------------------------
- ------------------------------------------------------------------------DOLLARS,
with interest thereon at the rate of -------- percent per annum from
- ----------------- until paid, payable in -------------- installments of not less
than $-------------- in any one payment; interest shall be paid --------------
and (*in addition to/*is included in) the minimum payments above required; the
first payment to be made on the -------- day of --------------, 19-----, and a
like payment on the ---------- day of -------------- thereafter, until the whole
sum principal and interest has been paid; if any of said installments is not so
paid, all principal and interest to become immediately due and collectible at
the option of the holder of this note. If this note is placed in the hands of an
attorney for collection, I/we promise and agree to pay holder's reasonable
attorney's fees and collection costs, even through no suit or action is filed
hereon; however, if a suit or an action is filed, the amount of such reasonable
attorney's fees shall be fixed by the courts in which the suit or action,
including any appeal thereon, is tried, heard or decided.
*Strike words not applicable.
-----------------------------------
-----------------------------------
-----------------------------------
FORM No. 217--INSTALLMENT NOTE.
SN Stevens-Ness Law Publishing Co., Portland, Ore.
<PAGE>
The rate of interest set forth in the Installment Note on the reverse
side hereof will be increased or decreased from time to time by the
amount of any increase or decrease in the financing rate payable by
United Grocers' Store Financing department on lines of credit existing
in its favor. Each such change in said rate to become effective on the
day in which such rate is changed. At the present time, interest to be
paid is 11.0 percent.
* The interest rate as set forth below shall vary with the prime rate published
by the United States National Bank of Oregon and will be increased or decreased
from time to time by the amount of increase or decrease in the United States
National Bank's prime rate. The Installment Note rate shall be adjusted on the
first day of each month in the applicable year (if the first day is not a
business day, then on the first succeeding day) to equal the United States
National Bank's rate on that date, plus percentage rate as set forth below, and
shall become the effective rate and shall continue in effect until the next
applicable year.
$------------ -----------------------, ----------------------, 19---
- ----------------------- after date, I (or if more than one maker) we jointly and
severally promise to pay to the order of ------------------------------------ at
- ------------------------------------------------------------------------DOLLARS,
with interest thereon at the rate of ------% per annum from
- ---------------------until paid; interest to be paid --------------------- and
if not so paid, all principal and interest, at the option of the holder of this
note, to become immediately due and collectible. Any part hereof may be paid at
any time. If this note is placed in the hands of an attorney for collection,
I/we promise and agree to pay holder's reasonable attorney's fees and collection
costs, even though no suit or action is filed hereon; if a suit or an action is
filed, the amount of such reasonable attorney's fees shall be fixed by the court
or courts in which the suit or action, including any appeal therein, is tried,
heard or decided.
-----------------------------------
-----------------------------------
-----------------------------------
FORM No. 216--PROMISSORY NOTE. TB STEVENS-NESS LAW PUB. CO., PORTLAND, ORE.
SUBSEQUENT INSTALLMENT NOTE
$ Date: January ____, 1992
THE UNDERSIGNED ("Borrowers"), jointly and severally, promise to pay to
the order of UNITED RESOURCES, INC., an Oregon corporation, at Post Office Box
22187, Portland, Oregon, ("Payee"), the sum of *** __ AND NO/100 DOLLARS***
($_,000.00), payable in eleven (11) consecutive monthly installments of *** __
AND NO/100 DOLLARS*** ($_,___.00), plus interest thereon from the date hereof,
the first payment to be made on February 1 1992, with subsequent payments to be
made on the same day of each month thereafter until the final payment of *** AND
NO/100 DOLLARS ($_.00) becomes due on January 1, 1993.
The outstanding principal balance will bear interest at a rate equal to
.__ percent in excess of the prime rate published by the United States National
Bank of Oregon, changing as of the first day of each month. Interest shall be
payable monthly on the same day as the principal, until the whole sum, principal
and interest, has been paid. If any of said installments is not so paid, all
principal and interest shall become immediately due and payable at the option of
the holder of this Note.
This Note may be prepaid in whole or in part at any time. All such
prepayments will be applied first to accrued interest and then 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
loan agreement between the Borrowers and United Resources, 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 United Resources, Inc. 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.
Upon the failure of the Borrower to make any payment under this note
when due, Payee may, at its option and without further notice or demand, declare
the unpaid principal balance of the Note and the accrued, but unpaid interest on
the Note, immediately due and payable, and pursue any and all other rights,
remedies and recourses available to Payee. Borrower hereby waives presentment
and demand for payment, notice of intent to demand or accelerate maturity,
notice of demand for acceleration of maturity, protest or notice of protest and
nonpayment, bringing of suit in diligence and taking any action to collect sums
owing under this Note. No extension for time for the payment of this Note or any
installment hereof shall affect the liability of Borrower. The failure of the
Payee to exercise any of its rights or options under this Note shall not
constitute a waiver of the right to exercise the same or right or option at any
subsequent time with respect to the same or any other events.
If this Note is placed in the hands of an attorney for collection,
Borrowers promise and agree to pay the reasonable attorneys' 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
attorneys' 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.
DBA
By
, President
By
, Secretary
INDIVIDUALLY:
<PAGE>
Loan ------
SUBSEQUENT NOTE
$--------- Date: --------------
THE UNDERSIGNED ("Borrowers"), jointly and severally, promise to pay to
the order of ----------------------------- ("Payee") the sum of
***----------------------- DOLLARS*** ($---------), payable in eleven (11)
consecutive monthly installments of -------------------------- ($-------------),
plus interest thereon from the date hereof, the first payment to be made on
- -----------------, with subsequent payments to be made on the same day of each
month thereafter until the final payment of ------------------------
($---------------) becomes due on August 1, 1993.
The outstanding principal balance will bear interest at a rate equal to
- ------------ percent in excess of the prime rate published by the United States
national Bank of Oregon, changing as of the first day of each month. Interest
shall be payable monthly on the same day as the principal, until the whole sum,
principal and interest, has been paid. If any of said installments is not so
paid, all principal and interest shall become immediately due and payable at the
option of the holder of this Note.
The Note may be prepaid in whole or in part at any time. All such
prepayments will be applied first to accrued interest and then 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
loan agreement and security agreement between the Borrowers and United
Resources, Inc./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 United
Resources, Inc. 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.
Upon the failure of the Borrower to make any payment under this Note
when due, Payee may, at its option and without further notice or demand, declare
the unpaid principal balance of the Note and the accrued, but unpaid interest on
the Note, immediately due and payable, and pursue any and all other rights,
remedies and recourses available to Payee. Borrower hereby waives presentment
and demand for payment, notice of intent to demand or accelerate maturity,
notice of demand for acceleration of maturity, protest or notice of protest and
nonpayment, bringing of suit in diligence, and taking any action to collect sums
owing under this note. No extension for time for the payment of this Note or any
installment hereof shall affect the liability of Borrower. The failure of the
Payee to exercise any of its
- 1 -
<PAGE>
rights or options under this Note shall not constitute a waiver of the right to
exercise the same or right or option at any subsequent time with respect to the
same or any other events.
If this Note is placed in the hands of an attorney for collection,
Borrowers promise and agree to pay the reasonable attorneys' 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 if filed, the Borrowers must pay such reasonable
attorneys' 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.
----------------------------------------
----------------------------------------
By -------------------------------------
-------------------------------------
----------------------------------------
----------------------------------------
By -------------------------------------
-------------------------------------
- 2 -
<PAGE>
Loan -----
SUBSEQUENT NOTE
$---------- Date: ----------------
THE UNDERSIGNED ("Borrowers"), jointly and severally, promise to pay to
the order of UNITED RESOURCES, INC., an Oregon corporation, at Post Office Box
22187, Portland, Oregon, the sum of ---------------------- ($--------------),
payable in eleven (11) consecutive monthly installments of
- ------------------------ together with interest thereon from the date hereof,
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 of
- -------------------------- ($-----------------) becomes due on -------------.
The outstanding principal balance will bear interest at a rate equal to
- ---- percent in excess of the prime rate published by the United States National
Bank of Oregon, changing as of the first day of each month. interest shall be
payable monthly on the same day as the principal, until the whole sum, principal
and interest shall become immediately due and payable at the option of the
holder of this note.
This Note may be prepaid in whole or in part at any time. All such
prepayments will be applied first to accrued interest and then 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
loan agreement between the Borrowers and United Resources, 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 United Resources, Inc. 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.
- 1 -
<PAGE>
If this Note is placed in the hands of an attorney for collection,
Borrowers promise and agree to pay the reasonable attorneys' 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
attorneys' 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.
----------------------------------------
By -------------------------------------
-------------------------------------
----------------------------------------
By -------------------------------------
-------------------------------------
- 2 -
<PAGE>
INSTALLMENT NOTE
$_________________ Date: ____________
THE UNDERSIGNED ("Borrowers"), jointly and severally, promise to pay to the
order of UNITED RESOURCES, INC., an Oregon corporation ("Payee") at Post Office
Box 22187, Portland, Oregon 97269/2187, or, to its assigns (the "Bank"), or at
such other address as the Bank may specify to the Borrowers in writing, the sum
of ***________________________DOLLARS*** ($______________), payable in ________
(__) consecutive monthly installments of ***__________________________
DOLLARS*** ($___________), 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 an initial fixed rate of
______ percent APR. 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 U. S. National Bank 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 Resources, Inc./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 United Resources, Inc. 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 that 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.
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 Borrower's financial condition.
Upon 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 attorneys' 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 attorneys' 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
,President
INDIVIDUALLY:
By
LOAN AGREEMENT
THIS AGREEMENT, made and entered into this -- day of --------------- by
and between UNITED GROCERS, INC., an Oregon corporation, hereinafter called
"UG," and ----------------------------------------------------, hereinafter
called "Borrowers."
W I T N E S S E T H
WHEREAS, the Borrowers have made application to UG for a loan in the
sum of ------------------------------------DOLLARS ($----------) for the purpose
of financing the remodel and installation of a service fish counter, multi-deck
deli, interior decor, etc. located at 336 NE Highway 20, Toledo, Lincoln County,
Oregon.
NOW, THEREFORE, it is mutually agreed as follows:
1. Loan. Subject to the terms and conditions state, UG shall loan to
the Borrowers the total sum $---------- as evidenced by an Installment Note in
the form of Exhibit "1," attached hereto and by this reference incorporated
herein, together with such subsequent advances upon Borrowers' request, as UG,
in its sole and absolute discretion, elects to advance.
2. Repayment.
2.1 The principal amount of the Installment Note shall be
repaid in not less than sixty (60) equal monthly installments of $--------
including interest payments thereon at the beginning loan rate of ------ percent
per annum.
2.2 After maturity or upon default, the principal balance
remaining, from time to time, unpaid hereunder shall bear interest at the rate
of five percent (5%) per annum, in excess of the interest in effect immediately
prior to such maturity or default until paid in full.
<PAGE>
2.3 Notwithstanding the foregoing, UG has the right, at any
time, to call, in whole or in part, the principal balance and accrued interest
remaining unpaid on the Installment Note. UG shall exercise its right by giving
Borrowers written notice thereof at least 90 days' prior to the call date. If UG
exercises its right in the manner and within the period provided, the principal
balance remaining unpaid, together with interest thereon, shall become
immediately due and payable on the call date.
2.4 Borrowers shall have the right to make additional payments
against the unpaid balance without penalty. Any such payments, if made, shall be
applied against the unpaid balance and shall not be credited against the
stipulated monthly payments.
2.5 The monthly installment payments shall first be applied
upon the interest accrued on the full amount of the indebtedness and, secondly,
upon the principal balance owing.
3. Security. Payment of the Installment Note shall be secured by the
following instruments of even date:
3.1 Purchase Money Security Agreement, Exhibit "2," from
Borrowers to UG covering all of the fixtures, trade fixtures, equipment
described on the attached equipment list market Exhibit "4" and merchandise
inventory, which United Grocers, Inc. will from time to time hereafter delivery
to Debtor used incident to the operation of a retail grocery store, located at
336 N.E. Highway 20, Toledo, Lincoln County, Oregon. Said Exhibit "2," is
attached hereto and by this reference incorporated herein.
4. Use of Proceeds. The net proceeds of all sums loaned
hereunder shall be used by the Borrowers to finance the purchase of certain
fixtures, trade fixtures and equipment for that certain supermarket business
operated by the Borrowers located at 336 NE Highway 20, Toledo, Lincoln County,
Oregon.
5. Conditions Precedent: UG shall not be obligated to lend any moneys
hereunder until it shall have received the following:
5.1 The Borrowers shall have tendered delivery to Borrowers of
the Installment Note described in paragraph 1 above, in the form of Exhibit "1,"
duly executed by Borrowers.
5.2 The Borrowers give to UG a Purchase Money Security
Agreement in the form of Exhibit "2."
LOAN AGREEMENT - 2
<PAGE>
5.3 Oregon Uniform Commercial Code standard form Financing
Statement (UCC-1) in the form of Exhibit "3," which is attached hereto and by
this reference incorporated herein.
6. Warranties. The Borrowers represent and warrant as follows:
6.1 All statement contained in the loan application heretofore
submitted to UG are true.
6.2 There are no actions, suits or proceedings pending or, as
far as the Borrowers are advised, threatened against or affecting the Borrowers,
or either of them, before any court or administrative officer or agency which
might result in any material adverse change in the business or property of said
business or in the properties herein described as being owned by the Borrowers.
7. Covenants. So long as any part of the Installment Note remains
unpaid, the Borrowers covenant as follows:
7.1 The Borrowers will not assign, mortgage or pledge any part
of the assets of Borrowers or incur any further indebtedness except for
short-term credit for the purchase of goods and services on open account.
7.2 Borrowers shall furnish to UG quarterly financial
statements consisting of Balance Sheets and Operating Statements in accordance
with generally accepted accounting principles consistently applied and shall
accurately and completely record all transactions therein, in a form and by an
accountant satisfactory to UG on Borrowers. Borrowers shall conduct a full and
complete physical count of its inventory at least quarterly. Values shown on
reports shall be at cost of retail sales price less Borrowers' margin on the
item. Borrowers shall furnish UG copies of such inventory upon request, together
with such detailed information or supporting documents as it may request.
7.3 UG, 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 Borrowers at all reasonable times.
7.4 Borrowers agree to maintain or cause to be maintained the
membership of the store in good standing with UG in accordance with the Bylaws
of UG, as long as this Loan Agreement remains in effect.
LOAN AGREEMENT - 3
<PAGE>
7.5 Borrowers acknowledge and agree that as a material
consideration and condition precedent to UG's extension of credit hereunder,
Borrowers' covenant and agree to purchase goods and merchandise from UG.
Borrowers' covenant and agree, for a period of five (5) years from the date
hereof, or for the term of the Loan Agreement and any extension or renewals
thereof, whichever is greater, to purchase from UG weekly, in accordance with
its credit terms, goods, and merchandise having a purchase price of not less
than 60 percent of Borrowers' retail weekly sales volume of all goods and
merchandise sold on or from the store(s)' premises and UG will supply all of
Borrowers requirements at such prices and on such terms as are reasonably
comparable to those offered by UG to other purchasers of like kind and like
quantities carrying on businesses similar to that of the Borrowers. If, at any
time, the Borrowers contend that UG is not able to supply particular goods or
merchandise customarily stocked by retail supermarkets, or that terms offered by
UG are not reasonably comparable to those offered by UG to other purchasers
described above, the Borrowers shall so advise UG in writing, specifying such
contention with particularity. If, within 20 days after receipt of such notice,
UG does not offer to supply goods or merchandise so specified or does not advise
Borrowers that the terms and conditions offered are reasonably comparable to
those offered to such other purchasers, Borrowers shall be free to secure such
specified goods and merchandise from any source which it desires. If UG asserts
that it is offering reasonably comparable terms and Borrowers nonetheless
purchase from another source, such purchase, if above percentage requirements
are not complied with, shall be a default under this Loan Agreement. In the
event of a breach of this purchase covenant, Borrowers agree to pay UG, as
liquidated damages, and not as a penalty or forfeiture, a sum computed as
follows:
(a) The average weekly purchases from the date of the
agreement to the date of the breach shall be determined;
(b) 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
LOAN AGREEMENT - 4
<PAGE>
(c) The computed sum shall be multiplied by one and
one-quarter percent (1 1/4%) to determine the liquidated damages due and owing
UG by reason of Borrowers' default. Said sum shall become immediately due and
owing within 15 days from date of written notice of the liquidated damage.
Borrowers' default hereunder shall also be a default under the Loan Agreement.
8. Insurance. The Borrowers shall maintain a standard form fire
insurance, extended coverage, together with vandalism and malicious mischief
insurance, insuring the fixtures, trade fixtures and equipment to at least the
actual cash value, with loss payable clauses unto UG.
9. Loan Costs. Borrowers agree to pay a loan fee of $--------------
(1%) of funds advanced hereunder, together with any and all costs incident to
perfecting the security agreements required hereunder.
10. Events of Default. Upon occurrence of any of the following
specified events of default:
10.1 If any material representation or warranty made by the
Borrowers herein, or pursuant to, or in writing in connection with the making of
this Loan Agreement, or the loan hereunder, shall prove to have been untrue in
any material respect when made; or
10.2 The Borrowers shall default in the due and punctual
payment of either principal or interest on the Installment Note; or
10.3 The Borrowers shall default in due performance or
observance of any term, covenant or agreement contained in paragraphs 7, 8, and
9 of this Loan Agreement; or
10.4 The Borrowers shall default in due performance or
observance of any other agreement contained herein, and such default shall
continue uncured for a period of ten (10) days after written notice to Borrowers
from the holder of the Installment Note; or
10.5 Any obligation of the Borrowers to UG and/or its
affiliated or subsidiary companies for the payment of money is not paid when
due, whether at any expressed or at any accelerated maturity; or
10.6 The membership of Borrowers in UG shall terminate or be
terminated for any reason whatsoever; or
LOAN AGREEMENT - 5
<PAGE>
10.7 The Borrowers shall make any assignment for the benefit
of creditors, or shall be adjudged bankrupt, or any proceedings shall be
commenced by the Borrowers under any bankruptcy reorganization, arrangement,
insolvency, readjustment of debt or liquidation, law or statute, or the federal
or any state government, whether now or hereafter in effect, or any such
proceeding shall be instituted against the Borrowers and an order approving the
petition is entered, or such proceedings shall remain undismissed for a period
of ten (10) days, or the Borrowers 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 Borrowers, or of all or substantially all of the
assets of the Borrowers, or any such trustee or receiver shall not be discharged
within the period of 90 days after the appointment thereof;
THEN, and in any such event, if any such default shall then continue,
UG may, by written notice to the Borrowers, addressed to it at its principal
place of business, or at such other address as the Borrowers hereafter designate
to UG in writing, declare the principal and interest accrued on the Installment
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 Borrowers
agree to pay reasonable attorneys fees incurred in enforcing UG's rights and
remedies after default under this Loan Agreement.
11. Waiver. Neither the failure nor any delay on the part of UG 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.
12. Benefit. This Loan Agreement shall be binding upon and inure to the
benefit of UG and its successors and assigns.
13. Construction. Any provision of this Loan Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition of unenforceability without invalidating the remaining
LOAN AGREEMENT - 6
<PAGE>
provision hereof; and any such prohibition or unenforceability shall not
invalidate or render unenforceable such provisions to the extent permitted by
law. Borrowers and UG in any litigation relating to or in connection with this
Loan Agreement in which they shall be adverse parties, waive trial by jury with
respect to the issue of liability on the obligations secured by the collateral
and on all issues regarding the commercially reasonable disposition of said
collateral. This Loan Agreement shall be governed by and construed in accordance
with the laws of the state of Oregon.
IN WITNESS WHEREOF, the parties hereto have executed this Loan
Agreement on the day and year first herein written.
SECURED PARTY: UNITED GROCERS, INC.
By
G. P. Fleming
Assistant Secretary
BORROWERS --------------------------------
By -----------------------------
-----------------------------
<PAGE>
LOAN AGREEMENT
THIS AGREEMENT, made and entered into this ----- day of ---------------
by and between UNITED GROCERS, INC., an Oregon corporation, hereinafter called
"UG," and ---------------------------------, hereinafter called "Borrowers."
W I T N E S S E T H
WHEREAS, the Borrowers have made application to UG for a loan in the
sum of --------------------------------DOLLARS ($----------) for the purpose of
financing the payoff of United Grocers Project Account Number --------- for that
certain supermarket business located at --------------------------------------.
NOW, THEREFORE, it is mutually agreed as follows:
1. Loan. Subject to the terms and conditions stated, UG shall loan to
the Borrowers the total sum of $----------- as evidenced by an Installment Note
in the form of Exhibit "1," attached hereto and by this reference incorporated
herein, together with such subsequent advances upon Borrowers' request, as UG,
in its sole and absolute discretion, elects to advance.
2. Repayment.
2.1 The Loan shall bear interest and be repayable in
accordance with the terms of the Note or the same may be reviewed or modified
from time to time by Lender in its sole discretion. The Lender is expressly
granted the right to call said Note, in whole or in part, upon 180 days' written
notice to the Borrower. The monthly installment payments shall first be applied
upon the interest accrued on the full amount of the indebtedness and secondly
upon the principal balance owing.
2.2 Notwithstanding the foregoing, UG has the right, at any
time, to call, in whole or in part, the principal balance and accrued interest
remaining unpaid on the Installment Note. UG shall exercise its right by giving
Borrowers written notice thereof at least 90 days' prior to the call date. If UG
exercises its right in the manner and within the period provided, the principal
balance remaining unpaid, together with interest thereon, shall become
immediately due and payable on the call date.
2.3 Borrowers shall have the right to make additional payments
against the unpaid balance without penalty. Any such payments, if made, shall be
applied against the unpaid balance and shall not be credited against the
stipulated monthly payments.
2.4 The monthly installment payments shall first be applied
upon the interest accrued on the full amount of the indebtedness and, secondly,
upon the principal balance owing.
3. Security. Payment of the Installment Note shall be secured by the
following instruments of even date:
3.1 Security Agreement, Exhibit "2," from Borrowers to UG
covering, without limitation, all of the present and hereafter acquired
merchandise inventory, fixtures, trade fixtures, equipment and leasehold
interest, including
<PAGE>
replacements and additions to those used incident to the operation of a retail
grocery store, located at -------------------------------
- ------------------------. Said Exhibit "2," is attached hereto and by this
reference incorporated herein.
4. Use of Proceeds. The net proceeds of all sums loaned hereunder shall
be used by the Borrowers to finance the payoff of United Grocers Project Account
Number 34109 for that certain supermarket business operated by the Borrowers
located at 107 N. Coast Highway, Newport, Lincoln County, Oregon.
5. Conditions Precedent: UG shall not be obligated to lend any moneys
hereunder until it shall have received the following:
5.1 The Borrowers shall have tendered delivery to UG of the
Installment Note described in paragraph 1 above, in the form of Exhibit "1,"
duly executed by Borrowers.
5.2 The Borrowers give to UG a Security Agreement in the form
of Exhibit "2."
5.3 Oregon Uniform Commercial Code standard form Financing
Statement (UCC-1) in tke form of Exhibit "3," which is attached hereto and by
this reference incorporated herein.
5.4 The Borrowers' execution of personal guaranties as
required.
6. Warranties. The Borrowers represent and warrant as follows:
6.1 All statements contained in the loan application
heretofore submitted to UG are true.
6.2 There are no actions, suits or proceedings pending or, as
far as the Borrowers are advised, threatened against or affecting the Borrowers,
or either of them, before any court or administrative officer or agency which
might result in any material adverse change in the business or property of said
business or in the properties herein described as being owned by the Borrowers.
7. Covenants. So long as any part of the Installment Note remains
unpaid, the Borrowers covenant as follows:
7.1 The Borrowers will not assign, mortgage or pledge any part
of the assets of Borrowers or incur any further indebtedness except for
short-term credit for the purchase of goods and services on open account.
7.2 Borrowers shall furnish to UG quarterly financial
statements consisting of Balance Sheets and Operating Statements in accordance
with generally accepted accounting principles consistently applied and shall
accurately and completely record all transactions therein, in a form and by an
accountant satisfactory to UG on Borrowers. Borrowers shall conduct a full and
complete physical count of its inventory at least quarterly. Values shown on
reports shall be at cost of retail sales price less Borrowers' margin on the
LOAN AGREEMENT - 2
<PAGE>
item. Borrowers shall furnish UG copies of such inventory upon request, together
with such detailed information or supporting documents as it may request.
7.3 UG, 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 Borrowers at all reasonable times.
7.4 In the event the Borrower defaults on any payment for open
account or any existing loans, the rate shall be increased to prime plus 2.0
percent until maturity.
7.5 Borrowers agree to maintain or cause to be maintained the
membership fo the store in good standing with UG in accordance with the Bylaws
of UG, as long as this Loan Agreement remains in effect. In the event the
Borrower's UG membership is terminated voluntarily or involuntarily, there will
be a 15 percent prepayment penalty on the then outstanding balance. In addition,
if the loan is not paid off, the rate shall increase to 18 percent APR. However,
in the event of a sale of the store to a UG member, the note becomes due and
payable without penalty.
7.6 Borrowers acknowledge and agree that as a material
consideration and condition precedent to UG's extension of credit hereunder,
Borrowers' covenant and agree to purchase goods and merchandise from UG.
Borrowers' covenant and agree, for a period of five (5) years from the date
hereof, or for the term of the Loan Agreement and any extension or renewals
thereof, whichever is greater, to purchase from UG weekly, in accordance with
its credit terms, goods and merchandise having a purchase price of not less than
55 percent of Borrowers' retail weekly sales volume of all goods and merchandise
sold on or from the store(s)' premises and UG will supply all of Borrowers
requirements at such prices and on such terms as are reasonably comparable to
those offered by UG to other purchasers of like kind and like quantities
carrying on businesses similar to that of the Borrowers. If, at any time, the
Borrowers contend that UG is not able to supply particular goods or merchandise
customarilystocked by retail supermarkets, or that terms offered by UG are not
reasonably comparable to those offered by UG to other purchasers described
above, the Borrowers shall so advise UG in writing, specifying such contention
with particularity. If, within 20 days after receipt of such notice, UG does not
offer to supply goods or merchandise so specified or does not advise Borrowers
that the terms and conditions offered are reasonably comparable to those offered
to such other purchasers, Borrowers shall be free to secure such specified goods
and merchandise from any source which it desires. If UG asserts that it is
offering reasonably comparable terms and Borrowers nonetheless purchase from
another source, such purchase, if above percentage requirements are not complied
with, shall be a default under this Loan Agreement. In the event of a breach of
this purchase covenant, Borrowers agree to pay UG, as liquidated damages, and
not as a penalty or forfeiture, a sum computed as follows:
(a) The average weekly purchases from the date of the
agreement to the date of the breach shall be determined;
LOAN AGREEMENT - 3
<PAGE>
(b) 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
(c) The computed sum shall be multiplied by one and
one-quarter percent (1 1/4%) to determine the liquidated damages due and owing
UG by reason of Borrowers' default. Said sum shall become immediately due and
owing within 15 days from date of written notice of the liquidated damage.
Borrowers' default hereunder shall also be a default under the Loan Agreement.
8. Insurance. The Borrowers shall maintain a standard form fire
insurance, extended coverage, together with vandalism and malicious mischief
insurance, insuring the merchandise inventory, fixtures, trade fixtures and
equipment to at least the actual cash value, with loss payable clauses unto UG.
9. Loan Costs. Borrowers agree to pay a loan fee of $2,000, one percent
(1%) of funds advanced hereunder, together with any and all costs incident to
perfecting the security agreements required hereunder.
10. Events of Default. Upon occurrence of any of the following
specified events of default:
10.1 If any material representation or warranty made by the
Borrowers herein, or pursuant to, or in writing in connection with the making of
this Loan Agreement, or the loan hereunder, shall prove to have been untrue in
any material respect when made; or
10.2 The Borrowers shall default in the due and punctual
payment of either principal or interest on the Installment Note; or
10.3 The Borrowers shall default in due performance or
observance of any term, covenant or agreement contained in paragraphs 7, 8, and
9 of this Loan Agreement; or
10.4 The Borrowers shall default in due performance or
observance of any other agreement contained herein, and such default shall
continue uncured for a period of ten (10) days after written notice to Borrowers
from the holder of the Installment Note; or
10.5 Any obligation of the Borrowers to UG and/or its
affiliated or subsidiary companies for the payment of money is not paid when
due, whether at any expressed or at any accelerated maturity; or
10.6 The membership of Borrowers in UG shall terminate or be
terminated for any reason whatsoever; or
10.7 The Borrowers shall make any assignment for the benefit
of creditors, or shall be adjudged bankrupt, or any proceedings shall be
commenced by the Borrowers under any bankruptcy reorganization, arrangement,
insolvency, readjustment of debt or liquidation, law or statute, or the federal
or any state government, whether now or hereafter in effect, or any such
proceeding shall be
LOAN AGREEMENT - 4
<PAGE>
instituted against the Borrowers and an order approving the petition is entered,
or such proceedings shall remain undismissed for a period of ten (10) days, or
the Borrowers 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 Borrowers, or of all or substantially all of the assets of the
Borrowers, or any such trustee or receiver shall not be discharged within the
period of 90 days after the appointment thereof;
THEN, and in any such event, if any such default shall then continue,
UG may, by written notice to the Borrowers, addressed to it at its principal
place of business, or at such other address as the Borrowers hereafter designate
to UG in writing, declare the principal and interest accrued on the Installment
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 Borrowers
agree to pay reasonable attorneys fees incurred in enforcing UG's rights and
remedies after default under this Loan Agreement.
11. Waiver. Neither the failure nor any delay on the part of UG 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.
12. Benefit. This Loan Agreement shall be binding upon and inure to the
benefit of UG and its successors and assigns.
13. Construction. Any provision of this Loan Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition of unenforceability without invalidating the remaining provision
hereof; and any such prohibition or unenforceability shall not invalidate or
render unenforceable such provisions to the extent permitted by law. Borrowers
and UG in any litigation relating to or in connection with this Loan Agreement
in which they shall be adverse parties, waive trial by jury with respect to the
issue of liability on the obligations secured by the collateral and on all
issues regarding the commercially reasonable disposition of said collateral.
This Loan Agreement shall be governed by and construed in accordance with the
laws of the state of Oregon.
LOAN AGREEMENT - 5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Loan
Agreement on the day and year first herein written.
SECURED PARTY: UNITED GROCERS, INC.
By
G. P. Fleming
Assistant Secretary
BORROWERS ---------------------------------
By ------------------------------
------------------------------
---------------------------------
By ------------------------------
------------------------------
LOAN AGREEMENT - 6
LOAN AGREEMENT FOR SUBSEQUENT NOTES
THIS AGREEMENT, made and entered into this ___ day of ____________,
1991, by and between UNITED RESOURCES, INC., an Oregon corporation, hereinafter
called "Lender"; and ______________, ______________, and , INC., doing business
as ______________, jointly and severally hereinafter called "Borrower."
W I T N E S S E T H
WHEREAS, the Borrower has made application to the Lender for a loan
in the sum of ____________________________ AND NO/100 DOLLARS ($___________.00)
for the purpose of financing the purchase of fixtures and equipment located at
____________________________, ______________, ______________ County, Oregon.
NOW, THEREFORE, it is mutually agreed as follows:
1. Loan. Subject to the terms and conditions stated, the Lender
shall total sum of AND NO/100 DOLLARS (________.00) as evidenced by an
Installment Note in the form of Exhibit A attached hereto.
2. Repayment. The Loan shall bear interest and be repayable in
accordance with the terms of the Note or the same may be reviewed or modified
from time to time by Lender in its sole discretion.
The Lender is expressly granted the right to call said Note, in
whole or in part, upon 180 days' written notice to the Borrower.
The monthly installment payments shall first be applied upon the
interest accrued on the full amount of the indebtedness and secondly upon the
principal balance owing.
3. Security. Payment of the Note shall be secured as follows:
(a) A Security Agreement in the form of Exhibit B attached
hereto, from the Borrower to the Lender, covering all of the present and
hereafter acquired merchandise inventory, fixtures, trade fixtures, equipment,
and proceeds therefrom of Borrower, located without limitation at ______________
County, Oregon or used in connection with the business there located.
(b) A security interest from the Borrower to the Lender
covering all capital stock, contract rights, and accounts receivable owed to the
Borrower by the Lender.
(c) 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 loan, $___________.00.
(d) Inventory at ______________, _________, ___________ County,
<PAGE>
Oregon, shall be maintained at all times at a level of not less than
$_________.00 cost to Borrower.
(e) Mortgage Agreement, Exhibit D, from ________________ and
____________________________ to United Resources, Inc. covering the real
property located at: ____________________________, ______________ County,
Oregon. Said Exhibit D is attached hereto and by this reference incorporated
herein.
(f) Guaranty, guaranteed by:
----------------------------
----------------------------
----------------------------
----------------------------
which is attached hereto, marked as Exhibit E, and by this reference
incorporated herein.
4. Use of Proceeds. The net proceeds of all sums loaned hereunder
shall be used by the Borrower to finance the purchase of merchandise inventory,
trade fixtures, fixtures and equipment for that certain supermarket business
operated by the Borrower located at ______________, _________, ________ County,
Oregon.
5. Conditions Precedent. The Lender shall not be obligated to lend
any monies hereunder until it shall have received the following:
(a) The Borrower shall have tendered delivery to Lender of the
Note described in Paragraph 1, duly executed by ______________,
____________________________.
(b) The Borrower shall have given to the Lender a Security
Agreement, as described in Paragraph 3(a), covering all present and hereafter
acquired merchandise inventory, trade fixtures, fixtures, equipment, and
proceeds therefrom, located without limitation at 7 County, Oregon or used in
connection with the business there located.
(c) The Borrower shall have granted Lender a valid and perfected
security interest in all of the collateral described in Paragraph 3(b) above.
(d) The Borrower shall have tendered delivery to the Lender
within 30 days of the date of this Agreement a certificate of life insurance to
equal the amount of the loan, as described in Paragraph 3(c).
(e) The Borrower shall have duly executed and given to the Lender
an Oregon Uniform Commercial Code standard form Financing Statement (UCC 1) in
the form of Exhibit C attached hereto.
(f) The Borrower shall have duly executed and given to the Lender
Mortgage Agreement in the form of Exhibit D as described in paragraph 3(e)
above.
(g) Guaranty in the form of Exhibit E, which is attached hereto
and by this reference incorporated herein.
<PAGE>
6. Warranties. The Borrower represents and warrants as follows:
(a) All statements contained in the loan application heretofore
submitted to the Lender are true.
(b) There are no actions, suits, or proceedings pending or, as
far as the Borrower is advised, threatened against or affecting the Borrower, or
either of them, before any court or administrative officer or agency which might
result in any material adverse change in the business or property of Borrower or
in the properties herein described as being owned by the Borrower.
7. 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 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 (corp name).
(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.
8. Insurance. The Borrower shall maintain standard form fire,
extended coverage, vandalism and malicious mischief insurance, insuring the
merchandise inventory, fixtures, trade fixtures and equipment at (name/dba) to
at least the actual cash value, with loss payable clauses in favor of the Lender
and its assignees.
9. Loan Costs. The Borrower agrees to pay a loan application fee of
$______.00, together with any and all costs incident to filing Uniform
Commercial Code Financing Statements.
10. 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 7, 8, and 9 of this
Agreement; or
<PAGE>
(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 ten (10) 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 ten (10) 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 ninety (90) 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 attorneys' fees incurred in enforcing the Lender's
rights and remedies after default under this Agreement, including any fees
incurred on appeal.
11. Waiver. Neither the failure nor any delay on the part of the
Lender Lo 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.
12. Benefit. This Agreement shall be binding upon and inure to the
benefit of the Lender and its successors and assigns.
13. Construction. This agreement shall be governed by and construed
in accordance with the laws of the State of Oregon.
IN WITNESS WHEREOF the parties have executed this Agreement the day
and year first above written.
LENDER: UNITED RESOURCES, INC.
By----------------------------
G. P. Fleming, President
<PAGE>
BORROWERS: --------------, INC.:
DBA --------------------------
By----------------------------
, President
By----------------------------
, Secretary
INDIVIDUALLY:
------------------------------
------------------------------
<PAGE>
EXHIBITS TO THE LOAN AGREEMENT
Exhibit A: Installment Note
Exhibit B: Security Agreement
Exhibit C: Financing Statement
Exhibit D: Mortgage Agreement
Exhibit E: Guaranty
<PAGE>
LOAN AGREEMENT FOR SUBSEQUENT NOTES
THIS AGREEMENT, made and entered into this day of __________, ________,
by and between UNITED RESOURCES, INC., an Oregon corporation or its successors
and assigns, hereinafter called "Lender"; and ______________________ doing
business as ___________________, jointly and severally hereinafter called
"Borrower."
W I T N E S S E T H :
WHEREAS, the Borrower has made application to the Lender for a loan in
the sum of ____________________ DOLLARS ($____________) for the purpose of
financing _____________________ located at __________________________________.
NOW, THEREFORE, it is mutually agreed as follows:
1. Loan. Subject to the terms and conditions stated, the Lender shall
loan to the Borrower the total sum of ______________________ DOLLARS
($__________) as evidenced by an Installment Note in the form of Exhibit A
attached hereto.
2. Repayment. The Loan shall bear interest and is repayable in
accordance with the terms and conditions of the Note as the same may be revised
or modified from time to time by Lender in its sole discretion.
The Lender is expressly granted the right to call said Note, in whole or
in part, upon 180 days' written notice to the Borrower.
The monthly installment payments shall first be applied to the interest
accrued on the full amount of the indebtedness and secondly upon the principal
balance owing.
3. Security. Payment of the Note shall be secured as follows:
(a) A Security Agreement in substantially the form of Exhibit B
attached hereto, from the Borrower to the Lender, covering all of the present
and hereafter acquired merchandise inventory, furniture, trade fixtures,
equipment, and proceeds therefrom of Borrower, located without limitation at
__________________________________________________ or used in connection with
the business there located.
(b) The Borrower shall obtain and maintain in full force and
effect for the length of the loan an irrevocable collateral assignment(s) to
United Grocers, Inc. and/or its subsidiaries and/or its assignees on a life
policy(s) on the lives of _____________________ for the total amount of the
loan, $___________________.
(c) Inventory at ___________________________, shall be maintained
at all times at a level of not less than $_______________ cost to Borrower.
4. Use of Proceeds. The net proceeds of all sums loaned hereunder shall
be used by the Borrower to finance the purchase of a scanning system for
<PAGE>
that certain supermarket business operated by the Borrower located at
_________________________.
5. Conditions Precedent. The Lender shall not be obligated to lend any
monies hereunder until it shall have received the following:
(a) The Borrower shall have tendered delivery to Lender of the
Note described in Paragraph 1, duly executed by _____________________________.
(b) The Borrower shall have given to the Lender a Security
Agreement, as described in Paragraph 3(a), covering all present and hereafter
acquired merchandise inventory, furniture, trade fixtures, equipment, and
proceeds therefrom, located without limitation at
_________________________________ or used in connection with the business there
located.
(c) The Borrower shall have tendered delivery to the Lender
within 30 days of the date of this Agreement a certificate of life insurance to
equal the amount of the loan, as described in Paragraph 3(b).
(d) The Borrower shall have duly executed and given to the Lender
__________________ Uniform Commercial Code standard form Financing Statement
(UCC 1) in the form of Exhibit C attached hereto.
6. Warranties. The Borrower represents and warrants as follows:
(a) All statements contained in the loan application and exhibits
attached heretofore submitted to the Lender are true, fairly and accurately
represent the financial condition of the Borrower.
(b) There are no actions, suits, or proceedings pending or, as
far as the Borrower is advised, threatened against or affecting the Borrower, or
either of them, before any court or administrative officer or agency which might
result in any material adverse change in the business or property of Borrower or
in the properties herein described as being owned by the Borrower.
7. 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 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.
LOAN AGREEMENT FOR SUBSEQUENT NOTE - 2
<PAGE>
8. Insurance. The Borrower shall maintain standard form fire, extended
coverage, vandalism and malicious mischief insurance, insuring the merchandise
inventory, furniture, trade fixtures and equipment at
__________________________________to at least the actual cash value, with loss
payable clauses in favor of the Lender and its assignees.
9. 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.
10. 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 7, 8, and 9 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 ten (10) 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 ten (10) 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 ninety (90) days after the appointment thereof;
(g) In the event the financial statements are not received, as
hereinafter defined in paragraph 7 (b), a penalty will be assessed by increasing
the interest rate being charged under this Note by an additional
LOAN AGREEMENT FOR SUBSEQUENT NOTE - 3
<PAGE>
4.00 percent APR. Such penalty will continue to be assessed until the financial
statements are received as required.
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 attorneys' fees incurred in enforcing the Lender's
rights and remedies after default under this Agreement, including any fees
incurred on appeal.
11. 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.
12. Benefit. This Agreement shall be binding upon and inure to the
benefit of the Lender and its successors and assigns.
13. Construction. This agreement shall be governed by and construed in
accordance with the laws of the State of Oregon.
LOAN AGREEMENT FOR SUBSEQUENT NOTE - 4
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement the day and
year first above written.
LENDER: UNITED RESOURCES, INC.
By
G. P. Fleming, President
BORROWERS:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
LOAN AGREEMENT FOR SUBSEQUENT NOTE - 5
<PAGE>
EXHIBITS TO THE LOAN AGREEMENT
Exhibit A: Installment Note
Exhibit B: Security Agreement
Exhibit C: Financing Statement
LOAN AGREEMENT FOR SUBSEQUENT NOTE - 6
AMENDMENT TO LOAN AND SECURITY AGREEMENTS
WHEREAS, the Note dated _________, in the amount of $_________, and
Amendment to said Note dated _________, in the amount of $_________, has a
present balance owing of $_________, known as Loan No. ___; and
WHEREAS, the Note dated _________, in the amount of $_________, has a
present balance owing of $_________, known as Loan No. ___; and
WHEREAS, Borrowers request additional financing in the amount of
$_________, for the purpose of upgrading the fixtures at the store located 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
No. ____.
2. The new note of $_________ together with interest shall be secured
under the Security Agreements respectively dated _________, and any
Amendments to said Loan and Security Agreements, continuing the terms
and conditions thereof, and said Loan and Security Agreements are
hereby ratified and reaffirmed. The terms and conditions of Loans ___
and ___ shall remain the same.
3. Irrevocable assignments of collateral on a life policy(s) on the life
(lives) of the individuals for the total amount of the loan shall be
maintained in full force and effect for the length of the loan. The
collateral assignment designation shall read as follows: United
Grocers, Inc. and/or its subsidiaries or assignees, as their interest
may appear.
4. Real property mortgages as described on the attached Exhibits B and C
shall continue to be pledged as partial collateral for the length of
the loan.
5. Inventories shall be maintained at all times at levels of not less than
$_________ cost to Borrowers at _________ and $_________ cost to
Borrowers at _________.
6. Borrowers agree to pay a loan fee of $_______, one percent of funds
advanced hereunder, together with any and all costs incident to
perfecting the security agreements required hereunder.
Dated: _________
BORROWERS: SECURED PARTIES:
UNITED GROCERS, INC.
By
, President By
G. P. Fleming
By Assistant Secretary
, Secretary
UNITED RESOURCES, INC.
INDIVIDUALLY:
By
- ----------------------------------- G. P. Fleming
President
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
1201
SECURITY AGREEMENT
(General)
Section 1.----------------------------------------------------------------------
(Name)
- ------------------------------------------------------------------------, Oregon
(No. and Street) (City or Town) (County)
(hereinafter called the debtor), for a valuable consideration, receipt whereof
hereby is acknowledged, hereby grants to----------------------------------------
- --------------------------------------------------------------------------------
(hereinafter called the secured party), whose address is------------------------
- -------------------------a security interest in the following described property
together with all accessories, substitutions, additions, replacements, parts and
accessions affixed to or used in connection therewith, as well as the products
and proceeds thereof (all hereinafter called "the Collateral"):
to secure payment of the debtor's debt to the secured party as evidenced hereby
and by debtor's note of even date herewith payable to the secured party in the
amount of $--------- payable on the terms, at the times and with interest as set
forth in said note; (delete remainder of this sentence if not applicable) also
to secure any and all other liabilities, direct and indirect, absolute or
contingent, now existing or hereafter arising from the debtor to the secured
party. Said note and said liabilities hereinafter collectively are called "the
obligations." Debtor agrees to pay said note and obligations and if any portion
thereof, principal or interest, is not paid when due and such default continues
for more than 10 days, debtor agrees to pay, in addition to the foregoing, the
reasonable collection costs of the secured party plus reasonable attorney's
fees.
Section 2. The debtor hereby warrants and covenants that:
2.1 The collateral is primarily for debtor's [ ] personal, family,
household or agricultural purposes, [ ] business or commercial, other than
agricultural purposes (indicate which); and if any part of the Collateral is
being acquired, in whole or in part, with the proceeds of the said note, the
secured party may disburse directly to the seller of the Collateral.
2.2 At all times, the Collateral will be kept at ---------------------
(No. and Street)
- --------------------------------------------------------------------------------
(City or Town)
- --------------------------------------------------------------------------------
- ------------------------------------------, Oregon and shall not be removed from
(County)
said location, in whole or in part, until such time as written consent to a
change of location is obtained by debtor from the secured party.
<PAGE>
2.3 If the Collateral is bought or used primarily for business or
commercial, other than agricultural purposes, the debtor's principal place of
business in Oregon is located at the place shown at the beginning of this
agreement; debtor also has places of business in the following other Oregon
counties:-----------------------------------------------------------------------
- -----------------------------------------------------------------; if debtor has
no place of business in Oregon but resides therein, the county in which debtor
resides is ---------- County in said state.
2.4 If debtor is a corporation, it is organized and existing under the
laws of the State of -----------, its principal office and place of business is
located at ------------------ and its principal office and place of business in
Oregon is located at the place shown at the beginning of this agreement.
2.5 If the Collateral is or is to become attached to real estate, a
description of the real estate is:
in ----------------- County, Oregon, and if the Collateral is attached to real
estate prior to the perfection of the security interest granted hereby, the
debtor will on the demand of the secured party furnish the latter with
disclaimers or subordination agreements in form suitable to the secured party,
signed by all persons having an interest in said real estate or any interest in
the Collateral which is prior to the secured party's interest.
2.6 If the Collateral is crops, a description of the land on which the
crops are growing or are to be grown is:
in ---------------- County, Oregon
2.7 If any motor vehicles are included in the above described
Collateral, the secured party's security interest is to be noted on each
certificate of title and each of said certificates shall then be deposited with
and kept by the secured party.
---------
Section 3. SPECIAL TERMS AND CONDITIONS:
<PAGE>
This agreement is subject to the additional provisions set forth on the
reverse hereof, the same being incorporated herein by reference. The debtor
acknowledges receipt of a complete executed copy of this agreement.
Executed and delivered in duplicate on -----------------, 19--.
- --------------------------------------------------------------------------------
(Secured Party)
By------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature of Debtor)
---------
NOTE: If the above contract is a consumer credit transaction and
therefore within the purview of the Truth-in-Lending Act and
Regulation Z, the secured party MUST comply with the Act and
the Regulation by making the required disclosures to the
debtor; for this purpose use Stevens-Ness Form No. 1310 or
equivalent. This form not suitable in connection with sales of
motor vehicles or other goods in Retail Installment
Transactions. See complete list of Security Agreements and
Retail Installment Contracts.
Form No. 1201--Security Agreement--General
Stevens-Ness Law Publishing Co.
Portland, Oregon 97204
(SN)
S-N Form No. 1201 UCC Series
ADDITIONAL PROVISIONS
Section 4. The debtor hereby further warrants and covenants that:
4.1 No financing statement covering any of the Collateral described on
the reverse hereof, or the products or proceeds thereof, is on file in any
public office. The debtor is the owner of said Collateral and each and every
part thereof free from any prior lien, security interest or encumbrance and will
defend the Collateral against the claims and demands of all persons whomsoever.
4.2 The debtor will not sell, exchange, lease or otherwise dispose of
the Collateral, or any part thereof, or suffer or permit any lien, levy or
attachment thereon or security
<PAGE>
interest therein or financing statement to be filed with reference thereto,
other than that of the secured party.
4.3 Debtor will maintain the Collateral in good condition and repair
and preserve the same against waste, loss, damage or depreciation in value other
than by reasonable wear. The debtor will not use any of the Collateral in
violation of any law or public regulation. Secured party may examine and inspect
the Collateral at any reasonable times, wherever located, and for that purpose
hereby is authorized by debtor to enter any place or places where any part of
the Collateral may be.
4.4 Debtor will keep the Collateral fully insured against loss or
damage by fire, theft (and collision if applicable) and such other hazards as
secured party may from time to time require, with such deductible provisions,
upon such terms, including loss payable and other endorsements, and in such
company or companies as the secured party may approve; debtor immediately will
deliver all policies to the secured party, to be retained by the latter in
pledge to secure debtor's obligations hereunder, with irrevocable authority to
adjust any loss, receive and receipt for any sum payable, surrender any policy,
discharge and release any insurer, endorse in debtor's name any loss or refund
check or draft and, in general, exercise in the name of the debtor or otherwise,
any and all rights of the debtor in respect thereto or in respect to the
proceeds thereof.
4.5 Debtor will pay, when due, all taxes, license fees and assessments
relative to the Collateral and its use and relative to the note and obligations
secured hereby. Should debtor fail in his performance of any of the foregoing,
the secured party may pay any security interest having priority hereto, may
order and pay for the repair, maintenance and preservation of the Collateral, or
any part thereof, may place and pay for any such insurance and may pay any such
taxes; the debtor agrees to pay to the secured party on demand all of the
latter's disbursements for any of said purposes with interest at ten percent per
annum on all sums so paid from the date of payment until repaid. Repayment of
all said sums shall be secured by this Security Agreement.
4.6 The debtor agrees to notify the secured party promptly in writing
of any change in his business or residence address or in the location where the
collateral is kept.
4.7 In the event of any assignment by the secured party of this
agreement or his rights hereunder, debtor will not assert as a defense,
counter-claim, set-off or otherwise against secured party's assignee any claim,
known or unknown, which debtor now has or claims to have or hereafter acquires
against the secured party. However, notwithstanding any such assignment, secured
party shall be liable to the debtor as if such assignment had not been made.
4.8 The debtor will join with the secured party in executing, filing
and doing whatever may be necessary under applicable law to perfect and continue
the secured party's security interest in the Collateral, all at debtor's
expense.
4.9 Debtor hereby consents to any extension of time of payment and to
any substitution, exchange or release of Collateral and to the addition to or
release of any party or person primarily or secondarily liable for the
obligations, or part thereof.
<PAGE>
Section 5. General Provisions:
5.1 The note which this agreement secures is a separate instrument and
may be negotiated, extended or renewed by the secured party without releasing
the debtor, the Collateral or any guarantor or co-maker.
5.2 All of the terms herein and the rights, duties and remedies of the
parties shall be governed by the laws of Oregon. Any part of this agreement
contrary to the law of any state having jurisdiction shall not invalidate other
parts of this agreement in that state.
5.3 All of the benefits of this agreement shall inure to the secured
party, his successors in interest and assigns and the obligations hereunder
shall be binding upon the debtor, his legal representatives, successors and
assigns.
5.4 If there be more than one debtor or a guarantor or co-maker of the
note or this agreement, the obligation of each and all shall be primary and
joint and several.
5.5 The secured party shall not be deemed to have waived any of his
rights under this or any other agreement executed by the debtor unless the
waiver is in writing signed by the secured party. No delay in exercising secured
party's rights shall be a waiver nor shall a waiver on one occasion operate as a
waiver of such right on a future occasion.
5.6 Each notice from one to the other party to this agreement shall be
sufficient if served personally or given by U.S. registered or certified mail,
or by telegraph, addressed to the other party at his address as set forth on the
reverse hereof, or as said address may be changed by written notice to the other
given pursuant to this paragraph. Reasonable notice, when notice is required,
shall be deemed to be five days from date of mailing.
5.7 In construing this security agreement the masculine pronoun shall
include the feminine and the neuter and the singular shall include the plural,
as the circumstances may require. Further, the debtor is the customer and the
secured party is the creditor within the meaning of Regulation Z and the
Truth-in-Lending Act.
5.8 A carbon impression of any signatures on any copy of this contract
shall be deemed, for all purposes, an original signature.
Section 6. Default:
6.1 Time is of the essence hereof. The debtor shall be in default under
this agreement upon the happening of any of the following events or conditions:
(a) Debtor's failure to pay, when due, the principal of or
interest on said note or obligations, or any installment
thereof;
(b) Debtor's failure to keep, observe or perform any provision of
this agreement or any other agreement between him and the
secured party;
<PAGE>
(c) The discovery of any misrepresentation, or material falsity of
any warranty, representation or statement made or furnished by
debtor to the secured party whether or not in connection with
this agreement;
(d) Loss, theft or destruction of or substantial damage to any of
the Collateral;
(e) The secured party deems or has reasonable cause to deem
himself insecure;
(f) Failure or termination of the business of, or commencement of
any insolvency or receivership proceedings by or against the
debtor, or if the debtor or any guarantor or co-maker of said
note dies or becomes insolvent, and if debtor or any guarantor
or co-maker of said note is a partnership, the death of any
partner.
Section 7. Remedies of Secured Party:
7.1 Upon debtor's default, secured party shall have each and all of the
rights and remedies granted to him by the Uniform Commercial Code of Oregon, by
the said note and by this agreement and may declare the note and obligations
immediately due and payable and may require debtor to assemble the Collateral
and make it available to the secured party at a place to be designated by the
secured party which is reasonably convenient to both parties. The debtor agrees
to pay the secured party's reasonable attorney's fees and other expenses
incurred by the latter in retaking, holding, preparing for sale and realizing on
said Collateral. Should suit or action be instituted on this contract, on the
said note or to replevy said collateral, or any part thereof, debtor agrees to
pay (1) plaintiff's reasonable attorney's fees to be fixed by the trial court
and (2) on appeal, if any, similar fees in the appellate court to be fixed by
the appellate court, and all said sums shall be included in the obligations
secured hereby.
FORM No. 1202--Purchase Money Security Agreement
1202
SN Stevens-Ness Law Publishing Co., Portland, Oregon 97204
PURCHASE MONEY SECURITY AGREEMENT
Dated --------------------, 19--
Customer(s)---------------------------------------------------------------------
(Hereinafter called buyer)
- --------------------------------------------------------------------------------
(Buyer's residence or other address specified by him)
Creditor(s)---------------------------------------------------------------------
(Hereinafter called seller)
- --------------------------------------------------------------------------------
(Seller's place of business)
Section 1. The above named buyer (and if more than one, then all buyers
jointly and severally), hereinafter sometimes called the debtor, hereby
purchases from the above named seller, and seller sells to the buyer the
following described goods:
together with all accessories, additions, replacements, parts and accessions now
or hereafter affixed to or used in connection therewith as well as the proceeds
thereof (all herein collectively called "collateral"), at and for the sum of
$--------- which buyer promises to pay to seller's order at the following times:
$--------- on the signing hereof (receipt of which hereby is acknowledged by
seller) and the balance, including interest, in monthly installments of not less
than $--------- each, payable on the -----day of each month hereafter beginning
with the month of -------------, 19--, and continuing until said sum together
with the interest next mentioned is fully paid; all unpaid principal shall bear
interest at the rate of ----% per annum from date hereof until paid; interest
payable monthly, the same being included in the minimum monthly payments above
required.
All or any part of said price may be paid in advance at any time. If any payment
is not paid when due and such default continues for a period of 10 days or
longer, seller shall be entitled to collect, and buyer agrees to pay, in
addition to the foregoing, seller's collection costs, including reasonable
attorney's fees. To secure buyer's performance hereof buyer grants to seller a
security interest in said collateral and in all thereof.
<PAGE>
Section 2. The buyer hereby warrants and covenants that:
2.1 The collateral is primarily for buyer's [ ] personal, family,
household or agricultural purposes, [ ] business or commercial, other than
agricultural, purposes (indicate which; see important notice below).
2.2 At all times the collateral will be kept at
- --------------------------------------------------------------------------------
(No. and Street) (City or Town) (County)
Oregon, and shall not be removed from said location, in whole or in part, until
such time as seller's written consent thereto shall have been obtained.
2.3 If the collateral is bought or used primarily for business or
commercial, other than agricultural, purposes, the buyer's principal place of
business in Oregon is that shown at the beginning of this agreement; buyer also
has places of business in the following other Oregon counties:
- --------------------------------------; if buyer has no place of business in
Oregon but resides therein, the county in which buyer resides is
- ------------------ County in said state.
2.4 If buyer is a corporation, it was organized under the laws of the
State of ---------- ---------------, its principal office and place of business
is located at -------------------------------- and its principal office and
place of business in Oregon is located at the place shown at the beginning of
this agreement.
2.5 If the collateral is or is to become attached to real estate, a
description of the real estate is:
in ----------------- County, Oregon, and buyer will on demand furnish the seller
with disclaimers or subordination agreements in form acceptable to the seller,
signed by all persons whose interests are or may be prior to the seller's
interest.
---------
Section 3. SPECIAL TERMS AND CONDITIONS:
With reference to the above described goods, there are no warranties of
merchantability, express or implied, and none as to their fitness for any
purpose except as may be agreed upon between the parties in a writing of even
date.
<PAGE>
This agreement is subject to the additional provisions set forth on the
reverse hereof, the same being incorporated herein by reference. The buyer
acknowledges receipt of a copy of this agreement.
IN WITNESS WHEREOF, the buyer and the seller have executed this
agreement in duplicate on the date first above mentioned.
- --------------------------------------------------------------------------------
(Seller)
By------------------------------------------------------------------------------
Address-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature of Buyer)
IMPORTANT NOTICE: If the above goods are primarily for buyer's personal, family,
household or agricultural purposes, and the seller is a creditor as defined in
the Truth-in- Lending Act and Regulation Z, seller MUST comply with the Act and
Regulation by making required disclosures; for this purpose, use Stevens-Ness
Form No. 1311 or equivalent. If compliance with the Act not required, disregard
this notice.
NOTE: This form not suitable for use in retail installment sales.
The following Stevens-Ness forms of such contracts are
available: No. 1204 Motor Vehicles; No. 1205 Consumer Goods;
No. 1227 Consumer Goods (short form); No. 1210 Goods and
Services Purchased for Personal, Family, Household or
Agricultural Purposes.
<PAGE>
S-N Form No. 1202
ADDITIONAL PROVISIONS
Section 4. The parties hereto agree:
4.1 Title to the collateral is retained by seller and shall not pass to
buyer until all sums herein agreed to be paid shall have been paid in cash; any
equipment, repairs or accessories placed upon or attached to said collateral
shall become a component part thereof as soon as installed or attached and title
thereto shall be vested in seller forthwith and included under the terms of this
contract.
4.2 Buyer acknowledges receipt and delivery of said collateral in good
condition and accepts the same as is; buyer agrees to permit seller to examine
said collateral at any time, to maintain the same in good condition and repair;
to house and protect the same against the elements; not to permit the same to
become subject to attachment, execution or other process; not to create or
permit to be created any lien, security interest or adverse claim of any
character against the same and not to sell, transfer or assign his right, title
or interest in said collateral or this contract without the written consent of
seller; to pay all taxes and assessments of every character levied or assessed
against said collateral, this contract and the indebtedness represented hereby.
4.3 If any motor vehicles are included in the above described
collateral, the seller's security interest is to be noted on each certificate of
title and each of said certificates shall then be deposited with and kept by the
seller.
4.4 Any sums payable by buyer under the terms hereof which are not paid
by him but are paid by seller shall bear interest at the highest lawful rate
until repaid and said sums with interest shall be added to the unpaid balance of
said price and be secured by this contract.
4.5 At all times said collateral is at buyer's risk; should said
collateral suffer any loss, damage or injury, buyer agrees notwithstanding to
purchase and pay for the same in full, according to the terms hereof.
4.6 Buyer agrees at all times to keep said collateral insured against
loss by fire, theft and other hazards as required by the seller, with loss
payable to the parties hereto as their respective interests may appear; all
insurance policies shall be deposited with and held by the seller; buyer hereby
authorizes seller on buyer's behalf to accept payment of any return or unearned
premium and for any loss sustained, to endorse in buyer's name, deposit in his
own name and receive the proceeds of any check or draft made payable to buyer in
connection with any such insurance; if any insurance collected by seller exceeds
the then unpaid balance of this contract, the excess shall be paid forthwith to
the buyer.
4.7 Buyer agrees that seller's acceptance of part or late payments
shall not constitute or be construed as a waiver of time as the essence of this
contract or of any subsequent defaults of buyer hereunder.
<PAGE>
4.8 Notices to buyer relative to this contract shall be deemed
delivered if mailed to buyer's address first appearing on the reverse hereof;
five days from date of mailing shall be deemed a reasonable notice.
4.9 Time is of the essence of this contract and if buyer shall default
in his performance of any of the terms or conditions hereof, or in the payment,
when due, of any sum herein required to be paid, or if seller with reasonable
cause deems the collateral in danger of loss, misuse or confiscation or deems
himself insecure, seller, as the secured party in this transaction, shall have
and may exercise each and all of the remedies granted to him by the Uniform
Commercial Code of Oregon and, at his option, may declare all sums then
remaining unpaid immediately due and payable and may require the buyer, as the
debtor herein, to assemble the collateral and make some available to the secured
party at a place to be designated by the secured party which is reasonably
convenient to both parties. Should the holder hereof repossess any of said
collateral and should buyer claim that any property not included in this
contract was contained in or attached to said collateral, he shall so notify the
holder hereof by registered mail within 24 hours after repossession is taken;
buyer's failure so to do shall be a waiver of and bar to any subsequent claim
therefor. In the event suit or action is instituted to collect any sum or sums
of money due hereunder or to replevy said collateral, buyer agrees to pay, in
addition to the statutory costs and disbursement, (1) plaintiff's reasonable
attorney's fees to be fixed by the trial court and (2) on appeal, if any,
similar fees in the appellate court to be fixed by the appellate court.
4.10 The buyer, who is the debtor herein, agrees to join with the
seller, who is the secured partly herein, in executing, filing and doing
whatever may be necessary under applicable law to perfect and continue the
seller's interest in said collateral, all at buyer's expense.
4.11 In construing this contract, the singular includes the plural; the
masculine includes the feminine and the neuter; the buyer is the debtor and the
seller is the secured party within the meaning of Oregon's Uniform Commercial
Code and, the buyer is the customer and the seller is the creditor within the
meaning of the Truth-in-Lending Act and Regulation Z.
IT IS FURTHER UNDERSTOOD AND AGREED that seller may transfer his
interest in this contract, in said collateral and the unpaid balance hereof at
any time, in which event all of the terms herein set forth for the seller's
benefit shall inure to the benefit of seller's assignee and that generally each
right herein given to the seller shall accrue to and may be exercised by
seller's assignee hereof. If seller assigns the contract, seller shall not be
his assignee's agent for the collection of any of the installments of said
purchase price or for any other purpose. In the event of any such assignment,
the buyer will not assert as a defense, counter-claim, set-off or otherwise, any
claim, known or unknown, which the buyer now has or claims against the seller.
A carbon impression of any signature on any copy of this contract shall
be deemed, for all purposes, an original signature.
<PAGE>
All the terms and conditions herein contained shall apply and inure to
and bind the heirs, executors, administrators, successors and assigns of the
respective parties hereto, subject, however, to the above restriction against
assignment hereof by the buyer.
---------
SELLER'S ASSIGNMENT Date----------------------, 19--
FOR VALUE RECEIVED, the undersigned seller does hereby sell, assign and transfer
to --- ------------------------ and assigns (hereinafter called assignee), the
foregoing sales contract, the property covered thereby and all of seller's
right, title and interest therein and authorizes said assignee to endorse and
collect any check or draft payable to the undersigned in connection with said
contract.
WITHOUT RECOURSE
This assignment is made WITHOUT RECOURSE, except as to the following warranties
to-wit: that the said contract is a bona fide one; that said buyer was of legal
age and entirely competent when he executed the same; that the property sold is
accurately described therein; that said property has been delivered into buyer's
possession; that the amount stated in said contract to have been received on the
purchase price of said property was actually paid in cash and/or by merchandise
received in trade at not more than its then cash value; that seller has the full
and complete title to said property subject only to buyer's rights hereunder;
that the amount owing upon said contract at the time of its execution is
correctly stated therein; that buyer has no counterclaims or set-offs against
the same; that there were no representations or warranties made to said buyer
not contained in said contract. Should any of the foregoing warranties be false,
then seller agrees to purchase on demand from said assignee said contract for
the amount of the then unpaid balance on said contract. Should suit or action be
instituted on any of the above warranties, seller agrees to pay (1) assignee's
reasonable attorney's fees to be fixed by the trial court and (2) on appeal, if
any similar fees in the appellate court to be fixed by the appellate court.
- --------------------------------------------------------------------------------
Seller
By------------------------------------------------------------------------------
WITH RECOURSE
The undersigned seller unconditionally GUARANTEES the prompt payment when due,
of all amounts to become due by the terms of said contract and the prompt
payment of all costs (including reasonable attorney's fees both in the trial and
appellate courts as fixed by said courts respectively), incurred in collecting
or attempting to collect the moneys to become due thereon and in enforcing any
right under said contract or under this guaranty and hereby consents that
extensions of the time of payment may be granted to the buyer, either before or
after maturity and that the said contract may be changed in any other particular
without notice and without in any manner releasing the undersigned from
liability. The seller agrees that seller's obligation hereunder shall be
enforcible even though the assignee's right to
<PAGE>
enforce the said contact, or any provision thereof, be suspended or impaired by
any statute or otherwise.
- --------------------------------------------------------------------------------
Seller
By------------------------------------------------------------------------------
(Sign under applicable provision and cross out the other one.)
SECURITY AGREEMENT 1203
Equipment
Section 1.----------------------------------------------------------------------
(Name)
- ------------------------------------------------------------------------, Oregon
(No. and Street) (City or Town) (County)
(hereinafter called the debtor), for a valuable consideration, receipt whereof
hereby is acknowledged, hereby grants to ---------------------------------------
- -------------------------------------------------------------------- hereinafter
called the secured party, whose address is --------------------------------,
a security interest in the following described property together with all
accessories, substitutions, additions, replacements, parts and accessions
affixed to or used in connection therewith as well as the proceeds thereof (all
hereinafter called "the Collateral"):
to secure payment of the debtor's debt to the secured party as evidenced hereby
and by debtor's note of even date herewith payable to the secured party in the
amount of $--------- payable on the terms, at the times and with interest as set
forth in said note; (if applicable, delete the remainder of this sentence) also
to secure any and all other liabilities, direct and indirect, absolute or
contingent, now existing or hereafter arising from the debtor to the secured
party (said note and said liabilities hereinafter collectively are called "the
obligations"). Debtor agrees to pay said note and obligations and if any portion
thereof, principal or interest, is not paid when due and such default continues
for more than 10 days, debtor agrees to pay, in addition to the foregoing,
secured party's reasonable costs of collection including reasonable attorney's
fees.
Section 2. The debtor hereby warrants and covenants that:
2.1 The collateral is bought primarily for [ ] debtor's personal,
family, household or agricultural purposes, [ ] debtor's business or commercial,
other than agricultural, purposes (indicate which) and if any part of the
Collateral is being acquired, in whole or in part, with the proceeds of said
note, the secured party may disburse directly to the seller of the Collateral.
2.2 At all times the Collateral will be kept at ----------------------
- ----------------------------------------------------------------------------- in
- ------------------- County, Oregon, and shall not be removed from said location,
in whole or in part, until such time as written consent to a change of location
is obtained by debtor from the secured party.
<PAGE>
2.3 If the Collateral is for debtor's business or commercial, other
than agricultural purposes, the debtor's principal place of business in Oregon
is that shown at the beginning of this agreement; debtor also has places of
business in the following other Oregon counties:-------------------------------;
if debtor has no place of business in Oregon but resides therein, the county in
which debtor resides is --------------------- County in said state.
2.4 If debtor is a corporation, it is organized and existing under the
laws of the State of ---------------------and its principal office and place of
business is located at ---------------------------------- and its principal
office and place of business in Oregon is located at the place shown at the
beginning of this agreement.
2.5 If the Collateral is or is to become attached to real estate, a
description of the real estate is:
in ------------------------- County, Oregon, and if the Collateral is attached
to real estate prior to the perfection of the security interest granted hereby,
the debtor will on the demand of the secured party furnish the latter with
disclaimers or subordination agreements in form suitable to the secured party,
signed by all persons having an interest in said real estate or any interest in
the Collateral which is prior to the secured party's interest.
2.6 If motor vehicles are included in the above described Collateral,
the secured party's security interest is to be noted on each certificate of
title and each of said certificates shall then be deposited with and kept by the
secured party.
---------
Section 3. SPECIAL TERMS AND CONDITIONS
This agreement is subject to the additional provisions set forth on the
reverse hereof, the same being incorporated herein by reference. The debtor
acknowledges receipt of a complete executed copy of this agreement.
Executed and delivered in duplicate on this ---- day of ----------------, 19----
- --------------------------------------------------------------------------------
(Secured Party)
By------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature of Debtor)
<PAGE>
- ---------
NOTE: If the above contract is a consumer credit transaction and
therefore within the purview of the Truth-in-Lending Act and
Regulation Z, the secured party MUST comply with the Act and
the Regulation by making the required disclosures to the
debtor; for this purpose use Stevens-Ness Form No. 1310 or
equivalent. This form not suitable in connection with sales of
motor vehicles or other goods in Retail Installment
Transactions. See complete list of Security Agreements and
Retail Installment Contracts.
Form No. 1203--Security Agreement--Equipment
Stevens-Ness Law Publishing Co.
Portland, Oregon 97204
(SN)
<PAGE>
S-N Form No. 1203--UCC Series
ADDITIONAL PROVISIONS
Section 4. The debtor hereby further warrants and covenants that:
4.1 No financing statement covering any of the Collateral described on
the reverse hereof, or the products or proceeds thereof, is on file in any
public office. The debtor is the owner of said Collateral and each and every
part thereof free from any prior lien, security interest or encumbrance and will
defend the Collateral against the claims and demands of all persons whomsover.
4.2 The debtor will not sell, exchange, lease or otherwise dispose of
the Collateral, or any part thereof, or suffer or permit any lien, levy or
attachment thereon or security interest therein or financing statement to be
filed with reference thereto, other than that of the secured party.
4.3 Debtor will maintain the collateral in good condition and repair
and preserve the same against waste, loss, damage or depreciation in value other
than by reasonable wear. The debtor will not use any of the collateral in
violation of any law or public regulation. Secured party may examine and inspect
the Collateral at any reasonable times, wherever located and for that purpose
hereby is authorized by debtor to enter any place or places where any part of
the Collateral may be.
4.4 Debtor will keep the Collateral fully insured against loss or
damage by fire, theft (and collision if applicable) and such other hazards as
secured party may from time to time require, with such deductible provisions,
upon such terms, including loss payable and other endorsements, and in such
company or companies as the secured party may approve; debtor immediately will
deliver all policies to the secured party, to be retained by the latter in
pledge to secure debtor's obligations hereunder, with irrevocable authority to
adjust any loss, receive and receipt for any sum payable, surrender any policy,
discharge and release any insurer, endorse in debtor's name any loss or refund
check or draft and, in general, exercise in the name of the debtor or otherwise,
any and all rights of the debtor in respect thereto or in respect to the
proceeds thereof.
4.5 Debtor will pay, when due, all taxes, license fees and assessments
relative to the Collateral and its use and relative to the note and obligations
secured hereby. Should debtor fail in his performance of any of the foregoing,
the secured party may pay any security interest having priority hereto, may
order and pay for the repair, maintenance and preservation of the Collateral, or
any part thereof, may place and pay for any such insurance and may pay any such
taxes; the debtor agrees to pay to the secured party on demand all of the
latter's disbursements for any of said purposes with interest at ten percent per
annum on all sums so paid from the date of payment until repaid. Repayment of
all said sums shall be secured by this Security Agreement.
4.6 The debtor agrees to notify the secured party promptly in writing
of any change in his business or residence address or in the location where the
collateral is kept.
<PAGE>
4.7 In the event of any assignment by the secured party of this
agreement or his rights hereunder, debtor will not assert as a defense,
counter-claim, set-off or otherwise against secured party's assignee any claim,
known or unknown, which debtor now has or claims to have or hereafter acquires
against the secured party. However, notwithstanding any such assignment, secured
party shall be liable to the debtor as if such assignment has not been made.
4.8 The debtor will join with the secured party in executing, filing
and doing whatever may be necessary under applicable law to perfect and continue
the secured party's security interest in the Collateral, all at debtor's
expense.
4.9 Debtor hereby consents to any extension of time of payment and to
any substitution, exchange or release of Collateral and to the addition to or
release of any party or person primarily or secondarily liable for the
obligations, or part thereof.
Section 5. General Provisions:
5.1 The note which this agreement secures is a separate instrument and
may be negotiated, extended or renewed by the secured party without releasing
the debtor, the Collateral or any guarantor or co-maker.
5.2 All of the terms herein and the rights, duties and remedies of the
parties shall be governed by the laws of Oregon. Any part of this agreement
contrary to the law of any state having jurisdiction shall not invalidate other
parts of this agreement in that state.
5.3 All of the benefits of this agreement shall inure to the secured
party, his successors in interest and assigns and the obligations hereunder
shall be binding upon the debtor, his legal representatives, successors and
assigns.
5.4 If there be more than one debtor or a guarantor or co-maker of the
note or this agreement, the obligation of each and all shall be primary and
joint and several.
5.5 The secured party shall not be deemed to have waived any of his
rights under this or any other agreement executed by the debtor unless the
waiver is in writing signed by the secured party. No delay in exercising secured
party's rights shall be a waiver nor shall a waiver on one occasion operate as a
waiver of such right on a future occasion.
5.6 Each notice from one to the other party to this agreement shall be
sufficient if served personally or given by U.S. registered or certified mail,
or by telegraph, addressed to the other party at his address as set forth on the
reverse hereof, or as said address may be changed by written notice to the other
given pursuant to this paragraph. Reasonable notice, when notice is required,
shall be deemed to be five days from date of mailing.
5.7 In construing this security agreement the masculine pronoun shall
include the feminine and the neuter and the singular shall include the plural,
as the circumstances may require. Further, the debtor is the customer and the
secured party is the creditor within the meaning of Regulation Z and the
Truth-in-Lending Act.
<PAGE>
5.8 A carbon impression of any signatures on any copy of this contract
shall be deemed, for all purposes, an original signature.
Section 6. Default:
6.1 Time is of the essence hereof. The debtor shall be in default under
this agreement upon the happening of any of the following events or conditions:
(a) Debtor's failure to pay, when due, the principal of or
interest on said note or obligations, or any installment
thereof;
(b) Debtor's failure to keep, observe or perform any provision of
this agreement or any other agreement between him and the
secured party;
(c) The discovery of any misrepresentation, or material falsity of
any warranty, representation or statement made or furnished by
debtor to the secured party whether or not in connection with
this agreement;
(d) Loss, theft or destruction of or substantial damage to any of
the Collateral;
(e) The secured party deems or has reasonable cause to deem
himself insecure;
(f) Failure or termination of the business of, or commencement of
any insolvency or receivership proceedings by or against the
debtor, or if the debtor or any guarantor or co-maker of said
note dies or becomes insolvent, and if debtor or any guarantor
or co-maker of said note is a partnership, the death of any
partner.
Section 7. Remedies of Secured Party:
7.1 Upon debtor's default, secured party shall have each and all of the
rights and remedies granted to him by the Uniform Commercial Code of Oregon, by
the said note and by this agreement and may declare the note and obligations
immediately due and payable and may require debtor to assemble the Collateral
and make it available to the secured party at a place to be designated by the
secured party which is reasonably convenient to both parties. The debtor agrees
to pay the secured party's reasonable attorney's fees and other expenses
incurred by the latter in retaking, holding, preparing for sale and realizing on
said Collateral. Should suit or action be instituted on this contract, on the
said note or to replevy said collateral, or any part thereof, debtor agrees to
pay (1) plaintiff's reasonable attorney's fees to be fixed by the trial court
and (2) on appeal, if any, similar fees in the appellate court to be fixed by
the appellate court, and all said sums shall be included in the obligations
secured hereby.
INVENTORY
LOAN AND SECURITY AGREEMENT
Date ----------------, 19--
Agreement between ----------------------------- (hereinafter called the debtor),
whose address is ---------------------------------------------------------------
and ------------------------------------ (hereinafter called the secured party),
whose address is --------------------------------------------------------------;
Section I. Debtor's Place of Business.
The chief place of business of debtor is ---------------------------------------
and, if other than at the above address, the place where debtor keeps his
records concerning accounts receivable is --------------------------------------
- -------------------------------------------------------------------------------.
Neither the said place nor the collateral shall be removed from Oregon without
the written consent of the secured party.
Section 2. Loan Agreement.
2.1 Amount of Loan. The secured party from time to time will lend the
debtor at debtor's request, such sums as the secured partly in his discretion
believes are adequately secured by this agreement.
2.2 Borrowing Percentage. The aggregate amount of the loans shall not
exceed -----% of the net value of the qualified inventory as hereinafter
defined, plus 100% of the collected balance in debtor's cash collateral account.
Should the aggregate amount of said loans at any time exceed said percentage,
the entire loan, including the excess, is secured hereby.
2.3 Debtor's Notes. All loans shall be evidenced by debtor's promissory
note or notes payable either on demand or on such maturity as the secured party
may fix; all notes shall bear interest at such rates and interest shall be
payable at such intervals as the parties hereto shall agree upon at the time
each loan is made.
2.4 Other Charges. In addition to the principal and interest of the
notes the debtor shall pay to the secured party upon his demand, all expenses
incurred by the secured party to audit and service debtor's account and to
preserve, collect, protect his interest in or realize on the collateral,
including counsel fees and legal expenses, taxes and insurance premiums. All
such expenses shall be part of the obligation secured by the collateral and
shall bear interest at -----% per annum from the date advanced by the secured
party until paid.
2.5 Terms of Payment.
(a) Deposit of Proceeds in Cash Collateral Account. Debtor,
forthwith upon receipt of all checks, drafts, cash and other
remittances (herein called proceeds) in part or full payment
for any of the collateral, will deposit the proceeds in a cash
collateral account maintained with the -----------------------
Branch of The ------------------------------------------------
--------------------------------- Bank, over which the secured
<PAGE>
party alone shall have power of withdrawal. Pending such
deposit the debtor shall not commingle any proceeds with any
other funds or property of the debtor, but shall hold the
proceeds separate and apart therefrom and upon an express
trust for the secured party until deposited in the cash
collateral account. Credit for proceeds deposited in the cash
collateral account shall be conditional upon final payment of
the deposited item. Once each week the secured party will
apply the whole or any part of the collected funds on deposit
in the cash collateral account against the principal or
interest of the notes and the other charges specified in
Section 2.4, the order and method of such application to be in
the discretion of the secured party. Any part of the cash
collateral account which the secured party elects not to so
apply may be paid over by the secured party to the debtor.
(b) Alternative Method of Payment. The secured party, by written
notice to the debtor (subject to revocation at any time), in
lieu of requiring deposit of proceeds in the cash collateral
account, may permit debtor to make payments weekly or at other
intervals, of an amount equal to ------% of the proceeds of
the collateral received by debtor during the interval.
(c) Goods Represented by Documents. If the collateral is
represented or covered by documents of title, whether or not
negotiable, in the possession of the secured party, the
secured party, upon payment of the amount secured thereby, may
release all or part of the documents or goods to the debtor.
2.6 Statement of Account and Additional Collateral. Once each month the
secured party may render a statement of account to the debtor showing the
current status of the loans, service charges and the cash collateral account. If
the statement or any interim statement indicates the loans outstanding exceed
the borrowing percentage, the debtor either shall furnish additional collateral
or pay the difference in cash.
Section 3. Collateral.
To secure the payment and performance of all obligations of the debtor
set forth on this agreement, the note or notes and any other obligations of the
debtor to the secured party, the debtor grants to the secured party a security
interest in the following collateral:
3.1 Inventory. All inventory now owned or hereafter acquired by the
debtor.
3.2 Accounts Receivable. All accounts of the debtor now existing or
hereafter arising, which are proceeds of the inventory.
3.3 Contract Rights. All contract rights of the debtor now existing or
hereafter arising, relating to the inventory.
3.4 Proceeds and Products. Proceeds and products of all the above.
<PAGE>
Section 4. Qualified Inventory.
4.1 Definition. Qualified inventory must be readily marketable and meet
all of the following specifications on the date of the loan and while any note
or notes are outstanding:
(a) No Encumbrances. All the goods are owned by the debtor free
from any lien, security interest or other encumbrance of any
person.
(b) Other Financing. No financing statement covering any of the
inventory or its proceeds or the debtor's accounts is on file
in any public office and the secured party has not received
any notice of any proposed acquisition of an inventory
security interest from any person.
(c) Documents. If any of the goods is represented or covered by
documents of title, instruments or chattel paper, the debtor
is the owner of the documents, instruments and paper and none
of it has been sold or transferred nor has any security
interest in any of it been granted to any person.
4.2 Net Value. The net value of the qualified inventory shall be
determined at cost or market, whichever is lower, exclusive of any
transportation, processing or handling charges. The determination of "net value"
shall be made by the secured party. The debtor shall notify the secured party
immediately of any event causing a loss to or depreciation in value of the
inventory and the amount of such loss or depreciation.
Section 5. Authority to Sell or Process Collateral.
So long as debtor is not in default on the note or notes or in breach
of any of the terms of this agreement, the debtor shall have the right to sell
or process the inventory in the regular course of debtor's business.
Section 6. Other Agreements of Debtor.
6.1 Certificates and Statements of Inventory Position. At the time of
each loan and at such intervals and in such form as the secured party may
request, but at least monthly, the debtor shall submit to the secured party a
certified statement of debtor's inventory position showing inventory on hand,
inventory represented or covered by warehouse receipts or bills of lading,
qualified inventory on hand, inventory in possession of bailees, including the
names and addresses of such bailees, and a statement of debtor's current
accounts.
6.2 Endorsements. If any process to debtor shall include or any of the
accounts shall be evidenced by, notes, trade acceptances or instruments or
documents, or if any inventory is covered by documents of title or chattel
paper, whether or not negotiable, debtor, if requested by the secured party,
immediately shall deliver them to the secured party, appropriately endorsed.
Regardless of the form of the endorsement, the debtor waives protest. If debtor
fails to endorse any instrument or document, the secured party is authorized to
endorse it on debtor's behalf.
<PAGE>
* ORS 79.1090(4) "Goods are . . . `inventory' if they are held by a person who
holds them for sale or lease or to be furnished under contracts of service or if
he has so furnished them, or if they are raw materials, work in process or
materials used or consumed in a business. Inventory of a person is not to be
classified as his equipment."
- ---------
If any loan above mentioned is a consumer loan as defined by the
Truth-in-Lending Act and Regulation Z, disclosures are required to be made by
the secured party to the debtor prior to consummation of that loan; for this
purpose use Stevens-Ness Form No. 1320, or equivalent. If compliance with Act
not required, disregard this notice.
S-N Form No. 1206--UCC Series (SN)
Security Agreement--Inventory
Stevens-Ness Law Publishing Co.
Portland, Oregon 97204
<PAGE>
S-N Form No. 1206 - Page 2
Section 6. (continued)
6.3 Maintenance of Records. The debtor at all times shall keep accurate
and complete records of the collateral and its status.
6.4 Right of Secured Party to Inspect. The secured party and any of his
agents shall have the right to call at the debtor's place or places of business
or any other place where the collateral may be located, at intervals to be
determined by the secured party, to inspect the collateral and inspect, audit
and copy any books and records of the debtor relating to the collateral or other
transactions with the secured party.
6.5 Reports. The debtor, if requested by the secured party, shall
submit to the secured party
(a) Periodical Certified Statement. Within forty-five days after
the end of each calendar quarter of each fiscal year of the
debtor, his financial statement as of the close of such
quarter, certified by an authorized person; within ninety days
after the end of each fiscal year, his financial statements as
of the close of the year, certified by independent accountants
and from time to time, such additional information and reports
regarding his financial status as the secured party may
require.
(b) Reconciliation Report. At least once in each thirty-day
period, a report in form satisfactory to the secured party
showing the sales from, additions to, changes in value of,
payment for and adjustments to inventory made since the
preceding reconciliation report, together with such other
information as the secured party may require.
6.6 Financing Statements. At the request of the secured party, debtor
shall join with the secured party in executing one or more financing statements
pursuant to the Uniform Commercial Code in form satisfactory to the secured
party, and will pay for filing the statement in the proper public office or
offices.
6.7 Other Borrowing. Without the written consent of the secured party,
the debtor will not engage in any other inventory or accounts receivable
financing or create any indebtedness for money borrowed except loans made
hereunder.
6.8 Further documentation. Debtor, at any time upon request of the
secured party, will do, make, execute and deliver all such additional and
further acts, instruments or papers as the secured party may require to assure
the secured party of the latter's rights hereunder and to the collateral and its
proceeds. If debtor is a corporation, it will promptly furnish the secured party
with certified copies of resolutions of its board of directors authorizing the
execution and delivery of this contract.
6.9 Insurance. Debtor will keep the inventory fully insured against
loss or damage by fire, theft (and collision, if applicable) and such other
hazards as secured party from time
<PAGE>
to time requires, with such deductible provisions, upon such terms, including
loss payable and other endorsements, and in such company or companies as the
secured party may approve; debtor immediately will deliver all policies to the
secured party, to be retained by the latter in pledge to secure debtor's
obligations hereunder, with irrevocable authority to submit any proofs, to
adjust any loss, receive and receipt for any sum payable, surrender any policy,
discharge and release any insurer, endorse in debtor's name any loss or refund
check or draft and, in general, exercise in the name of the debtor or otherwise,
any and all rights of the debtor in respect thereto or in respect to the
proceeds thereof. All proceeds of insurance shall be deposited in debtor's cash
collateral account.
6.10 Taxes. Debtor shall pay, when due, all taxes and assessments on or
relating to the collateral or its use or on the proceeds.
6.11 Notification of Account Debtor or Bailee. With respect to proceeds
in the form of accounts, at any time prior to or after default by the debtor,
the secured party may notify the account debtor on any of the collateral to make
payment directly to the secured party. The debtor, if the secured party so
requires, shall notify the account debtors of the secured party's security
interest in their accounts. Until such time as the secured party by written
notice to the debtor elects to exercise said right of notification, the debtor
is authorized as agent of the secured party, to collect and enforce the
accounts. At any time in the discretion of the secured party, the latter may
notify the bailee of any inventory of secured party's security interest therein.
6.12 Truth-in-Lending Act. When making consumer sales of inventory,
debtor agrees to comply with Regulation Z by making the required disclosures
and, upon request, will furnish secured party with satisfactory evidence of such
compliance.
Section 7. Default.
The debtor shall be in default under this agreement upon the occurrence
of any of the following events:
7.1 Nonpayment of Principal and Interest. Failure to pay when due the
principal of or interest on any note.
7.2 Breach of Debtor's Agreement. Failure by debtor to keep, observe or
perform any provision of this agreement or any other agreement between debtor
and the secured party.
7.3 Misrepresentation. The discovery of any misrepresentation, breach
of warranty or material falsity of any certificate, schedule or statement made
or furnished by debtor to the secured party, whether or not in connection with
this agreement.
7.4 Impairment. Change in the condition or affairs, financial or
otherwise, of the debtor or of any endorser, guarantor or surety for the
liability of debtor to the secured party which in the opinion of the secured
party impairs or decreases secured party's security.
7.5 Loss or destruction of or substantial damage to any of the
collateral.
<PAGE>
7.6 Insolvency. Termination of business or commencement of any
insolvency proceedings by or against debtor or if debtor becomes insolvent, or
if debtor dies, or, if debtor is a partnership, the death of any partner.
7.7 The secured party deems or has reasonable cause to deem himself
insecure.
Section 8. Remedies of Secured Party on Default.
Upon the occurrence of any event of default, the secured party may at
his option and without prior notice declare all notes and other obligations of
the debtor secured by this agreement immediately due and payable and shall have
and may exercise each and all of the rights and remedies granted to him by the
said notes, this agreement and the Uniform Commercial Code of Oregon. All
remedies of the secured party shall be cumulative. The secured party may require
the debtor to assemble the collateral and make it available to the secured party
at a place to be designated by the latter which is reasonably convenient to both
parties.
Section 9. General.
9.1 Waivers. The debtor waives demand, presentment, notice of dishonor
and protest of any instrument either of debtor or others which may be included
in the collateral or in the obligations secured hereby.
9.2 Consents. The debtor consents and agrees
(a) To any extension, postponement of time of payment, indulgence
and to any substitution, exchange or release of collateral;
(b) to the addition or release of any party or person primarily or
secondarily liable, or acceptance of partial payments on any
accounts or instruments and the settlement, compromising or
adjustment thereof;
(c) If there be more than one debtor or a guarantor or co-maker of
any note secured by this agreement, the obligation of each and
all shall be primary and joint and several;
(d) Each note which this agreement secures is a separate
instrument and may be negotiated, extended or renewed by the
secured party without releasing the debtor, the collateral or
any guarantor or co-maker.
(e) Should the secured party transfer his interest in said
collateral, debtor will not assert as a defense,
counter-claim, set-off or otherwise against secured party's
assignee any claim, known or unknown, which debtor now has or
claims to have or hereafter acquires against the secured party
and further, in such event, each right herein given to the
secured party shall accrue to and may be exercised by said
assignee.
<PAGE>
9.3 Duties with Respect to Collateral. The secured party shall have no
duty
(a) To collect the collateral or any proceeds;
(b) To preserve rights of debtor or others against prior parties;
(c) To realize on the collateral in any particular manner or seek
reimbursement from any particular source;
(d) To preserve, protect, insure or care for the inventory.
9.4 Non-waiver By Secured Party. Secured party shall not be deemed to
have waived any of his rights under this or any other agreement or instrument
signed by the debtor unless the waiver is in writing signed by the secured
party. No delay in exercising secured party's rights shall be a waiver nor shall
a waiver on one occasion operate as a waiver of such right on a future occasion.
9.5 Notices. Each demand, notice or other communication shall be served
or given by mail addressed to the party at his address set forth herein or as
changed by written notice to the other party, or by personal service upon the
party or proper officer. Reasonable notice, when notice is required, shall be
deemed to be five days from date of mailing.
9.6 Law Governing. All the terms herein and the rights, duties and
remedies of the parties shall be governed by the laws of Oregon.
9.7 In construing this agreement, the singular includes the plural and
the masculine pronoun includes the feminine and the neuter.
9.8 This contract shall bind and inure to the benefit of, as the
circumstances may require, not only the immediate parties hereto but their
respective heirs, executors, administrators, successors in interest and assigns.
Section 10. Special Terms and Conditions.
<PAGE>
EXECUTED in duplicate.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Individual Debtor)
- --------------------------------------------------------------------------------
(Partnership or Corporate Debtor)
By------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Individual Secured Party)
- --------------------------------------------------------------------------------
(Partnership or Corporate Secured Party)
By------------------------------------------------------------------------------
SECURITY AGREEMENT
(Equipment and Inventory)
DATE: ----------- ----, 1992
Grant and Related Data
1.1 ----------------------------, ("Debtor"), hereby grants to
UNITED GROCERS, INC., an Oregon corporation, ("Secured Party"), a security
interest in the following described personal property:
All present and hereafter acquired inventory, trade fixtures, equipment
and all proceeds therefrom, including insurance proceeds, accounts
receivable, United Grocers, Inc. capital stock and patronage rebates
earned, contract rights, leasehold improvements, and leasehold
interest, now or hereafter used in connection with the operation of
that certain retail grocery business presently known as ---------,
located at -----------------, -------, ------- County, Oregon.
together with all accessories, substitutions, additions, replacements, parts,
equipment and accessories now or hereafter affixed to or used in connection
therewith ("Collateral"), to secure any and all present and hereinafter incurred
indebtedness, and any renewals and to cover any and all extensions of credit and
also to secure any and all other liabilities, absolute or contingent, primary or
secondary, direct or acquired, due or to become due, now or at any time
hereafter owing by Debtor to Secured Party or its wholly owned subsidiaries.
1.2 The Collateral is bought or used primarily for Debtor's
business purposes, and it will be permanently kept at -----------, ------,
- ------ County, Oregon, which is the address of Debtor's place of business.
1.3 The Collateral is not and will not be attached to real
estate so as to become incorporated in and made a part of said real property.
1.4 As often as Secured Party shall require, Debtor shall
deliver to Secured Party such lists, descriptions and designations of inventory
as Secured Party such lists, descriptions and designations of inventory as
Secured Party may require to identify the nature, extent and location thereof.
2. Warranties, Covenants and Agreements. In order to induce Secured
Party to enter into this Security Agreement and make each loan, Debtor warrants
and covenants to Secured Party that:
2.1 Organization. Debtor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Oregon, has
the necessary authority and power to own and sell the Collateral and its other
assets and to transact the business in which
- 1 -
<PAGE>
it is engaged, and is duly qualified to do business in the jurisdiction where
the Collateral is located and in each other jurisdiction in which the conduct of
its business or the ownership of its assets requires such qualification.
2.2 Power and Authority. Debtor has full power, authority and
legal right to execute and deliver this Security Agreement, the notes, and the
contracts to perform its obligations hereunder and thereunder, to borrow
hereunder and to grant the security interest created by this Security Agreement.
2.3 Consents and Permits. No consent of any other party
(including any stockholders, trustees or holders of indebtedness), and no
consent, license, approval or authorization of, exemption by, or registration or
declaration with, any governmental body, authority, bureau or agency is required
in connection with the execution, delivery or performance by Debtor of this
Security Agreement, the notes or the contracts, or the validity or
enforceability of this Security Agreement, the notes or the contracts.
2.4 No Legal Bar. The execution, delivery and performance by
Debtor of this Security Agreement, the notes and the contracts do not and will
not violate any provision of any applicable law or regulation or of any
judgment, award, order, writ or decree of any court or governmental
instrumentality, will not violate any provision of the charter of Bylaws of
Debtor and will not violate any provision of or cause a default under any
mortgage, indenture, contract, agreement or other undertaking to which Debtor is
a party or which purports to be binding upon Debtor or upon any of its assets,
and will not result in the creation or imposition of any lien on any of the
assets of Debtor other than the security interest intended to be created hereby.
2.5 No Defaults. Debtor is not in default, and no event or
condition exists which after the giving of notice or lapse of time or both would
constitute an event of default, under any mortgage, lease indenture, contract,
agreement, judgment or other undertaking to which Debtor is a party or which
purports to be binding upon Debtor or upon any of its assets, except for any
such default, event or condition which, individually or in the aggregate, would
not affect Debtor's ability to perform its obligations under this Security
Agreement or any such mortgage, indenture, contract, agreement, judgment or
other undertaking.
2.6 Enforceability. This Security Agreement has been duly
authorized, executed and delivered by Debtor and constitutes a legal, valid and
binding obligation of Debtor, enforceable in accordance with its terms. When
executed and delivered, each contract and note shall have been duly authorized,
executed and delivered by Debtor and constitute a legal, valid and binding
obligation of Debtor, enforceable in accordance with its terms.
- 2 -
<PAGE>
2.7 Laws. Obligations: Operations. Debtor will:
(a) duly observe and conform to all requirements of any
governmental authorities relating to the conduct of its business or to its
properties or assets insofar as such requirements may have a material impact
respecting Debtor's obligations under this Security Agreement;
(b) maintain its existence as a legal entity and obtain and
keep in full force and effect all rights, licenses and permits which are
necessary to the proper conduct of its business;
(c) obtain or cause to be obtained as promptly as possible any
governmental, administrative or agency approval and make any filing or
registration therewith which at the time shall be required with respect to the
performance of its obligations under this Security Agreement or the operation of
its business; and
(d) pay all fees, taxes, assessments and governmental charges
or levies imposed upon any of the Collateral.
2.8 Except for the security interest granted hereby, and a
grant of a security interest in inventory and fixtures to United Resources,
Inc., Debtor is the sole owner of the Collateral free from any lien, security
interest or encumbrance, and will defend the Collateral against the claims and
demands of all persons whomsoever.
2.9 Financial Condition of Debtor. The consolidated financial
statements of Debtor heretofore delivered to Secured Party are complete and
correct, have been prepared in accordance with generally accepted accounting
principles consistently applied, and present fairly the financial position of
Debtor as at said date and the results of its operations for the period ended on
said date, and there has been no material adverse change in the financial
condition, business or operations of Debtor since said date.
2.10 Except as provided below with respect to inventory,
Debtor will not sell or offer to sell or otherwise transfer or dispose of the
Collateral or any part thereof by any interest herein, or create or cause or
permit to be created any lien, encumbrance or security interest in or upon any
part thereof.
2.11 While Debtor is not in default hereunder, Debtor may sell
the inventory, but only in the ordinary course of business and only to buyers
who qualify as a buyer in the ordinary course of business.
2.12 Insurance. Debtor will keep the Collateral fully insured
against loss or damage by fire, and such other hazards as Secured Party may from
time to time require, with such deductible provisions, upon such terms,
including loss payable and other endorsements, and in such company or companies
as Secured Party may approve; and Debtor will immediately deliver all such
insurance policies to Secured Party, to be retained while
- 3 -
<PAGE>
any indebtedness hereby secured remains owing. Secured Party shall hold all such
policies in pledge to secure payment of the indebtedness hereby secured, with
irrevocable authority to adjust any loss, receive and receipt for any sum
payable, surrender any policy, discharge and release any insurer, endorse any
loss or refund check or draft and, in general, exercise in the name of Debtor or
otherwise, any and all rights of Debtor in respect thereto or in respect to the
proceeds thereof.
2.13 Maintenance of Collateral. Debtor will, at its own
expense, keep and maintain the Collateral or cause the Collateral to be kept and
maintained in good repair, condition and working order and furnish or cause to
be furnished all parts, replacements, mechanisms, devices and servicing required
therefore so that the value, condition and operating efficiency thereof will at
all times be maintained and preserved, fair wear and tear excepted. All such
repairs, parts, mechanisms, devices and replacements shall immediately, without
further act, become part of the Collateral and subject to the security-interest
created by this Security Agreement. Debtor will not make or authorize any
improvement, change, addition or alteration to the Collateral if such
improvement, change, addition or alteration will impair the originally intended
function or use of the Collateral or impair the value of the Collateral as it
existed immediately prior to such improvement, change, addition or alteration.
Any part added to the Collateral in connection with any improvement, change,
addition or alteration shall immediately, without further act, become part of
the Collateral and subject to the security interest created by this Security
Agreement.
2.14 Inspection/Use of Collateral. Secured Party may enter any
premises in which any of the Collateral may be kept at any reasonable time for
the purpose of inspecting the same. Debtor will not permit any use of any of the
Collateral in violation of any law or ordinance, Debtor will not, without the
prior written consent of Secured Party cause or permit the Collateral or any
part thereof to be moved from its present location or to be used for hire or
under lease.
2.15 Taxes. Debtor will promptly pay when due all taxes,
license fees and governmental rates and charges upon or relating to any of the
Collateral or its use and relative to the indebtedness hereby secured.
2.16 Financial Reporting. Debtor shall provide to Secured
Party at least quarterly, and to Secured Party's officers, agents, attorneys or
accountants, reasonably complete financial data reflecting the inventory level,
debts and obligations of Debtor (not limited to those to Secured Party), the
current accounts receivable of Debtor, and all other information reasonably
calculated to provide Secured Party with information with respect to the
solvency of the Debtor, and to assure the Secured Party as of its rights
hereunder to the Collateral. All such financial information shall be accurate
and correct in all material respects and complete insofar as completeness may be
necessary to give the Secured Party true and accurate knowledge of the financial
condition of the Debtor.
2.17 As further consideration for the execution of this
Security Agreement, Debtor agrees to assign unto Secured Party, as collateral,
Debtor's interest in the lease,
- 4 -
<PAGE>
satisfactory to Secured Party, covering the premises wherein the business and
chattels are located. Any breach of said lease, shall be deemed a breach of this
Security Agreement and so also shall a breach of this Security Agreement be
deemed a breach of the lease. In the event of a breach of this Security
Agreement or of the lease, and in the event Secured Party finds it necessary to
exercise the right of possession, Debtor agrees to relinquish possession of the
premises, peaceably, to Secured Party, and in such event, this indenture shall
serve as an assignment of all the right, title and interest of Debtor of
Debtor's leasehold rights.
2.18 Optional Advances. At its option, Secured Party may
discharge taxes, liens, security interests or other encumbrances upon any of the
Collateral, may place and pay premiums upon insurance on any of the Collateral
and may incur expenses for maintenance and preservation of any of the
Collateral. Debtor agrees to pay to Secured Party upon demand all sums incurred
or paid for any of said purposes with interest from the date on which the same
were incurred to the date of payment at the rate of 18 percent per annum.
Payment thereof is secured by the Collateral.
2.19 Proceeds Account. Upon default as hereinafter defined,
Debtor, forthwith, upon receipt of all checks, drafts, cash and other
remittances (hereinafter called proceeds) in part or full payment for any of the
Collateral, will deposit the proceeds in a cash collateral account as specified
by Secured Party, over which the Secured Party alone shall have power of
withdrawal. Pending such deposit, the Debtor shall not commingle any proceeds
with any other funds or property of the Debtor, but shall hold the proceeds
separate and apart therefrom and upon an express trust for the Secured Party
until deposited in the cash collateral account. Credit for proceeds deposited in
the cash collateral account shall be conditional upon final payment of the
deposited item. Once a month, the Secured Party will apply the whole or any part
of the collected funds on deposit in the cash collateral account against the
principal or interest of the notes and the other charges specified, the order
and method of such application to be in the discretion of the Secured Party. Any
part of the cash collateral account which the Secured Party elects not to so
apply may be paid over by the Secured Party to the Debtor.
3. General Provisions.
3.1 The obligations which this Security Agreement secures may
be evidenced by separate instruments which may be negotiated, extended or
renewed by Secured Party without releasing Debtor, the Collateral or any
guarantor or comaker.
3.2 All of the terms of this Security Agreement and the
rights, remedies and duties of the parties hereto shall be governed by the laws
of the State of Oregon or other applicable laws. If any provision of this
Security Agreement is in conflict with the law of any state having jurisdiction,
the remaining parts hereof shall be effective as if such provision had not been
made.
3.3 If any interest of Debtor in any of the Collateral shall
be transferred or if any indebtedness hereby secured shall be assigned, the
terms, covenants and conditions
- 5 -
<PAGE>
hereof shall be binding upon and inure to the benefit of the successors in
interest of the parties hereto.
3.4 If there be more than one Debtor or a guarantor or comaker
or more than one guarantor or comaker, the liability of all such parties shall
be primary and joint and several.
3.5 If Secured Party shall, once or often, extend the time for
paying any indebtedness hereby secured or fail promptly to exercise any right or
remedy it may have for any default hereunder or breach or violation hereof, such
indulgence or forbearance shall not be deemed a waiver of strict and prompt
performance by Debtor of all the terms and conditions hereof and shall not
preclude Secured Party from thereafter, without notice, exercising any right or
remedy for any subsequent breach or default in performance of the same or any
other provision hereof or for any other breach or violation of this Security
Agreement.
3.6 If any notice is given to Secured Party, it shall be given
by registered or certified mail directed to Secured Party at the place where
indebtedness hereby secured is payable. If any notice is to be given to Debtor,
mailing by registered or certified mail to the address stated above shall be
sufficient unless Secured Party shall have received from Debtor notice in
writing of a change of address. Reasonable notice, when such notice is required,
shall be deemed to be five (5) days notice.
3.7 Debtor will promptly notify Secured Party in writing of
any change in Debtor's business or residence address and agrees to execute any
additional financing statements as Secured Party shall require.
4. Negative Covenants. Without Secured Party's prior written consent,
until all obligations are fully paid, performed and satisfied and this Security
Agreement is terminated, Debtor covenants that Debtor shall not:
4.1 merge or consolidate with or acquire any other party,
partnership, joint venture or corporation, hereinafter designated "Person"
4.2 other than in the ordinary course of Debtor's business,
make any investment in the securities of any Person;
4.3 declare or pay cash or stock dividends upon any of
Debtor's stock or make any distributions of Debtor's property or assets or make
any loans, advances and/or extensions of credit to, or investments in, any
Person(s), including, without limitation, any of Debtor's affiliates, officers
or employees;
4.4 redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Debtor's capital stock, or make any material change in
Debtor's capital structure or in any
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<PAGE>
of Debtor's business objectives, purposes and operations which might in any way
adversely affect the repayment of the obligations; and
4.5 enter into any transaction which materially and adversely
affects the Collateral or Debtor's ability to repay and satisfy its obligations
hereunder.
5. Default. Debtor shall be in default under this Security Agreement
upon the happening of any of the following events or conditions:
5.1 If Debtor shall fail to pay, when due, any obligation
within five (5) days after the same becomes due (whether at the stated maturity,
by acceleration or otherwise) of any indebtedness owing by Debtor to Secured
Party.
5.2 If Debtor shall fail to perform promptly at the time and
strictly in the manner provided by any covenant, representation or warranty of
Debtor contained in this or any other agreement between Debtor and Secured
Party.
5.3 If any warranty, representation, covenant or statement
made by Debtor to Secured Party in this or any other agreement is false in any
material respect.
5.4 If there shall be any loss, theft, substantial damage,
destruction, sale or encumbrance to or of any of the Collateral, or the making
of any levy, seizure or attachment thereof or thereon.
5.5 If there shall be any death, dissolution, termination of
existence, insolvency, business failure, appointment of a receiver of any part
of the property of, assignment for the benefit of creditors by, or commencement
of any proceeding under any bankruptcy or insolvency law, as now or hereafter
constituted, by or against Debtor or any guarantor or surety of Debtor.
5.6 If Debtor fails to maintain a marketable inventory at cost
of $-------.--, during the term of Debtor's indebtedness to the Secured Party,
at --------------------, -------, --- ---- County, Oregon.
5.7 If Secured Party deems or has reasonable cause to deem
itself insecure.
6. Remedies.
6.1 Upon an event of default, as specified in subparagraphs
5.1 through 5.7, and at any time thereafter, Secured Party may, without notice,
declare any and all promissory notes immediately due and payable, together with
all other amounts owing under this or any other agreement by and between Debtor
and Secured Party without demand, protest or other nature, all of which are
expressly waived.
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<PAGE>
6.2 If an event of default shall occur and be continuing,
Secured Party may exercise, in addition to all other rights and remedies granted
to it in this Security Agreement and in any other instrument or agreement
securing, evidencing or relating to the obligations, all rights and remedies of
secured parties under the Uniform Commercial Code of Oregon. Debtor agrees that
in any such event, Secured Party without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Debtor or any other person (all
and each of which demands, advertisements and/or notices are hereby expressly
waived), may forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase or otherwise dispose of and deliver the Collateral
(or contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any of Secured Party's offices or else where at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. Secured Party shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in Debtor, which right or equity is hereby
expressly released. Debtor further agrees, at Secured Party's request, to
assemble the Collateral, make it available to Secured Party at places which
Secured Party shall reasonably select, whether at Debtor's premises or
elsewhere. Secured Party shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale (after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any or all of the Collateral or in any way
relating to the rights of Secured Party hereunder, including attorneys fees and
legal expenses) to the payment in whole or in part of the obligations, in such
order as Secured Party may elect and only after so applying such net proceeds
and after the payment by Secured Party of any other amount required by any
provision of law, need Secured Party account for the surplus, if any, to Debtor.
To the extent permitted by applicable law, Debtor waives all claims, damages,
and demands against Secured Party arising out of the repossession, retention or
sale of the Collateral. Debtor agrees that no more than ton (10) days' notice
(which notification shall be deemed given when mailed, postage prepaid,
addressed to Debtor at its address set forth in subparagraph 7.2 hereof) of the
time and place of any public sale or of the time after which a private sale may
take place and that such notice is reasonable notification of such matters.
Debtor shall be liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all amounts to which
Secured Party is entitled.
6.3 Debtor agrees to pay all expenses, including reasonable
attorneys fees, incurred by Secured Party in taking, holding, preparing for sale
and selling any of the Collateral, as well as attorneys fees and court costs in
such amount as shall be adjudged reasonable for services in the trial court and
for services in any appellate court in any suit or action to require performance
or for the breach of this Security Agreement or upon any promissory note hereby
secured.
6.4 In any suit or action to require performance or for the
breach of this Security Agreement the court may, upon application of plaintiff
and without regard to the
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<PAGE>
condition of the property or the adequacy of the security for the indebtedness
hereby secured and without notice to Debtor or to any other party, appoint a
receiver to take possession and care of all of the Collateral and to collect and
receive any and all proceeds and receivables arising out of or generated by the
collection which had heretofore arisen or accrued or which may arise or accrue
during the pendency of such quit or action, and that any amounts so received
shall be applied toward payment of the indebtedness hereby secured, after first
paying therefrom the charges and expenses of such receivership.
7. Miscellaneous.
7 .1 No Waiver; Cumulative Remedies. No failure or delay on
the part of the Secured Party in exercising any right, remedy, power or
privilege hereunder or under the note shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder or thereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. No right or remedy in
this Security Agreement is intended to be exclusive but each shall be cumulative
and in addition to any other remedy referred to herein or otherwise available to
Secured Party at law or in equity; and the exercise by Secured Party of any one
or more of such remedies shall not preclude the simultaneous or later exercise
by Secured Party of any or all such other remedies. To the extent permitted by
law, Debtor waives any rights now or hereafter conferred by statue or otherwise
which limit or modify any of Secured Party's rights or remedies under this
Security Agreement.
7.2 Notices. All notices, requests and demands to or upon any
part hereto shall be deemed to have been duly given or made when delivered or
when deposited in the United States mail, first class postage prepaid, addressed
to such party as follows, or to such other address as may be hereafter
designated in writing by such party to the other party hereto:
Debtor:
DBA
Secured Party: UNITED GROCERS, INC.
P. 0. Box 22187
Portland, OR 97222
7.3 Survival of Representations and Warranties. All
representations and warranties made in this Security Agreement shall survive the
execution and delivery of this Security Agreement and the making of the loan
hereunder.
7.4 Amendments; Waivers. No provision of this Security
Agreement, the note or any related agreements, may be amended or modified in any
way, nor may
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<PAGE>
noncompliance therewith be waived, except pursuant to a written instrument
executed by Secured Party and Debtor.
7.5 Counterparts. This Security Agreement may be executed by
the parties hereto on any number of separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
7.6 Headings. The headings of the paragraphs and subparagraphs
are for convenience only, are not part of this Security Agreement and shall not
be deemed to affect the meaning or construction of any of the provisions hereof.
7.7 Successors or Assigns. This Security Agreement shall be
binding upon and inure to the benefit of Debtor and Secured Party and their
respective successors and assigns, except that Debtor may not assign or transfer
its rights hereunder or any interest herein without the prior written consent of
Secured Party.
7.8 Merger Clause. This Security Agreement contains the full,
final and exclusive statement of the agreement relating to the transactions
hereby contemplated.
7.9 Construction. Any provision of this Security Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition of
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by law, Debtor hereby waives any provision of law which renders any provision
hereby prohibited or unenforceable in any respect. This Security Agreement and
the note shall be governed by, and construed and interpreted in accordance with,
the laws of the State of Oregon.
7.10 Jurisdiction. Debtor hereby irrevocably consents and
agrees that any legal action, suit, or proceeding arising out of or in any way
in connection with this Security Agreement, say be instituted or brought in the
courts of the State of Oregon, in the County of Multnomah.
7.11 Purchase Requirements. Debtor agrees to maintain or cause
to be maintained the membership of the store in good standing with United
Grocers in accordance with the Bylaws of United Grocers, Inc., as long as this
Agreement remains in effect.
7.12 Debtor acknowledges and agrees that as a material
consideration and condition precedent to UG's extension of credit hereunder,
Debtor covenants and agrees to purchase goods and merchandise from UG for a
period of five (5) years. Debtor agrees that the weekly purchases from UG shall
be in accordance with UG credit terms and that the weekly purchase of goods and
merchandise shall not be less than 55 percent of Debtor's retail weekly sales
volume of all goods and merchandise sold on or from the store(s)' premises and
UG will supply all of Debtor's requirements at such prices and on such terms
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<PAGE>
as are reasonably comparable to those offered by UG to other purchasers of like
kind and like quantities carrying. on businesses similar to that of the Debtor.
If, at any time, the Debtor contends that UG is not able to supply particular
goods or merchandise customarily stocked by retail supermarkets, or that terms
offered by UG are not reasonably comparable to those offered by UG to other
purchasers described above, the Debtor shall so advise UG in writing, specifying
such contention with particularity. If, within 20 days after receipt of such
notice, UG does not offer to supply goods or merchandise so specified or does
not advise Debtor that the terms and conditions offered are reasonably
comparable to those offered to such other purchasers, Debtor shall be free to
secure such specified goods and merchandise from any source which it desires. If
UG asserts that it is offering reasonably comparable terms and Debtor
nonetheless purchases from another source, such purchase, if above percentage
requirements are not complied with, shall be a default. In the event of a breach
of this purchase covenant, Debtor agrees to pay UG, as liquidated damages, and
not as a penalty or forfeiture, a sum computed as follows:
(a) The average weekly purchases from the date of the
agreement to the date of the breach shall be determined;
(b) 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
(c) The computed sum shall be multiplied by one and
one-quarter percent (1 1/4%) to determine the liquidated damages due and owing
UG by reason of Debtor's default. Said sum shall become immediately due and
owing within 15 days from date of written notice of the liquidated damage.
Debtor's default hereunder shall also be a default under the Security Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
DEBTOR:
-------------------------
DBA----------------------
By-----------------------
, President
By-----------------------
, Secretary
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<PAGE>
INDIVIDUALLY:
-------------------------
-------------------------
SECURED PARTY: UNITED GROCERS, INC.
By-----------------------
G. P. Fleming
Assistant Secretary
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SECURITY AGREEMENT FOR SUBSEQUENT NOTES
(Equipment and Inventory)
Section 1. Grant and Related Data.
(a) ------------------------, -------------------- and ---------, INC.
DBA ------------------------------
("Debtor"), hereby grants to UNITED RESOURCES, INC., an Oregon corporation
("Secured Party"), a security interest in the following described personal
property:
All of Debtor's fixtures and equipment now owned or hereafter acquired,
and proceeds of such fixtures and equipment; all of Debtor's
inventories of every kind and nature now or hereafter acquired and kept
or held by Debtor, and the proceeds of such inventories; and all
substitutions, additions, replacements, parts, equipment and
accessories now or hereafter affixed to or used in connection therewith
("Collateral"),
to secure (i) the payment of Debtor's Installment Note of even date herewith in
the amount of $-----.-- payable to the order of Secured Party at the times and
in the amounts therein provided; and (ii) any renewals, modifications or
amendments thereof; and (iii) to secure all other present and hereafter incurred
indebtedness of Debtor to Secured Party.
(b) The Collateral is bought or used primarily for Debtor's
business purposes, and it will be permanently kept at --------------------,
- ---------, in the County of --------- State of Oregon, which is the address of
Debtor's place of business.
(c) The Collateral is not and will not be attached to real
estate so as to become a fixture.
(d) The Collateral consisting of inventory is maintained and
at all times will be maintained at a level of not less than $----.-- cost to
Debtor.
(e) As often as Secured Party shall require, Debtor shall
deliver to Secured Party such lists, descriptions, and designations of inventory
as Secured Party may require to identify the nature, extent, and location
thereof.
Section 2. Warranties, Covenants and Agreements.
Debtor warrants and covenants and it is understood by the parties that:
(a) Except for the security interest granted hereby, Debtor is
the owner of the Collateral free from any lien, security interest, or
encumbrance, and will defend the Collateral against the claims and demands of
all persons whomsoever.
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<PAGE>
(b) Except as provided below in Paragraph (c) and in Paragraph
(d) with respect to inventory, Debtor will not sell, offer to sell, or otherwise
transfer or dispose of the Collateral or any part thereof or any interest
therein, or create or cause or permit to be created any lien, encumbrance or
security interest in or upon any part thereof.
(c) In the event that United Resources, Inc. advances
additional sums or Debtor incurs subsequent indebtedness to United Resources,
Inc., Debtor hereby grants United Resources, Inc. a security interest in the
Collateral subordinate, in all respects, to the security interest granted hereby
in order to secure payment of such subsequent lending.
(d) While Debtor is not in default hereunder, Debtor may sell
inventory, but only in the ordinary course of business and only to buyers who
qualify as a buyer in the ordinary course of business. A sale in the ordinary
course of Debtor's business does not include a transfer in partial or total
satisfaction of a debt or any bulk sale.
(e) Debtor will keep the Collateral fully insured against loss
or damage by fire, and such other hazards as Secured Party may from time to time
require, with such deductible provisions, upon such terms, including loss
payable and other endorsements, and in such company or companies as Secured
Party may approve; and Debtor will immediately deliver all such insurance
policies to Secured Party to be retained while any indebtedness hereby secured
remains owing. Secured Party shall hold all such policies in pledge to secure
payment of the indebtedness hereby secured, with control to adjust any loss,
receive any receipt for any sum payable, surrender any policy, discharge and
release any insurer, endorse any loss or refund check or draft and, in general,
exercise in the name of Debtor or otherwise, any and all rights of Debtor in
respect thereto or in respect to the proceeds thereof.
(f) Debtor will maintain the Collateral in good condition and
repair and preserve the same against waste, loss, damage or depreciation in
value other than by reasonable wear. Secured Party may enter any premise in
which any of the Collateral may be kept at any reasonable time for the purpose
of inspecting the same. Debtor will not permit any use of any of the Collateral
in violation of any law or ordinance. Debtor will not, without the prior written
consent of Secured Party, cause or permit the Collateral or any part thereof to
be taken outside the state where permanently located as agreed in Section l(b)
or to be used for hire or under lease.
(g) Debtor will pay promptly when due all taxes, license fees
and governmental rates and charges upon or relating to any of the Collateral or
its use and relative to the indebtedness hereby secured.
(h) At its option, Secured Party may discharge taxes, liens,
security interests or other encumbrances upon any of the Collateral, may place
and pay premiums upon insurance on any of the Collateral and may incur expense
for maintenance and preservation of any of the Collateral. Debtor agrees to pay
to Secured Party upon demand all sums incurred or paid for any said purposes,
with interest from the date on which the same were incurred to the date of
payment at the rate of 18 percent per annum. Payment thereof is secured by the
Collateral.
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<PAGE>
Section 3. General Provisions.
(a) The obligations which this Agreement secures are evidenced
by separate instruments which may be assigned, renewed, negotiated or extended
by Secured Party without releasing Debtor, the Collateral, or any guarantor or
co-maker.
(b) All of the terms of this Agreement and the rights,
remedies, and duties of the parties hereto shall be governed by the laws of
Oregon. If any provision of this Agreement is in conflict with the law of any
state having jurisdiction, the remaining parts hereof shall be effective as if
such provision had not been made.
(c) If any interest of Debtor in any of the Collateral shall
be transferred or if any indebtedness hereby secured shall be assigned, the
terms, covenants, and conditions hereof shall be binding upon and inure to the
benefit of the successors in interest of the parties hereto.
(d) If there be more than one Debtor or a guarantor or
co-maker, the liability of all such parties shall be primary and joint and
several.
(e) If Secured Party shall, once or often, extend the time for
paying any indebtedness hereby secured or fail promptly to exercise any right or
remedy it may have for any default hereunder or breach or violation hereof, such
indulgence or forebearance shall not be deemed a waiver of strict and prompt
performance by Debtor of all the terms and conditions hereof and shall not
preclude Secured Party from thereafter, without notice, exercising any right or
remedy for any subsequent breach or default in performance of the same or any
other provision hereof or for any other breach or violation of this Agreement.
(f) If any notice is given to Secured Party, it shall be given
by registered or certified mail directed to Secured Party at the place where
indebtedness hereby secured is payable. If any notice is to be given to Debtor,
mailing by registered or certified mail to the address stated above shall be
sufficient unless Secured Party shall have received from Debtor notice in
writing of a change of address. Reasonable notice, when such notice is required,
shall be deemed to be five days' notice.
(g) Debtor will promptly notify Secured Party in writing of
any change in Debtor's business or residence address.
Section 4. Default.
Debtor shall be in default under this Agreement upon the
happening of any of the following events or conditions:
(a) If Debtor's inventory level falls below the stated value
of $-----.-- cost to Debtor.
(b) If Debtor shall fail to pay, when due, any installment of
principal or interest of any indebtedness owing by Debtor to Secured Party.
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<PAGE>
(c) If Debtor shall fail to perform promptly at the time and
strictly in the manner provided by any covenant of Debtor contained in this or
any other agreement between Debtor and Secured Party.
(d) If any warranty, representation, or statement made by
Debtor to Secured Party is false in any material respect.
(e) If there shall be any uninsured loss, theft, substantial
damage, destruction, sale or encumbrance to or of any of the Collateral, or the
making of any levy, seizure or attachment thereof or thereon.
(f) If there shall be any dissolution, termination of
existence, insolvency, business failure, appointment of a receiver of any part
of the property of, assignment for the benefit of creditors by, or commencement
of any proceeding under any bankruptcy or insolvency law by or against Debtor or
guarantor or surety for Debtor.
(g) If Secured Party has reasonable cause to deem itself
insecure.
Section 5. Remedies.
Upon such default and at any time thereafter, Secured Party
shall have each and all of the rights and remedies granted to Secured Party by
the Uniform Commercial Code of Oregon or other applicable laws, by this
Agreement and by the Installment Note or Notes hereby secured, and Secured Party
may without notice declare any or all such Installment Notes immediately due and
payable and Secured Party may require Debtor to assemble the Collateral and make
it available to Secured Party at a place to be designated by Secured Party which
is reasonably convenient to both parties. Debtor agrees to pay all expenses,
including reasonable attorneys' fees incurred by Secured Party in taking,
holding, preparing for sale, and selling any of the Collateral, as well as
attorneys' fees and court costs in such amount as shall be adjudged reasonable
for services in the trial court and for services in any appellate court in any
suit or action to require performance or for the breach of this Agreement or
upon any Installment Note hereby secured.
In the construction of this Agreement, the singular shall include the
plural as the circumstances may require.
Signed in duplicate this --- day of -----, 1990.
SECURED PARTY: UNITED RESOURCES, INC.
By----------------------------
G. P. Fleming, President
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<PAGE>
BORROWERS: ----------------------:
DBA --------------------------
By ---------------------------
, President
By----------------------------
, Secretary
INDIVIDUALLY:
------------------------------
------------------------------
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UNITED GROCERS, INC.
CAPITAL STOCK NOTE
1997 Capital Stock Requirement: 200 shares at $61.53 Date of Issue_____________
Total Amount Due $12,306.00
Less Minimum Down 6,000.00
Balance Due 6,306.00
Per Annum Interest 10.0%
Payment $132.40
Term 50 Weeks
For the purpose of completing payment of the Capital Stock obligation to United
Grocers, Inc., the undersigned promise(s) to pay to the order of United Grocers,
Inc., at Portland, Oregon, the balance due as stated above, with interest
thereon at the rate stated above from date of issue; payable in 50 weekly
installments, with the final payment adjusted to cover the ending balance, and
the undersigned authorize(s) United Grocers, Inc., to charge said payments to
the regular Statement of Account until the whole sum, principal and interest,
has been paid. If any of the said installments are not so paid, the whole sum of
both principal and interest will become immediately due and collectable at the
option of the holder of this Note; and, in case suite or action is instituted to
collect this Note, or any portion thereof, the undersigned promise(s) to pay
such additional sum as the court may adjudge reasonable as attorney's fees in
such suit or action.
- --------------------------------- ----------------------------------
Store or Corporate Name Signature
- --------------------------------- ----------------------------------
Address Signature
- --------------------------------- ----------------------------------
City State Zip Signature
RESIDUAL STOCK REDEMPTION NOTE
$--------------- PORTLAND, OREGON ---------------
United Grocers, Inc., an Oregon corporation, pursuant to Article V,
Section 6, of its Bylaws, promises to pay to
---------------------------- the sum of
$-------------- in lawful money of the United States, in 20 equal quarterly
principle installments, together with interest from the date hereof to the date
of payment at a present rate of ---% per annum. It is agreed that at any time
the interest rate being paid by United Grocers, Inc., on its latest series of
Capital Investment Notes shall increase or decrease from the interest rate
specified herein, a corresponding adjustment shall be made in this interest
rate. If such interest rate shall be increased above the original rate set forth
in this Note, the quarterly payment payable hereunder shall be correspondingly
increased so that the indebtedness evidenced hereby will be paid in full in
regular quarterly installments by the end of the amortization period hereinabove
set forth. If such interest rate shall be reduced, the quarterly payment shall
likewise be reduced, the quarterly payment shall likewise be reduced to
effectuate payment in full in accordance with the amortization period.
The payments hereunder shall be due and payable quarterly on the
fifteenth day of February, May, August and November of each year until the whole
sum of principle and interest has been paid in full. The first payment will be
on the regular payment date first following board approval of the transaction.
All sums paid on this Note shall be applied in the following order: to
interest as accrued and then to principal.
This Note is transferable only upon the books of the corporation upon
surrender and properly endorsed by the registered owner hereof, subject to the
rules and regulations as now or may hereinafter be adopted by the Board of
Directors of United Grocers, Inc.
IN WITNESS WHEREOF, the corporation has caused this Note to be executed
by its duly authorized officers.
United Grocers, Inc., an Oregon corporation
By-----------------------------------------
Alan C. Jones, President
By-----------------------------------------
John W. White, Vice-President
United Grocers, Inc.
Residual Stock Note Amounts
Owing to Directors
Payment
Original Remaining Per Qtr
Director Note # Dollars Dollars Dollars
- -------- ------ ------- -------- -------
H. Larry Montgomery 00213 105,450 45,473 5,273
H. Larry Montgomery 00252 120,939 114,892 6,047
Robert A. Lamb 00214 122,892 55,301 6,145
Robert A. Lamb 00228 128,122 89,685 6,406
SUBLEASE AGREEMENT EXHIBIT 10.F
THIS SUBLEASE AGREEMENT entered into this 28 day of August, 1991, by and
between UNITED GROCERS, INC, an Oregon corporation, hereinafter designated as
Sublessor, and HOWARDS ON SCHOLLS, INC. and GAYLON BAESE, hereinafter jointly
and severally designated as Sublessee;
WITNESSETH
WHEREAS, the Sublessor has entered into a Lease dated August 28, 1991,
with Landlord for a supermarket located at 12220 S.W. Scholls Ferry Road,
Tigard, Washington County, 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 13
years 5 months, commencing on date set forth in Exhibit "A," "B" (Modification
of Lease), and "C" (Rental Amounts) 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," "B," and "C."
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," "B," and "C," as set forth in said Exhibits, upon the condition that
Sublessees are not in default and provide Sublessor with lease guaranty
insurance for the renewal term as outlined in the Lease Modification Agreement,
Exhibit "B" and further provide that the Sublessees are not in default in any
other agreements with United Grocers, Inc. or any of its subsidiary companies.
(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," "B," and "C" and to make such
payments and provide such performance when due by the terms of the lease and
amendments thereto. Notwithstanding the foregoing, Sublessee shall be obligated
to pay the real property taxes due November 15, 1991 and thereafter commencing
December 1, 1991 and each month thereafter, pay to Sublessor an amount which is
equal to 1/12 of the estimated real property taxes as provided in page 4 of 8 of
the "Lease Assignment and Modification Agreement." The provision contained in
the first paragraph of page 5 of 8 of said "Lease Assignment
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<PAGE>
and Modification Agreement" is for the sole and exclusive benefit of Sublessor.
(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," "B," and "C."
(4) Sublessees shall be bound by the same responsibilities, rights,
privileges and duties as Sublessor, as enumerated in Exhibits "A," "B," and "C,"
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 with prior written notice to Lessee, 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 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
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-three percent (53%) of its retail sales of all goods and merchandise by it
for resale on the premises to the extent that Sublessor shall now or
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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, 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 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 53% 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 one and three-quarters
(1-3/4%) 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
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<PAGE>
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.
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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 and personal
property leases 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. Notwithstanding the foregoing, the reference to Sublessors shall
also refer to Sublessor's lending subsidiary, United Resources, Inc., as secured
party.
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:
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(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 those described in Exhibit X.
(b) Sublessees will not sell, dispose of, encumber or permit any
other security interest, lien or encumbrance to attach to the Collateral without
the prior written consent of United Grocers, Inc., which consent shall not be
unreasonably withheld 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 and/or its subsidiary 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.
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<PAGE>
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,
the nonprevailing party shall and does 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 in 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 the 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 within five (5) days after written notice, 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;
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<PAGE>
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 selling 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 material
(in excess of $5,000.00) 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 3 percentage points over the then existing prime rate 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,
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<PAGE>
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 Sublessee 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 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
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<PAGE>
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 or
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.
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
By /s/ G. P. Fleming, Assistant Secretary
G. P. Fleming, Assistant Secretary
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<PAGE>
6433 SE Lake Road
P. O. Box 22187
Portland, Oregon 97222
SUBLESSEES HOWARDS ON SCHOLLS, INC., an Oregon corporation
By /s/ Gaylon G. Baese
President
By /s/ Gaylon G. Baese
Secretary
INDIVIDUALLY:
/s/ Gaylon Baese
12220 S.W. Scholls Ferry Road
Tigard, OR 97223
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KEYBANK
REAL ESTATE GROUP
825 N.E. Multnomah, Suite 428
Portland, Oregon 97232
Tel: 503 790-7528
Toll Free: 1-800-827-7528
Fax: 503 790-7536
April 29, 1996
Garden Homes Enterprises, Inc.
7410 S.W. Oleson Road
Portland, OR 97223
Attn: Colin Lamb
Re: Project Name: Garden Home Marketplace
("Project")
Location: S.W. Garden Home Road,
Portland, Oregon
Loan Amount: $4,935,000
Dear Ladies and Gentlemen:
KEY BANK OF OREGON, an Oregon banking corporation ("Lender"), is
pleased to inform you that it has approved your application for a loan (the
"Loan") on the Project, upon delivery and acceptance of the following documents
and information, and subject to the following terms and conditions:
1. TERMS OF COMMITMENT.
1.1 BORROWER: GARDEN HOMES ENTERPRISES, INC., an Oregon corporation
("Borrower").
1.2 Intentionally deleted.
1.3 GUARANTORS: LAMB'S, INC., an Oregon corporation doing business as
LAMB'S THRIFTWAY ("Lamb's"), GENEVIEVE LAMB, COLIN LAMB, GARY LAMB and the
GENEVIEVE LAMB REVOCABLE TRUST, shall guarantee the Loan. UNITED GROCERS, INC.,
an Oregon corporation, also shall guarantee the Loan, but shall be released from
all liability as a guarantor if, upon the fifth anniversary of the date of
execution of the term loan agreement between Lamb's and Lender (to be executed
on the same date as the Loan Documents (defined below)), Lamb's is not then in
default and has not been in default under said agreement or any other documents
related to such agreement within the two (2) fiscal years of Lamb's immediately
preceding such anniversary date. The guarantors of the Loan are collectively
referred to herein as "Guarantors." All references to the Borrower herein shall
be deemed to refer to and include the Guarantors and the obligations of Borrower
<PAGE>
April 29, 1996
Page 2
hereunder also shall be deemed to be the obligations of the Guarantors.
1.4 ARCHITECT AND GENERAL CONTRACTOR: The architect for the Project shall
be ARCHITECTS ASSOCIATIVE, INC., a Washington corporation, and the general
contractor shall be JAMES E. JOHN CONSTRUCTION CO., INC., a Washington
corporation ("General Contractor").
1.5 LOAN PURPOSE: To provide construction financing for the construction
of a mini-mall and two additional commercial buildings to be constructed on a
70,000 square foot parcel of real property located at the corner of S.W. Garden
Home Road and Oleson Road in the City of Portland, Washington County, Oregon,
and described more fully on Exhibit "A" attached hereto.
1.6 FEES AND COMMISSIONS:
1.6.1 As partial consideration for the issuance by Lender of this
Commitment, and as compensation for the substantial work already performed by
Lender, Borrower has paid to Lender a nonrefundable commitment fee in the sum of
$25,000. If Borrower elects not to close the Loan, or if this Commitment is
terminated by Lender pursuant to any provision hereof, then all obligations of
Lender shall terminate and the amount paid to Lender pursuant to this Section
1.6.1 shall be retained by Lender.
1.6.2 Upon the closing of the Loan and as a condition precedent to
funding of the Loan, Borrower shall pay to Lender a loan fee in the sum of
$73,700, in addition to the fee due under Section 1.6.1.
1.7 SECONDARY FINANCING: No secondary financing shall be permitted.
1.8 COMPLETION: Construction of the Project shall be commenced no later
than thirty (30) days following the Loan closing (the "Closing Date") and shall
be completed within seven (7) months after the Closing Date in accordance with
the Plans and Specifications approved by Lender.
2. LOAN TERMS.
2.1 LOAN AMOUNT: $4,935,000.
2.2 TERM OF LOAN: The Loan shall consist of two (2) periods described as
follows:
Construction Period of Loan: The construction period of the Loan
(the "Construction Period") shall commence upon the
<PAGE>
April 29, 1996
Page 3
Closing Date and expire twelve (12) months after the Closing Date, subject to
the extension privilege set forth in this Section. Provided that all obligations
under the Loan are then current and no default exists under any of the Loan
Documents, Borrower may extend the Construction Period for one (1) additional
period of six (6) months by: (i) giving written notice to Lender of the election
to extend at least thirty (30) days prior to the commencement of the extension
period; and (ii) paying an extension fee in the amount of $12,337.50. If such
extension is exercised, then the Construction Period shall expire eighteen (18)
months after the Closing Date.
Term Period of Loan: Provided that (i) no default exists under the
Loan Documents (defined in Section 3), and (ii) the construction of the Project
is completed to the satisfaction of Lender and in accordance with all of the
terms and provisions of the Loan Documents, the term of the Loan shall be
extended through a term period (the "Term Period") commencing upon expiration of
the Construction Period and finally maturing ten (10) years after expiration of
the Construction Period. If the foregoing conditions to commencement of the Term
Period are not satisfied, then the Loan shall mature and be finally due and
payable on the expiration of the Construction Period.
2.3 INTEREST RATE: During the Construction Period, the interest rate on
the Loan shall be computed on the unpaid balance at a fully floating rate per
annum which will be equal to the Basic Commercial Lending Rate of Key Bank of
Oregon, as publicly announced and in effect from time to time, plus one and
one-half percent (1.5%). On the first day of the Term Period (the "Adjustment
Date"), the interest rate on the Loan shall be fixed at a per annum rate
(rounded upward to the nearest one-eighth of one percent) equal to two and
one-half percent (2.5%) plus the LIBO Rate. As used herein, the phrase "LIBO
Rate" means the percentage rate of interest at which _______________ (___) day
("Interest Period") deposits in United States dollars in an amount equal to the
principal balance of the Note (defined below), or the next higher amount for
which a quote is available, are offered to major banks in the London Interbank
Market as of approximately 11:00 a.m. London time two Business Days before the
Adjustment Date. The LIBO Rate shall be the "offered to" rate reported by a
reliable source for London Interbank Offered Rate ("LIBOR") quotes selected by
Lender in its sole discretion. If two or more applicable "offered to" rates are
reported by that source, the LIBO Rate shall be the arithmetic mean of such
rates. If LIBOR quotes are not available in the London Interbank Market, Lender
may substitute a comparable interest rate index selected by Lender in the
exercise of its sole and absolute discretion, and in such case reference herein
to the LIBO Rate shall be to such comparable interest rate index. "Business Day"
means any day on which dealings in deposits in United States dollars are
<PAGE>
April 29, 1996
Page 4
conducted in the London Interbank Market other than Saturday, Sunday or a day on
which national banks in Portland, Oregon are authorized or required by law to be
closed.
Interest shall be computed on the basis of a 360-day year. Each
delinquent payment will be subject to a late charge in the amount of five
percent (5%) of the delinquent installment. In addition to such late payment
charge, if the Note is in default, at the option of Lender and without prior
written notice, Lender shall have the right to increase the interest rate on the
Loan to a fully floating default interest rate (the "Default Rate") equal to
four (4) percentage points above the then applicable rate.
2.4 PAYMENT OF PRINCIPAL AND INTEREST: During the Construction Period,
interest accruing on the outstanding principal balance of the Loan shall be due
and payable on the first day of each calendar month following the date of the
first disbursement of Loan proceeds. During the Term Period, the Loan shall be
paid in equal monthly installments of principal and interest based upon a
twenty-five (25) year amortization period at the interest rate established on
the Adjustment Date, such installments to be due and payable on the first day of
each calendar month during the Term Period until ten (10) years after the
expiration of the Construction Period, when the Loan shall mature and be finally
due and payable.
2.5 Intentionally deleted.
2.6 RESTRICTIONS ON PREPAYMENT: Borrower may prepay the Note in whole or
in part without notice or penalty. Any partial prepayments shall be applied
first to accrued interest and then to the unpaid principal balance of the Note.
Partial prepayments shall not operate to reduce the monthly installments due
during the Term Period.
2.7 TAX AND INSURANCE IMPOUNDS: The Deed of Trust (defined in Section 3)
shall contain a covenant that in the event of default by Borrower under the Loan
Documents, then Lender, at the Lender's option, may require Borrower to deposit
with Lender an initial sum, and on the date of each month thereafter upon which
the monthly installment payments fall due, an additional sum which, in Lender's
estimate, shall produce an amount sufficient to pay annual taxes, assessments
and insurance premiums as the same become due. During the Construction Period,
the deposit amounts shall be represented by a line item in the construction
budget for the Project and Lender may disburse such sums to pay taxes and
insurance premiums on the appropriate due dates. Upon any default under the
provisions of the Deed of Trust or the Note, Lender may, at its option, apply
any money in the fund resulting from said deposits to the payment of the
indebtedness
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April 29, 1996
Page 5
secured by the Deed of Trust in such manner as Lender may elect.
2.8 APPLICATION OF RENTS: During the Construction Period, all rents and
profits derived from the Project, including the improvements to be constructed
thereon and any leases covering the same, shall be applied to interest,
principal and other charges due on the Loan, in the order and manner specified
in the Note. During the Term Period, the application of such rents and profits
shall be governed by the provisions of the Deed of Trust.
3. SECURITY AND LOAN DOCUMENTS.
3.1 SECURITY: Repayment of the Loan shall be secured by liens and security
interests encumbering the real property described on Exhibit "A" attached hereto
and the improvements (whether now existing or hereafter constructed) which
constitute the Project (the "Property"), together with the personal property and
the interests of Borrower in the related collateral described in the Loan
Documents referenced in Section 3.2. The liens and security interests of Lender
covering the Property and all other collateral for the Loan shall be first
priority liens and security interests.
3.2 LOAN DOCUMENTS: At the closing of the Loan, and as a condition to
closing and any disbursements, Borrower shall deliver to Lender fully executed
originals of the following documents (the "Loan Documents"), each to be prepared
by Lender and to be in form and substance satisfactory to Lender:
3.2.1 A Promissory Note in the face amount of the Loan (the "Note");
3.2.2 A Deed of Trust and Security Agreement with Assignment of
Rents covering the Property, Borrower's leasehold interest under the Ground
Lease (defined below) and all other collateral (the "Deed of Trust"), together
with such UCC financing statements as Lender may require;
3.2.3 A Guaranty executed by each of the Guarantors;
3.2.4 An Environmental Agreement executed by Borrower, any Co-Makers
and Guarantors;
3.2.5 A Construction Loan Agreement and a separate Assignment of
Plans and Specifications (together with a written consent to assignment executed
by the Architect), Assignment of the General Construction Contract (together
with a written consent to assignment executed by the General Contractor), and an
Assignment of all permits, licenses and approvals pertaining to the Project
and/or the Property; and
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April 29, 1996
Page 6
3.2.6 Such additional approvals, consents, certificates,
resolutions, organizational documents, estoppel statements and other documents,
agreements and instruments as Lender may require, including without limitation,
an agreement executed between Lender, Borrower and Maxine Hayzlett ("Hayzlett"),
the current lessor under the lease executed between Hayzlett and Roland L.
Hayzlett (now deceased), as lessor, and Borrower, as lessee, dated January 1,
1980, and covering Lot 7, Schomacker's Subdivision, Washington County, Oregon
(the "Ground Lease"), whereby Hayzlett, among other such assurances as Lender
may reasonably require: (i) consents to the liens and security interests created
by the Deed of Trust; (ii) agrees to provide notice to Lender of any Borrower
default under the terms of the Ground Lease; (iii) agrees to accept any cure of
Borrower's default under the Ground Lease which is tendered by Lender for the
account of Borrower within the applicable grace period set forth therein; and
(iv) agrees to permit Lender to assume Borrower's obligations under the Ground
Lease in the event of Borrower's default thereunder.
4. CONDITIONS TO LENDER'S OBLIGATIONS.
Lender shall have no obligation to close the Loan nor to disburse
any portion thereof unless and until each of the conditions contained herein,
including those set forth in this Section 4, have been fulfilled to Lender's
complete satisfaction. All conditions must be satisfied, and the Loan closed, no
later than two (2) months after the date of execution of this Commitment. It is
specifically agreed that all conditions with respect to Lender's obligations,
including (without limitation) those set forth in this Section 4, are material.
4.1 Intentionally deleted.
4.2 APPRAISAL: Prior to closing, Borrower shall deliver to Lender an
appraisal of the Property prepared by an appraiser acceptable to Lender and
Borrower shall cause NATIONAL MORTGAGE COMPANY ("National Mortgage") to assign
to Lender all of its rights and interests in said appraisal. Such appraisal
shall comply with all applicable regulations and shall be in form and substance
satisfactory to Lender.
4.3 BONDS: Borrower shall obtain and deliver to Lender, prior to closing,
such performance, payment and completion bonds as Lender may require.
4.4 FINANCIAL STATEMENTS: Borrower, Co-Makers and Guarantors, if any,
shall furnish to Lender, prior to closing, certified financial statements
current within one hundred eighty (180) days of the date hereof. Such statements
shall include balance sheets, statements of operations and changes in financial
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April 29, 1996
Page 7
position of such parties and each general partner or member of Borrower (if
Borrower is a partnership, joint venture or limited liability company), together
with a pro forma cash flow projection for the Project in form acceptable to
Lender. All of such statements shall reflect financial conditions and prospects
satisfactory to Lender. Borrower warrants that all financial statements
previously delivered to Lender in connection with the Loan are true, correct and
complete, and that no material adverse change has occurred since the respective
dates of such statements which would make the same materially misleading or not
true, correct and complete.
4.5 INSURANCE: Prior to closing, Borrower shall obtain and furnish to
Lender (i) copies of the following insurance policies, (ii) original
certificates evidencing such insurance coverage, and (iii) originals of the
other materials referenced herein. Such insurance policies and certificates
shall be issued by an insurance company or companies acceptable to Lender and
shall provide for thirty (30) days' prior written notice to Lender of
cancellation or any material change in coverage. All such insurance policies,
certificates and materials shall be in form and substance acceptable to Lender.
(a) A comprehensive general liability policy of insurance
including "Products and Completed Operations" coverage and a
provision insuring performance of Borrower's contractual indemnity
obligations under the Loan Documents, providing coverage of at least
$3,000,000 per occurrence. Said insurance shall name Lender as an
additional insured.
(b) An "all risk" builder's risk, physical hazard insurance
policy in an amount equal to 100% of the full replacement value of
all buildings, improvements and contents comprising the Project,
without coinsurance or depreciation, and in any event not less than
the full face amount of the Loan. Said insurance policy shall name
Lender as loss payee under a Lender's Loss Payable Endorsement in
form reasonably acceptable to Lender and shall contain a standard
mortgage endorsement waiving any breach of warranty by Borrower.
Upon completion of construction, a casualty policy as described in
item (c) below shall be substituted for the builder's risk policy.
(c) An "all-risk" casualty insurance policy in an amount equal
to 100% of the full replacement value of the Property and all other
tangible collateral, without coinsurance or depreciation, and in any
event not less than the full face amount of the Loan, with a law and
ordinance endorsement. Said insurance policy shall
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April 29, 1996
Page 8
name Lender as loss payee under a Lender's Loss Payable Endorsement
in form reasonably acceptable to Lender and shall contain a standard
mortgage endorsement waiving any breach of warranty by Borrower.
(d) A policy of business interruption insurance with respect
to the Property and the Project covering a period of one (1) year.
(e) Borrower shall provide Lender with either (i) a
certificate from the appropriate governmental agency indicating that
the Property is not located in a flood-prone area, as defined by the
U.S. Department of Housing and Urban Development in the Flood
Disaster Protection Act of 1973, as amended, or (ii) a policy of
flood insurance naming Lender as loss payee under a Lender's Loss
Payable Endorsement in form reasonably acceptable to Lender.
(f) Borrower shall provide Lender with written evidence of
compliance with all worker's compensation laws.
4.6 TITLE INSURANCE: At closing, Borrower shall furnish to Lender the
commitment of a title company to issue an ALTA (1970 Form) extended coverage
mortgagee's policy of title insurance insuring the lien of the Deed of Trust as
a first and valid lien encumbering the Property, subject only to those
exceptions to title to which Lender does not object. Such policy also shall
contain such endorsements and provisions for further endorsements as Lender may
require. Lender's decisions regarding the state of title, marketability of
title, effect of encumbrances and covenants, conditions and restrictions
affecting the Property and the form and sufficiency of all documents incident
thereto, and the form of the mortgagee's policy shall be final and conclusive.
The title insurance policy shall provide coverage in the full amount of the
Loan. Lender shall have the right to approve the title insurance company issuing
the policy and to require such reinsurance or coinsurance as Lender may deem
appropriate.
4.7 CONTRACTS: Copies of all general contracts and significant
subcontracts for the construction of the improvements comprising the Project, or
for services rendered in connection therewith for which liens may be asserted
against the Property or the Project, shall be furnished to Lender for its
approval as soon as practicable. All such contracts, by their terms, shall be
effective only upon Lender's giving such approval. In no event shall any such
contracts be entered into by Borrower, nor shall any construction, grading or
other work be commenced on the Property prior to closing, without the prior
written consent of Lender, unless Borrower shall have obtained and delivered to
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April 29, 1996
Page 9
Lender and Lender shall have approved performance and payment bonds covering
such contractors in amounts and issued by companies acceptable to Lender. The
General Construction Contract between Borrower and the General Contractor (as
submitted to Lender prior to execution of this Commitment) shall either be
amended to add a ten percent (10%) retainage provision acceptable to Lender, or
Borrower shall be required to obtain a completion bond for the Project in form
and substance satisfactory to Lender.
4.8 BUILDING PERMIT: Borrower shall deliver to Lender prior to closing
such building and other permits issued or approved by the municipality or other
governmental authority having jurisdiction over the Property as will permit the
construction of all improvements comprising the Project in accordance with the
Plans and Specifications approved by Lender. Additionally, before occupancy of
the commercial buildings comprising the Project, Borrower must submit an
application to the municipality or other governmental authority having
jurisdiction over the Property for a building permit for the eight
multiple-family units to be constructed on the Property following completion of
the Project.
4.9 CERTIFICATES OF ARCHITECT: Prior to closing, Borrower shall furnish to
Lender a certificate from the Architect or such other person as may be
acceptable to Lender confirming that all improvements to be included in the
Project will, if constructed and completed in accordance with final Plans and
Specifications approved by Lender, comply with all applicable building codes and
zoning and land use laws and ordinances and all other applicable Federal and
state laws, rules, regulations, codes and orders, including (without limitation)
the provisions of the Americans with Disabilities Act, as amended. Upon
completion of such improvements, the Lender shall be furnished a certificate by
the Architect confirming that the improvements have been completed in accordance
with the final Plans and Specifications approved by the Lender and that the
completed improvements comply with all applicable building codes and zoning and
land use laws and ordinances and all other applicable Federal and state laws,
rules, regulations, codes and orders, including (without limitation) the
provisions of the Americans with Disabilities Act, as amended.
4.10 ZONING: Prior to closing, Lender shall be furnished with written
verification from the applicable governmental authority to the effect that the
Property is zoned or otherwise properly designated for the land uses being made
thereof and as contemplated by the Project and that all required subdivision,
building and other permits and approvals have been issued, the issuance thereof
not being subject to any unexpired appeals or appeal rights.
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April 29, 1996
Page 10
4.11 SOILS REPORT: Prior to closing, Borrower shall furnish to Lender a
soils report prepared by a soils engineer approved by Lender dated within six
(6) months of closing, which report must be in all respects acceptable to
Lender. Upon completion of foundations, the soils engineer shall certify to
Lender the proper implementation of any recommendations set forth in the soils
report.
4.12 PLANS AND SPECIFICATIONS: Prior to closing, final Plans and
Specifications containing the signatures of Borrower, the Architect and the
General Contractor shall be submitted to Lender for its approval, and no
construction shall be commenced until such Plans and Specifications are so
approved by Lender.
4.13 COST BREAKDOWN: Prior to closing, Borrower shall submit to Lender a
certified final cost breakdown, acceptable to Lender, setting forth in detail an
itemized cost estimate of all direct and indirect costs of construction of the
Project. Such breakdown, when approved by Lender, shall be the budget for the
Project and disbursements shall be made thereon pursuant to the Construction
Loan Agreement.
4.14 UTILITIES: Prior to closing, Borrower shall furnish to Lender letters
from local utility companies or agencies evidencing the availability of all
utilities and utility services in such capacities as are necessary to service
the Project and all improvements included and/or to be included in the Project,
and to meet the volume and capacity requirements in view of the Project's uses.
4.15 SURVEY: Prior to the closing, Borrower shall furnish to Lender, and
to the title insurance company that will issue the title insurance policy
required hereby, two copies of an acceptable current survey of the Property,
prepared and certified by a registered land surveyor acceptable to Lender.
Within thirty (30) days following the completion of the foundations and footings
for each improvement comprising the Project, Borrower shall furnish an updated
and revised survey showing the location of such foundations and footings, and
all overhangs, with appropriate certifications of the surveyor to the effect
that the improvements do not encroach on any property line or easement nor
violate any building setback requirements.
4.16 LEASES: Borrower shall furnish to Lender for Lender's approval prior
to closing (a) all existing leases related to the Property (including, without
limitation, the Ground Lease), (b) the proposed form of the standard lease to be
used in connection with the leasing of any of the Property, and (c) if the
Project is intended to be used for any purpose other than residential uses, an
executed estoppel statement from each lessee in such form as Lender shall
require. Borrower shall enter into and
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April 29, 1996
Page 11
negotiate the terms of each future lease in good faith, at arm's-length and with
a view toward maximizing Borrower's economic return. Borrower shall obtain the
prior written consent of Lender to any desired substantial variation in
Borrower's standard lease form as to any particular lease of the Property, which
consent shall not be unreasonably withheld by Lender. All leases of the Property
other than residential tenancies shall be subordinated to the lien of the Deed
of Trust, subject to a non-disturbance and attornment agreement in form
acceptable to Lender. None of said leases may be cancelled nor the rental
reduced without the consent of Lender; however, in the case of residential
tenancies or leases, Borrower shall be free to terminate leases or tenancies
from time to time in accordance with the terms of the applicable leases and
prudent business practices. At closing, and at any other times as Lender may
reasonably require, Borrower shall furnish Lender with copies and assignments of
all executed leases and all subsequent leases.
4.17 PRE-LEASING: Prior to closing, Borrower shall have entered into
binding leases covering seventy-five percent (75%) of the space in the proposed
improvements, which leases (and all terms thereof) shall be subject to Lender
approval, and the projected Net Operating Income from the Project shall be
expected to produce a minimum Debt Service Coverage Ratio of 1.2:1. As used
herein, the following terms shall have the designated meanings:
Net Operating Income shall mean all projected revenues, receipts and
income of Borrower to be realized from the ownership, operation and
use of the Project (based on executed leases) less all projected
operating expenses directly related to the Project, including
(without limitation) management fees and reserves for maintenance
and repairs, but excluding (i) depreciation, (ii) payments made on
the Note, and (iii) any distributions or dividends paid to partners,
shareholders or other owners of Borrower pursuant to the organic
documents of Borrower.
Debt Service Coverage Ratio shall mean the ratio that projected Net
Operating Income for each calendar year of the term of the Loan
bears to principal and interest payments to be due on the Note
during the applicable calendar year.
4.18 BORROWER'S EQUITY: On or before the Closing Date, Borrower shall
contribute to and deposit with Lender, from its funds and not from funds
borrowed from any source, all funds required, in the judgment of Lender, to
cover the difference between the total estimated costs to accomplish the purpose
of
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April 29, 1996
Page 12
the Loan and the Loan amount. Except for Borrower's funds to be held in reserve,
Lender shall disburse Borrower's funds prior to the disbursement of any Loan
proceeds. Based on the Construction Loan Budget, attached as Exhibit "B", that
equity amount is estimated to be $567,901.
4.19 COMPLIANCE WITH LAW AND ATTORNEY'S OPINION: Closing the Loan will be
subject to Lender's receipt of an opinion or opinions from Borrower's legal
counsel in form and substance acceptable to Lender to the effect that: (a) the
Loan Documents are valid and binding obligations of Borrower and Guarantors,
respectively, enforceable in accordance with their terms, and that each of the
Loan Documents has been duly authorized, executed and delivered by Borrower and
Guarantors, respectively; (b) the Loan, the Loan Documents and all transactions
embraced thereby are not usurious; (c) Borrower and Guarantors, if not
individuals, are validly existing partnerships, corporations, or other entities,
as the case may be, duly organized under the laws of their respective
jurisdictions of organization and, if appropriate, are duly qualified to
transact business in the jurisdiction in which the Property is located; (d) the
acquisition of the Loan, the construction and operation of the Project, and the
performance of all obligations of Borrower under the Loan Documents has been
duly authorized by all requisite action of the Borrower; (e) Borrower is not
engaged in or subject to any litigation nor is the Property subject to any
litigation which, if adversely determined, would materially affect the ability
of Borrower to perform its obligations under the Loan; and (f) the execution of
the Loan Documents by Borrower and Guarantors will not violate the terms of any
agreement to which Borrower or Guarantors are a party. Lender also may require
that such opinion letter or letters contain opinions, in form and substance
satisfactory to Lender, regarding such other matters as Lender reasonably may
designate.
4.20 DOCUMENTS AND SATISFACTION OF REQUIREMENTS: The form and substance of
all documents and insurance policies, and the satisfaction and timing of any and
all requirements herein, shall be in all respects satisfactory to Lender, in its
sole discretion.
4.21 ENVIRONMENTAL INSPECTION AND REPORT: Prior to closing, and as a
condition to closing, Borrower shall, at its sole cost and expense, retain the
services of an environmental engineering consultant ("Consultant") approved by
Lender, to perform an environmental audit of the Project and prepare a final
report which documents the results of the environmental audit. Borrower shall
expressly provide in its agreement with the Consultant that: (a) the services
performed, and the report prepared, by Consultant are for the benefit of the
Borrower and Lender; and (b) Consultant shall address the final report to both
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April 29, 1996
Page 13
Borrower and Lender. The environmental audit performed by Consultant shall
include, without limitation: (i) an investigation of the past and present
ownership of, and operations conducted at, the Project; (ii) an investigation of
all appropriate government agency records relating, directly or indirectly, to
the past and present use, generation, handling, storage or disposal of Hazardous
Materials (defined in Section 5) at the Project, and relating to past and
present compliance with Environmental Laws (defined in Section 5); and (iii) a
physical inspection of the Project and surrounding properties to evaluate
whether Hazardous Materials are present or likely to be present at the Project.
Unless waived in writing by Lender, the Consultant's final report shall show
that the Project is in full compliance with Environmental Laws, that there is no
underground storage tanks located on or under the Project, and that there is and
has been no release or threatened release of Hazardous Materials on, under or
from the Project. Lender, through its officers, agents or employees, shall have
the right to retain the services of an independent environmental engineering
consultant, at Borrower's sole cost and expense, to review the services
performed and the report prepared by Consultant, and to provide an independent
opinion as to the conclusions and recommendations provided by Consultant. It is
expressly understood that Lender is under no duty to supervise, inspect or
confirm the investigations, inspections or work performed by Consultant or the
independent environmental engineering consultant retained by Lender, and that
any such investigations, inspections or work are for the sole purpose of
preserving Lender's rights hereunder. Lender's acceptance of Consultant's
report, or the opinion of the independent environmental engineering consultant,
shall not constitute a representation that Consultant performed its services in
accordance with generally accepted environmental engineering and consulting
standards, shall not constitute a representation that the information,
conclusions or recommendations contained in Consultant's report are complete,
fully investigated or accurate, and shall not be relied upon by Borrower or any
third party.
4.22 DISBURSEMENT CONDITIONS: Disbursement of Construction Loan proceeds
will be made in thirty (30) consecutive calendar day increments to reimburse the
Borrower for costs paid in connection with the construction of the proposed
improvements, including the costs of the unimproved land, engineering, loan
costs and off-site improvements where required, but not to exceed the amount of
the Construction Loan committed hereunder. Such disbursements are subject to any
holdback provisions below. In the event that the actual costs are less than
those covered by the Construction Budget, the Lender shall only be obligated to
advance the actual costs expended.
A. Value. Disbursements will be made provided that the
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April 29, 1996
Page 14
value in place on the site shall not be less than the total of all
costs paid in connection with the development of the proposed
improvements, and provided further that the Borrower complies with
the following disbursement procedure.
B. Disbursement Procedures. The Borrower shall deliver
the following to the Lender with each request for an
advance and on completion of the construction:
(i) A disbursement certificate provided by Lender,
certified by Borrower and detailing the costs of the
improvements, the payee for each amount paid, and the
Borrower's check number.
(ii) Upon Lender's request, invoices covering
each cost for which reimbursement is
requested.
(iii) A certificate by an inspector, acceptable to
Lender, certifying the percent of work
completed in each budget category for which
reimbursement is requested. The certificate
must indicate the date the work completion
inspection was made, which date must be
within ten (10) consecutive calendar days of
the date of the disbursement certificate.
The certificate must further certify that
the quality of the work completed meets the
Plans and Specifications and all
requirements of the city or county under
whose jurisdiction the Project falls.
C. Payment of Request. Provided Borrower has met all
conditions required by Lender, loan proceeds covered by
the disbursement certificate shall be deposited in
Borrower's account at Key Bank of Oregon.
D. Draw Holdback. At Lender's option, ten percent (10%)
of each of the improvement hard costs as itemized in
the Budget shall be held back by Lender to be applied
towards the completion holdback. This shall be done on
each draw request.
E. Completion Holdback. At Lender's option, an amount
equal to no less than ten percent (10%) of the
improvement costs shall be held by the Lender from the
final disbursements until such time as (1) the Project
is complete and fully accepted by all governmental
bodies where approval is required, the requisitions
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April 29, 1996
Page 15
presented represent all monies due on the Project, and receipt by
Lender of a completion certificate signed by Borrower and the
Architect indicating the above; (2) receipt of a certificate from
one of Lender's appraisers certifying that the improvements have
been completed substantially in accordance with the approved Plans
and Specifications; (3) Lender has been provided with an early issue
ALTA lien free endorsement to its mortgagee's policy or the lien
period as to all work performed and material supplied has expired;
and (4) no lien is then of record against the Property (except as
insured against).
5. GENERAL PROVISIONS.
5.1 LOAN CLOSING: The closing of the Loan, all Loan Documents, title
certificates or policies of title insurance, and other legal matters must be
approved by Lender's legal counsel.
5.2 TENANT IMPROVEMENTS: Lender, at its option and in its sole discretion,
shall have the right to withhold from the Loan proceeds from time to time such
amounts as Lender deems necessary to fund the cost of construction and
installation of the tenant improvements for each tenant space. Thereafter, when
all such improvements for a given space are completed to the satisfaction of
Lender and in accordance with executed leases, Lender shall advance to Borrower
the sums previously withheld in connection with said space. The purpose of this
withholding provision is to insure the availability of adequate funds to cover
the costs of tenant improvements necessary to the leasing of the Property.
5.3 ASSIGNMENT OF PROCEEDS; BANKRUPTCY: Neither this Commitment, the Loan,
nor the Loan proceeds shall be assignable without Lender's prior written
consent, which may be withheld in Lender's sole discretion, and without such
consent there shall be no right to designate a payee of the Loan proceeds. In
the event of bankruptcy or insolvency of Borrower, a Co-Maker, or any Guarantor
(or of any one of the persons or entities comprising the Borrower, a Co-Maker or
a Guarantor), whether voluntary or involuntary, or the commencement of
proceedings under the Federal Bankruptcy Code or any similar state or Federal
statute by or against the Borrower, any Co-Maker or Guarantor (or any one of the
persons or entities comprising the Borrower, or any Co-Maker or Guarantor), this
Commitment shall immediately terminate and, at Lender's option, all amounts due
hereunder or under the Loan Documents shall become immediately due and payable.
5.4 EXPENSES AND FEES; GENERAL COST AND ATTORNEY FEE PROVISION:
5.4.1 Expenses and Fees: Borrower's acceptance hereof
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April 29, 1996
Page 16
shall constitute its agreement, regardless of whether the Loan closes and funds,
to pay all expenses in connection with the Loan, including (without limitation)
title insurance costs, escrow fees, tax service fee, taxes, recording and filing
fees and charges, legal fees for preparation, negotiation and examination of
documents (including, without limitation, the Loan Documents and any documents
executed in connection with participation interests in the Loan), fees and
charges for surveys, credit reports, and all other fees and costs incidental to
the closing and making of the Loan. These expenses are in addition to any fees
or commissions payable by Borrower under the heading "FEES AND COMMISSIONS".
Lender shall not be required to pay any premium, brokerage fee, loan broker fee,
commission, or similar compensation in connection with this transaction and
Borrower agrees to defend, indemnify, and hold Lender harmless from and against
all claims asserted by any person on account of any such fee, commission or
compensation, including attorney fees paid or incurred by Lender with respect to
any such claim.
5.4.2 Attorney Fees: In the event of litigation to enforce or
interpret any provision hereof, the prevailing party shall be entitled to
receive, in addition to all other sums and relief, its reasonable costs and
attorney fees incurred both at and in preparation for trial and any appeal or
review, such amounts to be set by the courts before which the matter is heard.
Without limitation on and in addition to the foregoing, Borrower shall reimburse
Lender for all such costs and fees which Lender may incur in connection with any
bankruptcy or similar proceeding wherein Borrower, any Co-Maker or Guarantor is
a "debtor," including (without limitation) issues peculiar to Federal bankruptcy
law.
5.5 ALIENATION OF PROPERTY: The Property shall not be further encumbered
(whether such encumbrance is prior or inferior to the lien of the Deed of
Trust), sold, transferred, or otherwise alienated nor shall the purpose of the
Loan be materially changed (e.g., a change of the Project from apartments to
condominium status), in whole or in part, without the prior written consent of
Lender, which consent may be withheld in Lender's sole discretion. In the event
of a violation of the foregoing covenants, Lender may, at its option and without
notice, terminate this Commitment.
5.6 QUALITY: The Borrower will ensure the construction and maintenance of
all improvements comprising or to comprise the Project in a first-class
condition and quality, and free from encroachment upon building lines, easements
and property lines and in compliance with all applicable set-back requirements.
5.7 LIENS: The Deed of Trust and other security interests specified herein
shall constitute second priority liens and
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April 29, 1996
Page 17
security interests against the Property and all other collateral. The Borrower
will not permit any lien other than those contemplated in favor of Lender and
approved by Lender to exist on the Property or any other collateral, except the
first lien Trust Deed executed and delivered by Borrower to PIONEER NATIONAL
TITLE INSURANCE COMPANY, as trustee for the benefit of National Mortgage dated
February 10, 1981, recorded in the Official Records of Washington County,
Oregon, at Fee No. 81005313 (the "First Lien Trust Deed") and securing the
payment and performance of a note executed by Borrower and payable to National
Mortgage in the amount of $1,350,000 (the "Prior Note").
5.8 LITIGATION: The Borrower and each Co-Maker and Guarantor shall
promptly furnish Lender written notice of any litigation affecting the Borrower,
such Co-Makers, Guarantors or the Property.
5.9 HAZARDOUS MATERIALS: For the purposes of this Commitment, the phrase
"Hazardous Materials" shall mean and include any asbestos, oil, hazardous
substance, pollutant, contaminant, hazardous waste, hazardous material,
dangerous waste, extremely hazardous waste, toxic waste, or air pollution, as
any such term or similar term is now or hereafter used, defined or understood in
any Federal, state, county, city or other governmental statute, law, code, rule,
regulation, ordinance, order or decree which is applicable to the Property and
relates to the protection of the environment, animal habitat or the use of land
(collectively, "Environmental Laws"). Borrower represents and warrants to Lender
that, to the best knowledge and belief of Borrower and based upon due and
diligent inquiry by Borrower, (a) there are no Hazardous Materials in, upon or
buried beneath the Property nor have any Hazardous Materials been emitted or
released from the Property in violation of any Environmental Laws, and (b) there
are not now nor have there been any underground storage tanks located on the
Property, including any such tanks used for the storage of any Hazardous
Materials. In no event shall Borrower bring onto, store upon, use upon, bury
beneath, emit or release from, nor allow to be brought onto, stored upon, used
upon, buried beneath, emitted or released from the Property, any Hazardous
Material in violation of any Environmental Laws, nor install any underground
tanks for storage of any of the same. Borrower shall indemnify and hold Lender,
its officers, directors and agents, and the Property, harmless from any claim,
cost, damage or expense, including attorney fees, monitoring costs, response
costs, and penalties, with respect to any breach or alleged breach of any of the
warranties and covenants contained herein regarding Hazardous Materials. The
warranties and covenants contained herein shall be made a part of all Loan
Documents and shall survive the exercise of any remedies by Lender in case of
default, including (without limitation) foreclosure or obtaining title to the
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April 29, 1996
Page 18
Property in lieu of foreclosure.
5.10 INSPECTION: Lender, through its officers, agents or employees, shall
have the right at all reasonable times:
5.10.1 To enter upon the Project and inspect the construction work
to determine that the same is in conformity with the Plans and Specifications
and all of the requirements of the Loan and this Commitment.
5.10.2 To retain the services of a licensed architect or engineer
selected by Lender who shall consult on the adequacy of the Plans,
Specifications and working drawings and inspect the construction work for
compliance with the approved Plans and with reasonable standards of structural
safety. From time to time, Lender may retain the services of other experts and
consultants as it may deem appropriate in connection with the supervision and
inspection of the Plans, Specifications, working drawings and construction work.
5.10.3 To examine, subject to the limitations hereinafter set forth,
the books, records, accounting data and other documents (and to make extracts
therefrom or copies thereof) of Borrower and all contractors and significant
subcontractors supplying goods and/or services in connection with the Project.
However, the right of inspection set forth herein shall extend only to books,
records, accounting data and other documents pertaining to the Project or
materials supplied therefor. The books, records and documents shall promptly be
made available to Lender upon written demand therefor. All contracts hereafter
let by Borrower relating to the Project shall require agreement to the foregoing
inspection rights, except where such rights have been waived by Lender in
writing.
5.10.4 All costs and expenses incurred by Lender in the exercise of
its rights under this Section 5.10, including the fees of any architect,
engineer, or other professional engaged by Lender, shall be paid by Borrower
upon receipt of written notification from Lender as to the amount thereof, and
Lender shall be entitled to deduct such fees and costs from any Loan
disbursement to Borrower or from any undisbursed Loan funds.
5.10.5 It is expressly understood that Lender is under no duty to
inspect such records, to supervise or inspect the work of construction, or
Borrower's books, and any such inspections are for the sole purpose of
preserving Lender's rights hereunder. Failure to perform any of the foregoing
shall not constitute a waiver of any of the rights of Lender. Inspection not
followed by a notice of default shall not constitute a waiver of any default
then existing; nor shall it constitute a representation that there has been or
will be compliance with the Plans and
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April 29, 1996
Page 19
Specifications or that the construction is free from defective materials or
workmanship. The results of any such inspection conducted by or at the request
of Lender shall be the sole property of Lender and shall not be available to
Borrower without Lender's approval, which Lender may withhold with or without
cause.
5.11 SCOPE OF AGREEMENT: This Commitment sets forth the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior written or oral understandings with respect thereto; provided, however,
that all written or oral representations made by Borrower to Lender with respect
to the subject matter hereof shall survive the execution of this Commitment. No
modification or waiver of any provision of this Commitment shall be effective
unless the same shall be in writing and signed by the parties hereto. This
Commitment and the transactions contemplated hereby shall be governed by and
construed in accordance with the laws of the State of Oregon. In the event any
portion of this Commitment Letter is held by a court to be invalid or
unenforceable as written, then the parties intend and desire that (a) such
portion be valid and enforceable to the extent permitted by law, and (b) the
balance hereof shall remain fully valid and enforceable.
5.12 SURVIVAL: All warranties, covenants and conditions contained herein
for the benefit of Lender, and Lender's rights with respect to the same, shall
survive closing of the Loan and shall not be deemed to have merged into any of
the Loan Documents.
5.13 NO THIRD PARTIES BENEFITED: There are no third party beneficiaries
hereof. No third party shall have any claim to any right hereunder or to any
proceeds of the Loan.
5.14 PUBLICITY: At its option, Lender may announce and publicize the
making of the Loan. Lender shall be included in general signage on the Project,
or, at its own expense, may place display signs on the Project indicating its
involvement in Project financing. Borrower shall maintain any display signs as
long as this Commitment or the Loan is in effect.
5.15 CONSTRUCTION INTEREST RESERVES: Interest reserves included in the
Construction Loan Budget have been divided into two parts: Construction Interest
and Lease-Up Interest.
Construction Interest: During the construction phase of the Project,
monthly interest payments on the Note will be paid directly from the
Construction Interest Budget line item by Lender when due. Should the
Construction Interest Budget line item be fully disbursed prior to completion of
the construction phase of the Project, then Borrower shall contribute, with
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April 29, 1996
Page 20
separate funds of Borrower, the amount of the shortfall. If construction has
been completed and funds from this line item remain undisbursed, Borrower may
apply those funds to the Lease-Up Interest Line Item or, with Lender's approval,
use the excess funds for other Project expenses approved by Lender.
Lease-Up-Interest: Income and rents generated from the Project shall
be applied to the monthly interest payments due on the Note (i.e., the rental
income generated by the Project, after all operating expenses have been paid,
shall be applied to the monthly interest payments as the payments become due).
During the Lease-Up phase of the Project, funds from the Lease-Up Interest Line
Item of the Construction Budget will be disbursed to meet monthly interest
payments only to the extent that net income from the Project is insufficient to
pay such monthly payments. With respect to the Budget Line Item for Lease-Up
Interest, no funds may be drawn by Borrower for interest beyond the amount
permitted to be drawn through the current month; interest reserves for future
months may not be drawn by Borrower to pay current interest. If the interest to
be paid on the Loan exceeds the amount budgeted for interest in the Construction
Budget, then Borrower shall contribute, from separate funds, the amount of the
shortfall.
6. WARRANTIES AND REPRESENTATIONS OF BORROWER.
Borrower makes the following representations, warranties and
covenants to and with Lender to induce Lender to enter into this Commitment:
6.1 No Litigation. There is no litigation, administrative proceeding or
dispute pending against Borrower or with respect to the Property, nor, to the
best knowledge and belief of Borrower, is any such litigation, administrative
proceeding or dispute threatened or contemplated, the adverse determination of
which might affect the ability of Borrower to repay the Loan or to complete the
Project. There is no condemnation or similar proceeding pending with respect to
the Property, or any portion thereof, nor, to the best knowledge and belief of
Borrower, is any such proceeding threatened or contemplated.
6.2 Compliance with Laws. Borrower has examined and is familiar with all
laws applicable to the Project. The contemplated Project will, in all respects,
conform to and comply with all such laws.
6.3 Financial Statements. All financial statements, information and other
data furnished or to be furnished by Borrower to Lender in connection with this
Loan are and shall be, in all respects, (a) true, complete and correct, and (b)
prepared in accordance with generally accepted accounting principles. No
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April 29, 1996
Page 21
adverse change has occurred since the date of any of said items previously
delivered to Lender.
6.4 Authority. Borrower and each general partner of Borrower, if any, and
each other party signatory to the Loan Documents, whether individuals,
corporations, partnerships or other entities (the "Parties"), have full power
and authority to execute this Commitment and to undertake and consummate the
transactions contemplated hereby and by the Loan Documents, and to pay, perform
and observe the conditions, covenants, agreements and obligations herein and
therein contained. This Commitment has been validly executed by the Parties and
constitutes the legal, valid and binding representations, warranties and
obligations of the Parties.
6.5 Use of Proceeds. The proceeds of the Loan shall be used for business
or commercial purposes not personal, agricultural or consumer purposes.
6.6 Indemnity. Borrower shall, at Borrower's expense, protect, defend,
indemnify, save and hold the Property, Lender and its officers, directors and
agents harmless from and against all claims, demands, losses, expenses, damages,
causes of action (whether legal or equitable in nature) asserted by any person
or entity arising out of, caused by or relating to (a) any act or omission of
Borrower and/or (b) the inaccuracy or alleged inaccuracy of any warranty of
Borrower. Borrower shall pay Lender, upon demand, all claims, judgments,
damages, losses and expenses (including court costs and reasonable attorneys'
fees and expenses) incurred by Lender as a result of any legal or other action
arising out of the foregoing.
6.7 First Lien Trust Deed. At the request of Borrower, Lender has agreed
to defer final payment of the Prior Note until after the Closing Date in order
for Borrower to avoid paying the prepayment penalty set forth therein. Borrower
shall pay and perform all of its obligations under the Prior Note and First Lien
Trust Deed as and when due and shall pay in full the entire indebtedness
evidenced by the Prior Note on or before September 2, 1996. If Borrower fails to
perform its obligations under this Section or defaults in any payments or other
obligations due under the Prior Note or the First Lien Trust Deed, then (i) such
failure shall constitute an event of default by Borrower under the Loan
Documents and Lender, at its option, shall be entitled to exercise any remedy
available to it by reason of such default, and (ii) Lender shall have the right
to cure such default for the account of Borrower, utilizing Loan funds for such
purpose if Lender so elects (including any Loan holdbacks shown in the
Construction Loan Budget for this purpose), and any such advance shall be
secured by the Loan Documents and constitute an additional obligation of
Borrower.
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April 29, 1996
Page 22
7. STATUTORY NOTICE. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND
COMMITMENTS MADE BY US (LENDER) AFTER OCTOBER 3, 1989, CONCERNING LOANS
AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR
HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE
IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US (LENDER) TO BE
ENFORCEABLE.
8. TERM AND ACCEPTANCE OF THIS COMMITMENT.
This Commitment is presented to you in duplicate for acceptance in
accordance with your application and shall be of no force or effect unless
Lender has received a fully executed counterpart hereof and the commitment fee
referenced above on or before May 15, 1996.
Time is of the essence with respect to all time periods set forth
herein. All of the terms of this Commitment must be complied with and the Loan
closed within two (2) months from the date of acceptance of this Commitment by
Lender; otherwise, all obligations of Lender hereunder shall terminate and be of
no further force or effect. In the event of such termination, Lender shall
retain the commitment fee referenced above.
KEY BANK OF OREGON, an Oregon
banking corporation
By: /s/ Alan D. Hubka
Name: Alan D. Hubka
Title: Vice President
The undersigned have read the foregoing Commitment with all
attachments and agree, acknowledge, and accept the terms and conditions thereof.
Date: April___, 1996
Borrower: GARDEN HOMES ENTERPRISES, INC.
By: /s/ Colin Lamb
Name: Colin Lamb
Title: President
<PAGE>
April 29, 1996
Page 23
Guarantors: LAMBS, INC.
By: /s/ Colin Lamb
Name: Colin Lamb
Title: Vice President
/s/ Genevieve L. Lamb
----------------------------------------
Genevieve Lamb
/s/ Colin Lamb
----------------------------------------
Colin Lamb
/s/ Gary R. Lamb
----------------------------------------
Gary Lamb
GENEVIEVE LAMB REVOCABLE TRUST
By: /s/ Genevieve L. Lamb
Name: Genevieve L. Lamb
Title: Trustor
UNITED GROCERS INC.
By: /s/ Alan C. Jones
Name: Alan C. Jones
Title: President/CEO
EXIBIT 10.H2
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT entered into this 8th day of April, 1996, by
and between UNITED GROCERS, INC., an Oregon corporation, hereinafter designated
as Sublessor, and Al Mancasola's Grocery Markets, Inc., dba Farmers Sentry
Markets, a California corporation, hereinafter designated as Sublessee;
W I T N E S S E T H
WHEREAS, the Sublessor has entered into a Lease dated March 13, 1996,
with Voit Shasta Partners, a California Limited Partnership, for a supermarket
located at the NEC Shasta Dam & Wonderland Blvd.'s, City of Shasta Lake, CA
(more particularly described in Exhibit "A" attached to said lease), commencing
on the date set forth in the attached Exhibit "A" Lease, 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 not to
exceed 20 years, commencing on the date set forth in Article 4 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 Sublessee those premises described in
said Exhibit "A," for the term of 20 years.
1.1 The Sublessee, so long as he is 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 Article 4
of said Exhibit.
(2) Sublessee covenants and agrees 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), 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) Sublessee shall, upon execution hereof, pay any and all rental or
security deposits and all other sums including minimum rent, as required
pursuant to the terms and conditions of said Exhibit "A."
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(4) Sublessee shall pay, directly to Sublessor, a Finance Fee,
hereinafter referred to as "additional rent," in the amount hereinafter set
forth per month in advance on the first day of each calendar month during the
Original Term of the Sublease. The Finance Fee for any fractional calendar month
shall be prorated. The Finance Fee payable to Sublessor shall be in addition to
the amounts payable by Sublessee per the terms of Exhibit "A."
Months Monthly Finance Fee
1 - 30 $ 0.00
31 - 36 $1,818.00
37 - 60 $1,591.00
61 - 84 $1,735.00
85 - 120 $1,487.00
121 - 180 $1,606.00
181 - 240 $1,705.00
(5) Sublessee shall be bound by the same responsibilities, rights,
privileges and duties as Sublessor, as enumerated by 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 have the right to approve, which approval shall not be
unreasonably withheld, and 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 with respect to said Exhibit "A" and Sublessees use of the
demised premises.
5.1 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. Sublessee 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.
(A) In the event of an assignment, Sublessee shall thereafter
pay to Sublessor in connection with such assignment, fifty percent (50%) of all
sums and other consideration paid (or payable) to and for the benefit of
Sublessee by the Assignee on account of the assignment as and when such sums and
other considerations are paid (or are payable) by the Assignee.
(B) In the event the transfer is by virtue of a sublease,
fifty percent (50%) of any rent or other consideration received by Sublessee,
either initially or over the
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<PAGE>
term of the sublease, in excess of such rent called for hereunder, or in the
case of a sublease of a portion of the Leased Premises, in excess of such rent
fairly allocable to such portion, after appropriate adjustments to ensure that
all other payments called for hereunder are taken into account, shall be paid by
Sublessee to Sublessor, promptly after its receipt by Sublessee.
5.2 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
Sublessee in the County of Shasta, State of 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 County of Shasta,
State of California, or that 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
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 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
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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 the date of written notice of the liquidated
damages.
(C) Sublessee covenants that as long as this Sublease remains
in effect, and for the 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
(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 Sublessee or their owners, as the case may
be, are prepared to accept from a third party. Prior to such sale by the
Sublessee or their owners, the Sublessee shall first notify Sublessor of the
desire to sell the store or controlling interest 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 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 Sublessee 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
Sublessee 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
one hundred twenty (120) days following the date Sublessor declined the
purchase, and if such sale is not consummated in accordance with the offered
terms and conditions with said one hundred twenty (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 heirs at law of Sublessee or any shareholder
or heir at law of any shareholder, 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) Sublessee represents and warrants 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.
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<PAGE>
(E) 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.
(6) SECURITY AGREEMENT.
6.1 GRANT, COLLATERAL AND OBLIGATIONS. Sublessee 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
Sublessee;
(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 Sublessee;
(C) subject to liens securing purchase money financing
therefor as described in Exhibit "B," 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 "C," 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 Sublessee under
this Sublease, all renewals and extensions thereof, the price of goods, services
and merchandise purchased by Sublessee 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.
6.2 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:
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<PAGE>
(A) Sublessee is the owner 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 "B," hereto to which Secured Party has consented
("Permitted Liens").
(B) Sublessee 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 and except in
the ordinary course of business so long as any security interests are
subordinate to the security interest of sublessor.
(C) All tangible Collateral shall be kept at Sublessees'
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.
(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 Sublessees' 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.
6.3 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.
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<PAGE>
6.4 FINANCING STATEMENTS. Sublessee 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.
6.5 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, Sublessee 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.
(7) DEFAULT. The following shall constitute a default under this
Sublease:
7.1 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;
7.2 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
Sublessees hereunder;
7.3 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;
7.4 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
Sublessees' purchases of goods and services from Sublessor any other loans or
leases Sublessee may have or enter into with Sublessor, and Sublessees'
obligations under the Bylaws of Sublessor and its application for membership in
Sublessor;
7.5 If Sublessee vacate or abandon the premises or allow the
premises to remain vacant or unoccupied;
7.6 If Sublessee make an assignment for the benefit of
creditors, or if, with or without Sublessees' 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
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
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<PAGE>
7.7 If Sublessee sell 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 in the ordinary course of business.
(8) REMEDIES. In the event of any default under this Sublease:
8.1 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 Sublessees' rights of possession in the premises without terminating
this Sublease;
8.2 Sublessor shall have the immediate right, whether or not
the Sublease shall have been terminated pursuant to paragraph 8.1, 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;
8.3 Sublessor may (but shall be under no obligation to),
whether or not this Sublease shall have been terminated pursuant to paragraph
8.1, 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);
8.4 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
8.5 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 (9) 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.
8.6 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 Sublessee of its liabilities and
obligations under this Sublease, all of which shall survive such expiration,
termination, repossession or resubletting.
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<PAGE>
(9) DAMAGES.
9.1 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, Sublessee 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 Sublessee on each such day.
9.2 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 9.1, Sublessor
shall be entitled to recover from Sublessee, and Sublessee 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 9.1 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.
(10) 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
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<PAGE>
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.
(11) 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.
(12) 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 (30) day period.
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this Sublease.
Al Mancasola's Grocery Markets, Inc. United Grocers, Inc.,
(a California corporation) (an Oregon corporation)
By /s/ Ron Mancasola By /s/ Alan Jones
Its President Alan Jones, Its President
Date: 4/29/96 Date: 5/13/96
(Sublessee) (Sublessor)
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OPERATING AGREEMENT
of
WILLAMETTE FOODS MARKETPLACE, LLC,
an Oregon limited liability company
Dated effective as of March 3, 1996
MEMBERS:
PML INVESTMENTS, LLC
and
UNITED RESOURCES, INC.
<PAGE>
OPERATING AGREEMENT
OF
WILLAMETTE FOODS MARKETPLACE, LLC
This OPERATING AGREEMENT (this "Agreement") is made and entered into
effective as of March 3, 1996 (the "Effective Date"), by and among PML
INVESTMENTS, LLC ("PML"), and UNITED RESOURCES, INC. ("United").
AGREEMENT
For and in consideration of the mutual covenants contained in this
Agreement, the Members agree as follows:
1. ORGANIZATION OF COMPANY
1.1 NAME
The Members have formed a limited liability company (the "Company")
under the laws of the State of Oregon. The name of the Company Willamette Foods
Marketplace, LLC.
1.2 CERTIFICATE OF FORMATION
Articles of Organization for the Company (the "Certificate") were filed
with the Secretary of State of the State of Oregon on February 26, 1996.
1.3 TERM
The Company shall commence as of the Effective Date of this Agreement
and shall continue until December 31, 2046, unless earlier terminated and
dissolved pursuant to Section 7.1 of this Agreement.
1.4 REGISTERED AGENT
The name and address of the initial registered agent of the Company are
as follows:
Pamela M. Garcia
14555 S.W. Teal Blvd.
Beaverton, OR 97007
The registered agent may be changed by the Members from time to time by filing
an amendment to the Certificate in accordance with the Oregon Limited Liability
Act (or any successor statute) as amended from time to time (the "Act").
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1.5 PURPOSES AND NATURE OF BUSINESS
The purposes of the Company shall be (a) to acquire, own, lease, and
operate a retail grocery business located at 2000 8th Street, West Linn, Oregon
97068 (the "Location"), (b) to engage in any other lawful business activity
permitted by the Act, and (c) to engage in all other acts and things necessary,
proper or advisable to effect and carry out any purposes of the Company and to
operate its business.
1.6 DEFECTS AS TO FORMALITIES
No failure to observe any formalities or requirements of this
Agreement, the Certificate or the Act shall be grounds for imposing personal
liability on the Members for liabilities of the Company.
1.7 LIABILITY OF MEMBERS TO THIRD PARTIES; RELIANCE BY THIRD- PARTY
CREDITORS
1.7.1 LIABILITY OF MEMBERS
Except as otherwise provided in the Act or in this Agreement, no Member
shall be personally liable for any debt, obligation or liability of the Company,
whether arising in contract, tort, or otherwise, solely by reason of being a
Member of the Company.
1.7.2 RELIANCE BY THIRD PARTIES
This Agreement is entered into among the Company and the Members for
the exclusive benefit of the Company, its Members, and their successors and
assigns. Specifically (but not by way of limitation), this Agreement is not
intended for the benefit of any creditor of the Company or any other person.
Except to the extent provided by applicable statute, and then only to that
extent, no such creditor or third party shall have any rights under this
Agreement or under any other agreement between the Company and any Member,
either with respect to any contribution to the Company or otherwise.
1.8 DEFINED TERMS
The definitions of certain terms used in this Agreement are set forth
in Exhibit 1.8.
PAGE 2
<PAGE>
2. CAPITAL
2.1 CAPITAL CONTRIBUTIONS
Each Member initially shall contribute the respective amounts described
on Exhibit 2.1 ("Initial Capital Contribution") and shall have the respective
Membership Interests described on Exhibit 2.1. Members may make additional
Capital Contributions at such times and in such amounts as shall be determined
by a unanimous vote of the Members. Exhibit 2.1 shall be amended from time to
time to reflect any transfers of Membership Interests, admissions of additional
Members or the making of any additional non-pro rata Capital Contributions.
2.2 COMPANY CAPITAL
(a) No Member shall be paid interest on any Capital Contribution.
(b) No Member shall have the right to withdraw, or receive any return
of, its Capital Contributions, except as may be specifically provided in this
Agreement. No Member shall have priority over any other Member, either as to the
return of its Capital Contributions or as to profits, losses or distributions,
except as otherwise specifically provided in this Agreement.
(c) Under circumstances requiring a return of any Capital Contribution,
no Member shall have the right to receive property, other than cash, except as
may be specifically provided in this Agreement.
(d) A creditor who makes a nonrecourse loan to the Company will not, as
a result of making such a loan, have or acquire at any time any direct or
indirect interest in the profits, capital or property of the Company, except
that if security is given for such a loan then the creditor may be a secured
creditor.
2.3 LOANS
The Company may borrow money from any Member upon such terms and
conditions as may be agreed by the Members. Unless otherwise agreed by a
unanimous vote of all Members, no such loan shall increase the interest of the
Member making the loan in the capital of the Company, or affect the Member's
share of the Profits and Losses of the Company.
2.4 MAINTENANCE OF CAPITAL ACCOUNTS
The Company shall establish and maintain Capital Accounts with respect
to each Member in accordance with the following:
(a) Each Member's Capital Account shall be increased by (i) the
Member's Capital Contributions, (ii) the Member's share of Profits as determined
pursuant to Section 4.4 below, (iii) the amount of any Company liabilities
assumed
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<PAGE>
by the Member, and (iv) the amount of any Company liabilities that are secured
by any property distributed to that Member.
(b) Each Member's Capital Account shall be decreased by (i) the amount
of cash and the value of any Company property (other than cash) distributed to
that Member pursuant to any provision of this Agreement, (ii) the Member's share
of Losses as determined pursuant to Section 4.4 below, (iii) the amount of any
liabilities of the Member assumed by the Company, and (iv) the amount of any
liabilities that are secured by any property contributed by the Member to the
Company.
(c) If the Company at any time distributes any of its assets in kind to
any Member, the Capital Accounts shall be adjusted to account for that Member's
allocable share (as determined under Section 4.4 below) of the Profits or Losses
that would have been realized by the Company had it sold the assets that were
distributed at their respective fair market values immediately prior to their
distribution.
(d) In the event of a transfer of all or a portion of a Member's
Membership Interest in the Company in accordance with the terms of this
Agreement, a transferee shall succeed to the Capital Account of the transferor
in proportion to the percentage of the Member's Membership Interest transferred
to that transferee.
(e) The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with those Regulations.
3. MEMBER MANAGEMENT
3.1 MEMBER MANAGED
The business and affairs of the Company are to be managed by the
Members; provided, however, that management of the business and affairs of the
Company shall be vested in the Operating Member (as defined below) as described
in Section 3.1.1 below, and certain major decisions described in Section 3.1.2
below shall require the approval of Members holding at least a specified
percentage of the Membership Interests in the Company.
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<PAGE>
3.1.1 APPOINTMENT AND AUTHORITY OF OPERATING MEMBER; TAX MATTERS
MEMBER
(a) Subject to limitations and restrictions set forth in Section 3.1.2,
the Members hereby agree that PML (the "Operating Member") shall, until
otherwise agreed by all of the Members, have the sole and exclusive right to
manage the business and affairs of the Company and shall have all powers and
rights necessary, appropriate or advisable to effectuate and carry out the
purposes and business of the Company. Consistent with and subject to the
foregoing, the Operating Member shall have all of the rights and powers that may
be possessed by a manager in a limited liability company with managers pursuant
to the Act, and such rights and powers as are otherwise conferred by law or as
may otherwise be necessary, advisable, or convenient to the performance or
discharge of the Operating Member's duties under this Agreement and to the
management of the business and affairs of the Company, including, without
limitation, expending funds of the Company in furtherance of the Company's
business, engaging such persons on behalf of and in the name of the Company as
the Operating Member may deem necessary or advisable to effectuate and carry out
the purposes and business of the Company, and executing, delivering, and
performing on behalf of and in the name of the Company, and without the
signature of any other Member, any agreement, document or instrument that the
Operating Member may deem necessary or desirable to effectuate and carry out the
purposes and business of the Company. Notwithstanding its appointment as
Operating Member, PML shall not be required to devote its full time or attention
to the business and affairs of the Company; provided, that its duties are
discharged with the care an ordinarily prudent person in a like position would
exercise under similar circumstances, and in a manner that PML reasonably
believes to be in the best interests of the Company.
(b) PML shall act as tax matters member pursuant to Code Section
6231(a)(7). Any costs incurred by the tax matters member in the performance of
its duties shall be reimbursed by the Company, or if the Company has dissolved,
by the (former) Members, on a basis in proportion to the Members' respective
Member Interests during the fiscal years at issue.
3.1.2 RESTRICTIONS ON AUTHORITY OF MEMBERS
(a) Neither the Operating Member nor any other Member shall have
authority to do or take any of the following actions without the unanimous
approval of all of the Members:
(1) Amend or restate the Certificate or this Agreement;
(2) Sell, exchange or otherwise dispose of or encumber all or
substantially all of the assets of the Company;
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<PAGE>
(3) Consolidate or merge the Company with any other entity;
(4) File for bankruptcy by or on behalf of the Company;
(5) admit any additional Members;
(6) Except as otherwise provided in Section 4.3, make
distributions of cash or other assets of the Company to one or more Members
other than in proportion to their respective Membership Interests;
(7) Incur any indebtedness in an amount exceeding $50,000 in any
one instance (except in connection with refinancings and renewals of existing
indebtedness that do not involve material increases in liability to the
Company);
(8) Acquire any land or other real property or any lease or other
interest in land or other real property, in any case, material to the business
of the Company (other than any easement, right-of way, or other similar interest
reasonably necessary or desirable, in the opinion of the Operating Member, for
the ownership or operation of the Company's business at the Location);
(9) Demolish all or substantially all of the Company's existing
leasehold improvements to the real property at the Location (the "Property");
(10) Construct any improvements or make any capital improvements,
repairs, alterations, or changes in or to the Property involving an expenditure
in excess of $50,000 in any one instance; or
(11) Execute any assignment, sublease or other arrangement
involving the rental, use, or occupancy of the Property or any material part
thereof for a term in excess of 12 months (other than in the ordinary course of
business).
(b) No Member (other than the Operating Member) shall have the
authority to bind the Company unless duly authorized by the Operating Member in
accordance with Section 3.1.3 or by all of the Members in accordance with this
Agreement. Each Member shall indemnify, defend and hold harmless the Company and
each of the other Members from and against any claims, losses or damages
resulting from the taking of any action by such Member that is not authorized by
this Agreement.
PAGE 6
<PAGE>
3.1.3 DELEGATION BY OPERATING MEMBER
The Operating Member may delegate certain actions or responsibilities,
employ employees, hire agents and appoint officers to act on behalf of the
Company.
3.1.4 MEMBER MEETINGS
The Members shall meet at the times and place as they may from time to
time agree.
3.2 COMPENSATION; EXPENSE REIMBURSEMENT
The Operating Member shall be entitled to compensation for services
rendered to the Company in connection with the management of the Company's
business as provided on Schedule A attached hereto, or as may be unanimously
approved by the Members. The Operating Member shall also be entitled to
reimbursement from the Company for reasonable fees and expenses incurred for or
on behalf of the Company or otherwise in connection with the performance of its
duties hereunder.
3.3 OTHER BUSINESS OF MEMBERS
Except as otherwise may be required by the Act, the Members may engage
in business ventures and activities of any nature and description, independently
or with others and whether or not in competition with the business of the
Company. Neither the Company nor any of the Members shall have any rights in or
to the independent ventures and activities of other Members, or the income or
profits derived therefrom, by reason of their acquisition of an interest in the
Company or their status as Members.
3.4 RIGHT OF COMPANY TO DEAL WITH MEMBERS OR AFFILIATES
The Company may enter into agreements, contracts or arrangements with
one or more of the Members or their affiliates pursuant to which that Member or
affiliate provides financing, goods and/or services to the Company in connection
with the Company's activities; provided, that either (a) the agreements,
contracts or arrangements are (i) on terms no less favorable than the Company
would obtain from an unaffiliated third party and, if such agreements, contracts
or arrangements are material to the business of the Company, the material terms
thereof are disclosed to all Members, or (b) the terms of such agreements,
contracts or arrangements are unanimously approved by all of the Members.
PAGE 7
<PAGE>
4. DISTRIBUTIONS AND ALLOCATIONS
4.1 DISTRIBUTIONS
Except as otherwise provided in Section 4.3, distributions of cash or
other assets of the Company shall be made at such times and in such amounts as
may be unanimously agreed by the Members. Except as otherwise provided in
Section 4.3, any such distribution shall be made among the Members in proportion
to the Membership Interest owned by each Member.
4.2 LIMITATIONS ON DISTRIBUTIONS
No distribution shall be made pursuant to Section 4.1 if, after the
distribution is made (a) the Company would be unable to pay its debts as they
become due or the (b) liabilities of the Company (other than liabilities for
which recourse to creditors is limited to specific assets of the Company) would
exceed the fair market value of the Company's assets (net of any liabilities to
which those assets may be subject).
4.3 TAX DISTRIBUTIONS
Notwithstanding any limitations provided elsewhere in this Agreement,
the Company shall, within 30 days after the close of each fiscal quarter of the
Company, distribute to all Members the Estimated Tax Amount calculated for such
fiscal quarter. Each Member's share of the Estimated Tax Amount shall be based
upon such Member's proportionate share of the Company's taxable income allocated
to such Member during the period to which the distribution relates. Any
distributions made pursuant to this Section 4.3 shall apply against the amounts
distributable to the Member pursuant to Section 4.1.
4.4 ALLOCATION OF PROFITS AND LOSSES
Profits and Losses for any fiscal year or other period shall be
allocated among the Members in proportion to their respective Membership
Interests.
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<PAGE>
5. INDEMNIFICATION
5.1 INDEMNIFICATION
To the fullest extent not prohibited by law, the Company shall
indemnify and hold harmless each Member of the Company from and against any and
all losses, claims, demands, costs, damages, liabilities (joint and several),
expenses of any nature (including attorneys' fees and disbursements), judgments,
fines, settlements, and other amounts arising from any and all claims, demands,
actions, suits, or proceedings, civil, criminal, administrative or
investigative, in which a Member may be involved, or threatened to be involved,
as a party or otherwise, arising out of or incidental to any business of the
Company transacted or occurring while that Member was a Member, regardless of
whether the Member continues to be a Member of the Company at the time any such
liability or expense is paid or incurred.
5.2 NONEXCLUSIVITY OF RIGHTS
The indemnification provided by this Section shall be in addition to
any other rights to which those indemnified may be entitled under any agreement
or vote of the Members, as a matter of law or equity or otherwise, and shall
continue as to a Member who has ceased to serve in that capacity, and shall
inure to the benefit of the heirs, successors, assigns and administrators of the
Member so indemnified.
5.3 INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS
The Operating Member may cause the Company to indemnify and advance
expenses to any officer, employee or agent of the Company to the same extent and
subject to the same conditions under which it may indemnify, and advance
expenses, to Members under this Section 5.
5.4 INSURANCE
The Company may maintain insurance, at its expense, to protect itself
and any Member, or officer, employee or agent of the Company against any
expense, liability or loss whether or not the Company would have the power to
indemnify such person against such expense, liability or loss under the Act.
6. TRANSFERS OF COMPANY INTERESTS
No Member may sell, assign, transfer, pledge or otherwise encumber such
Member's Membership Interest in the Company without the unanimous consent of the
remaining Members.
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<PAGE>
7. DISSOLUTION OF COMPANY; SPECIAL WITHDRAWAL RIGHT
7.1 EVENTS CAUSING DISSOLUTION
The Company shall dissolve upon the happening of any of the following
events:
(i) the Bankruptcy, death, withdrawal, removal or
adjudication of incompetence of a Member unless the remaining
Members, within 120 days of that event, unanimously agree to
continue the Company and, in the event there are fewer than two
remaining Members, admit a new Member;
(ii) the sale or other disposition of all or substantially
all of the assets of the Company and the collection of all
proceeds from that sale or disposition;
(iii) the vote of all Members to dissolve the Company; or
(iv) the expiration of the term of the Company specified in
Section 1.3 above.
7.2 LIQUIDATION
(a) Upon a dissolution of the Company, the Operating Member or
a court-appointed trustee (the "Liquidator") shall take full account of the
Company's assets and liabilities and the Company's property shall be liquidated
as promptly as is consistent with obtaining its fair value. The proceeds from
the liquidation, to the extent they are sufficient, shall be applied and
distributed in the following order and priority:
(i) First, to the payment and discharge of all of the
Company's debts and liabilities (including those to any Members),
including the establishment of any necessary reserves; and
(ii) Thereafter, any remaining property and assets of the
Company shall be distributed among the Members in accordance with
their positive Capital Account balances.
(b) The Capital Account balances of each Member shall be
appropriately adjusted before any distributions are made pursuant to this
Section 7.2, to reflect sales or other dispositions by the Company giving rise
to Capital Account adjustments and to reflect the Capital Account adjustments
provided elsewhere under this Agreement. Profits and Losses resulting from a
liquidation, if any, shall be allocated among the Members as provided for in
Section 4.4. If any assets of the Company are to be distributed in kind, those
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assets shall be distributed to the Members in the percentages of ownership that
reflect the percentage shares of cash that would have been distributed to each
pursuant to this Section 7.2 had the asset been sold at its fair market value.
(c) Each Member shall look solely to the assets of the Company
for all distributions with respect to the Company, including the return of a
Member's Capital Contributions and a Member's share of cash, and shall have no
recourse therefor, upon dissolution or otherwise, against the Company or any
other Member. No Member shall have any right to demand or receive property other
than cash upon dissolution and termination of the Company.
7.3 DEFICIT CAPITAL ACCOUNTS
Notwithstanding anything to the contrary contained in this Agreement,
and notwithstanding any custom or rule of law to the contrary, to the extent
that a deficit, if any, in the Capital Account of any Member results from or is
attributable to (a) deductions and losses of the Company (including non-cash
items such as depreciation), or (b) distributions of money pursuant to this
Agreement to all Members, upon dissolution of the Company that deficit shall not
be an asset of the Company and that Member shall not be obligated to contribute
that amount to the Company to bring the balance of that Member's Capital Account
to zero.
8. BOOKS, RECORDS AND ACCOUNTING
8.1 BOOKS AND RECORDS
The Operating Member shall maintain records and accounts of all
operations and expenditures of the Company.
8.2 ACCOUNTING
The Company's fiscal year shall be the calendar year. Capital Accounts
and the books of record shall be accounted for using generally accepted
accounting principles. For purposes of filing Federal and State income tax
returns, the Company shall be treated as a partnership and accounted for subject
to Subchapter K of the Code and the regulations promulgated thereunder.
9. AMENDMENT
This Agreement may be amended, restated or modified from time to time
only by a written instrument unanimously adopted by the Members. No Member shall
have any vested rights in this Agreement that may not be modified through an
amendment to this Agreement.
PAGE 11
<PAGE>
10. MISCELLANEOUS
10.1 FURTHER ASSURANCES
Each party agrees, at the request of any other party, at any time and
from time to time after the date hereof, promptly to execute and deliver all
such further documents, and promptly to take and forbear from all such action,
as may be reasonably necessary or appropriate in order to more effectively
confirm or carry out the provisions of this Agreement.
10.2 GOVERNING LAW
The parties intend that this Agreement shall be governed by and
construed in accordance with the laws of the State of Oregon applicable to
contracts made and to be wholly performed within Oregon by persons domiciled in
Oregon.
10.3 CONSTRUCTION
Whenever the singular number is used in this Agreement and when
required by the context, the same shall include the plural and vice versa, and
the masculine gender shall include the feminine and neuter genders and vice
versa.
10.4 HEADINGS
The headings in this Agreement are inserted for convenience only and
are in no way intended to describe, interpret, define, or limit the scope,
extent or intent of this Agreement or any provision hereof.
10.5 EXHIBITS AND SCHEDULES
Exhibits 1.8 and 2.1 and Schedule A are attached to and by this
reference made a part of this Agreement.
10.6 AMENDMENT; WAIVER
This Agreement may not be amended except in writing executed by the
parties. No provision of this Agreement shall be deemed to have been waived
unless such waiver is in writing signed by the waiving party. No failure by any
party to insist upon the strict performance of any provision of this Agreement,
or to exercise any right or remedy consequent upon a breach thereof, shall
constitute a waiver of any such breach, of such provision or of any other
provision. No waiver of any provision of this Agreement shall be deemed a waiver
of any other provision of this Agreement or a waiver of such provision with
respect to any subsequent breach, unless expressly provided in writing.
PAGE 12
<PAGE>
10.7 HEIRS, SUCCESSORS AND ASSIGNS
Each and all of the covenants, terms, provisions and agreements
contained in this Agreement shall be binding upon and inure to the benefit of
the parties hereto and, to the extent permitted by this Agreement, their
respective heirs, legal representatives, successors and assigns.
10.8 ATTORNEYS' FEES
If any suit or action arising out of or related to this Agreement is
brought by any party, the prevailing party or parties shall be entitled to
recover the costs and fees (including, without limitation, reasonable attorneys'
fees, the fees and costs of experts and consultants, copying, courier and
telecommunication costs, and deposition costs and all other costs of discovery)
incurred by such party or parties in such suit or action, including without
limitation any post-trial or appellate proceeding, or in the collection or
enforcement of any judgment or award entered or made in such suit or action.
10.9 SEVERABILITY
Any provision of this Agreement that is deemed invalid or unenforceable
shall be ineffective to the extent of such invalidity or unenforceability,
without rendering invalid or unenforceable the remaining provisions of this
Agreement.
10.10 NOTICES
All notices, requests, demands or other communications required or
permitted to be given under this Agreement shall be in writing. Notices may be
served by certified or registered mail, postage paid with return receipt
requested; by private courier, prepaid; by telex, facsimile, or other
telecommunication device capable of transmitting or creating a written record;
or personally. Mailed notices shall be deemed delivered five (5) days after
mailing, properly addressed. Couriered notices shall be deemed delivered on the
date that the courier warrants that delivery will occur. Telex or
telecommunicated notices shall be deemed delivered when receipt is either
confirmed by confirming transmission equipment or acknowledged by the addressee
or its office. Personal delivery shall be effective when accomplished. Unless a
party changes its address by giving notice to the other party as provided
herein, notices shall be delivered to the parties at the following addresses:
If to PML: PML Investments, LLC
14555 SW Teal Blvd.
Beaverton, OR 97007
Facsimile No.: (503) 579-3426
Attention: Pamela M. Garcia
PAGE 13
<PAGE>
If to United: United Resources, Inc.
6433 SE Lake Road
Milwaukie, OR 97222
Facsimile No.: (503) 833-1962
Attention: George P. Fleming
10.11 EXIT STRATEGIES AND CAPITAL CALLS
The Members agree to negotiate in good faith to agree upon and execute,
on or before April 30, 1996, (1) the terms of additional capital contributions
and (2) a buy-sell agreement or other "exit strategy" with respect to their
interests in the Company, which may address, among other matters, the possible
purchase and sale of interests in the Company in the event of deadlock, or on
the Bankruptcy or dissolution of a Member, or on the death of certain principal
owners of the controlling entities of the Members.
10.12 COUNTERPARTS
This Agreement may be executed by the parties in separate counterparts,
each of which when executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument.
[This space intentionally left blank]
PAGE 14
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this OPERATING
AGREEMENT as of the date first above written.
PML INVESTMENTS, LLC
By
-----------------------------------------------
Name:
Title:
UNITED RESOURCES, INC.
By
-----------------------------------------------
Name:
Title:
PAGE 15
<PAGE>
EXHIBIT 1.8
DEFINED TERMS
The defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Exhibit A. The singular
shall include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, as the context requires.
"Act" means the Oregon Limited Liability Company Act, and any successor
statute, as amended from time to time.
"Agreement" means this Operating Agreement as originally executed and
as amended or restated from time to time.
"Bankruptcy" means, "bankruptcy" as defined in ORS 63.001(3).
"Capital Account," with respect to any Member, means the account
maintained with respect to a Member determined in accordance with Section 2.4.
"Capital Contribution" means, with respect to any Member, the amount of
money and the initial fair market value of any property or the fair market value
of services contributed or to be contributed to the Company with respect to the
interest in the Company held by such Member.
"Certificate" means the Articles of Organization of the Company as
filed with the Secretary of State of Oregon as the same may be amended or
restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended, from time
to time, or any corresponding provision or provisions of any succeeding law and
any reference to a Section of the Code shall be deemed to include a reference to
any successor provision thereto.
"Estimated Tax Amount" means the amount equal to the highest federal
and state statutory marginal tax rate for individuals for a given taxable year
multiplied by the taxable income allocable to the Members for the applicable
fiscal quarter pursuant to Section 4.4.
"Majority Interest" means greater than fifty percent (50%) of the
Membership Interests of all of the Members.
"Member" (collectively, "Members") means each of the parties who
executes a counterpart of this Agreement and any successors or assigns admitted
as members pursuant to this Agreement.
"Membership Interest" means the basic share of limited liability
company interest entitling the holder thereof to all rights and benefits of a
Member under this Agreement.
"Profits" and "Losses" means, for each fiscal year (or other period),
an amount equal to the Company's taxable income or loss for such fiscal year (or
other period), determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
<PAGE>
(a) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses pursuant to this definition of "Profits" and "Losses" shall be
added to such taxable income or loss; and
(b) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Profits or Losses pursuant to this
definition of "Profits" and "Losses" shall be subtracted from such
taxable income or loss.
"Regulations" means temporary and final income tax regulations
promulgated under the Code in effect as of the date of filing the Articles and
the corresponding sections of any regulations subsequently issued that amend or
supersede such regulations, from time to time.
<PAGE>
EXHIBIT 2.1
INTERESTS OF MEMBERS
Initial Membership
Capital Contributions Interest
--------------------- --------
PML Investments, LLC $204,000 51%
United Resources, Inc. $196,000 49%
<PAGE>
SCHEDULE A
MANAGEMENT FEE SCHEDULE -- WILLAMETTE
PML shall be paid a monthly management fee for services rendered by PML
directly to the Company equal to 1.25% of the annual gross sales of the Company.
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
1. Organization of Company ........................................................... 1
1.1 Name ................................................................. 1
1.2 Certificate of Formation ............................................. 1
1.3 Term ................................................................. 1
1.4 Registered Agent ..................................................... 1
1.5 Purposes and Nature of Business ...................................... 2
1.6 Defects as to Formalities ............................................ 2
1.7 Liability of Members to Third Parties;
Reliance by Third-Party Creditors .................................... 2
1.7.1 Liability of Members ............................................ 2
1.7.2 Reliance by Third Parties ....................................... 2
1.8 Defined Terms ........................................................ 2
2. Capital ........................................................................... 3
2.1 Capital Contributions ................................................ 3
2.2 Company Capital ...................................................... 3
2.3 Loans ................................................................ 3
2.4 Maintenance of Capital Accounts ...................................... 3
3. Member Management ................................................................. 4
3.1 Member Managed ....................................................... 4
3.1.1 Appointment and Authority of Operating
Member; Tax Matters Member ...................................... 5
3.1.2 Restrictions on Authority of Members ............................ 5
3.1.3 Delegation by Operating Member .................................. 7
3.1.4 Member Meetings ................................................. 7
3.2 Compensation; Expense Reimbursement .................................. 7
3.3 Other Business of Members ............................................ 7
3.4 Right of Company to Deal With Members or
Affiliates ........................................................... 7
4. Distributions and Allocations ..................................................... 8
i
<PAGE>
4.1 Distributions ........................................................ 8
4.2 Limitations on Distributions ......................................... 8
4.3 Tax Distributions .................................................... 8
4.4 Allocation of Profits and Losses ..................................... 8
5. Indemnification ................................................................... 8
5.1 Indemnification ...................................................... 8
5.2 Nonexclusivity of Rights ............................................. 9
5.3 Indemnification of Officers, Employees and
Agents ............................................................... 9
5.4 Insurance ............................................................ 9
6. Transfers of Company Interests .................................................... 9
7. Dissolution of Company; Special Withdrawal Right .................................. 9
7.1 Events Causing Dissolution ........................................... 9
7.2 Liquidation .......................................................... 10
7.3 Deficit Capital Accounts ............................................. 11
8. Books, Records and Accounting ..................................................... 11
8.1 Books and Records .................................................... 11
8.2 Accounting ........................................................... 11
9. Amendment ......................................................................... 11
10. Miscellaneous ..................................................................... 12
10.1 Further Assurances ................................................... 12
10.2 Governing Law ........................................................ 12
10.3 Construction ......................................................... 12
10.4 Headings ............................................................. 12
10.5 Exhibits and Schedules ............................................... 12
10.6 Amendment; Waiver .................................................... 12
10.7 Heirs, Successors and Assigns ........................................ 13
10.8 Attorneys' Fees ...................................................... 13
ii
<PAGE>
10.9 Severability ......................................................... 13
10.10 Notices .............................................................. 13
10.11 Exit Strategies and Capital Calls .................................... 14
10.12 Counterparts ......................................................... 14
</TABLE>
iii
OPERATING AGREEMENT
of
WEST LINN FOODS MARKETPLACE, LLC,
an Oregon limited liability company
Dated effective as of March 3, 1996
MEMBERS:
PML INVESTMENTS, LLC
and
UNITED RESOURCES, INC.
<PAGE>
OPERATING AGREEMENT
OF
WEST LINN FOODS MARKETPLACE, LLC
This OPERATING AGREEMENT (this "Agreement") is made and entered into
effective as of March 3, 1996 (the "Effective Date"), by and among PML
INVESTMENTS, LLC ("PML"), and UNITED RESOURCES, INC. ("United").
AGREEMENT
For and in consideration of the mutual covenants contained in this
Agreement, the Members agree as follows:
1. ORGANIZATION OF COMPANY
1.1 NAME
The Members have formed a limited liability company (the "Company")
under the laws of the State of Oregon. The name of the Company is West Linn
Foods Marketplace, LLC.
1.2 CERTIFICATE OF FORMATION
Articles of Organization for the Company (the "Certificate") were filed
with the Secretary of State of the State of Oregon on February 26, 1996.
1.3 TERM
The Company shall commence as of the Effective Date of this Agreement
and shall continue until December 31, 2046, unless earlier terminated and
dissolved pursuant to Section 7.1 of this Agreement.
1.4 REGISTERED AGENT
The name and address of the initial registered agent of the Company are
as follows:
Pamela M. Garcia
14555 S.W. Teal Blvd.
Beaverton, OR 97007
The registered agent may be changed by the Members from time to time by filing
an amendment to the Certificate in accordance with the Oregon Limited Liability
Act (or any successor statute) as amended from time to time (the "Act").
PAGE 1
<PAGE>
1.5 PURPOSES AND NATURE OF BUSINESS
The purposes of the Company shall be (a) to acquire, own, lease, and
operate a retail grocery business located at 5639 NE Hood Street, West Linn, OR
97068 (the "Location"), (b) to engage in any other lawful business activity
permitted by the Act, and (c) to engage in all other acts and things necessary,
proper or advisable to effect and carry out any purposes of the Company and to
operate its business.
1.6 DEFECTS AS TO FORMALITIES
No failure to observe any formalities or requirements of this
Agreement, the Certificate or the Act shall be grounds for imposing personal
liability on the Members for liabilities of the Company.
1.7 LIABILITY OF MEMBERS TO THIRD PARTIES; RELIANCE BY THIRD-PARTY
CREDITORS
1.7.1 LIABILITY OF MEMBERS
Except as otherwise provided in the Act or in this Agreement, no Member
shall be personally liable for any debt, obligation or liability of the Company,
whether arising in contract, tort, or otherwise, solely by reason of being a
Member of the Company.
1.7.2 RELIANCE BY THIRD PARTIES
This Agreement is entered into among the Company and the Members for
the exclusive benefit of the Company, its Members, and their successors and
assigns. Specifically (but not by way of limitation), this Agreement is not
intended for the benefit of any creditor of the Company or any other person.
Except to the extent provided by applicable statute, and then only to that
extent, no such creditor or third party shall have any rights under this
Agreement or under any other agreement between the Company and any Member,
either with respect to any contribution to the Company or otherwise.
1.8 DEFINED TERMS
The definitions of certain terms used in this Agreement are set forth
in Exhibit 1.8.
PAGE 2
<PAGE>
2. CAPITAL
2.1 CAPITAL CONTRIBUTIONS
Each Member initially shall contribute the respective amounts described
on Exhibit 2.1 ("Initial Capital Contribution") and shall have the respective
Membership Interests described on Exhibit 2.1. Members may make additional
Capital Contributions at such times and in such amounts as shall be determined
by a unanimous vote of the Members. Exhibit 2.1 shall be amended from time to
time to reflect any transfers of Membership Interests, admissions of additional
Members or the making of any additional non-pro rata Capital Contributions.
2.2 COMPANY CAPITAL
(a) No Member shall be paid interest on any Capital Contribution.
(b) No Member shall have the right to withdraw, or receive any return
of, its Capital Contributions, except as may be specifically provided in this
Agreement. No Member shall have priority over any other Member, either as to the
return of its Capital Contributions or as to profits, losses or distributions,
except as otherwise specifically provided in this Agreement.
(c) Under circumstances requiring a return of any Capital Contribution,
no Member shall have the right to receive property, other than cash, except as
may be specifically provided in this Agreement.
(d) A creditor who makes a nonrecourse loan to the Company will not, as
a result of making such a loan, have or acquire at any time any direct or
indirect interest in the profits, capital or property of the Company, except
that if security is given for such a loan then the creditor may be a secured
creditor.
2.3 LOANS
The Company may borrow money from any Member upon such terms and
conditions as may be agreed by the Members. Unless otherwise agreed by a
unanimous vote of all Members, no such loan shall increase the interest of the
Member making the loan in the capital of the Company, or affect the Member's
share of the Profits and Losses of the Company.
2.4 MAINTENANCE OF CAPITAL ACCOUNTS
The Company shall establish and maintain Capital Accounts with respect
to each Member in accordance with the following:
(a) Each Member's Capital Account shall be increased by (i) the
Member's Capital Contributions, (ii) the Member's share of Profits as determined
pursuant to Section 4.4 below, (iii) the amount of any Company liabilities
assumed
PAGE 3
<PAGE>
by the Member, and (iv) the amount of any Company liabilities that are secured
by any property distributed to that Member.
(b) Each Member's Capital Account shall be decreased by (i) the amount
of cash and the value of any Company property (other than cash) distributed to
that Member pursuant to any provision of this Agreement, (ii) the Member's share
of Losses as determined pursuant to Section 4.4 below, (iii) the amount of any
liabilities of the Member assumed by the Company, and (iv) the amount of any
liabilities that are secured by any property contributed by the Member to the
Company.
(c) If the Company at any time distributes any of its assets in kind to
any Member, the Capital Accounts shall be adjusted to account for that Member's
allocable share (as determined under Section 4.4 below) of the Profits or Losses
that would have been realized by the Company had it sold the assets that were
distributed at their respective fair market values immediately prior to their
distribution.
(d) In the event of a transfer of all or a portion of a Member's
Membership Interest in the Company in accordance with the terms of this
Agreement, a transferee shall succeed to the Capital Account of the transferor
in proportion to the percentage of the Member's Membership Interest transferred
to that transferee.
(e) The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with those Regulations.
3. MEMBER MANAGEMENT
3.1 MEMBER MANAGED
The business and affairs of the Company are to be managed by the
Members; provided, however, that management of the business and affairs of the
Company shall be vested in the Operating Member (as defined below) as described
in Section 3.1.1 below, and certain major decisions described in Section 3.1.2
below shall require the approval of Members holding at least a specified
percentage of the Membership Interests in the Company.
PAGE 4
<PAGE>
3.1.1 APPOINTMENT AND AUTHORITY OF OPERATING MEMBER; TAX MATTERS
MEMBER
(a) Subject to limitations and restrictions set forth in Section 3.1.2,
the Members hereby agree that PML (the "Operating Member") shall, until
otherwise agreed by all of the Members, have the sole and exclusive right to
manage the business and affairs of the Company and shall have all powers and
rights necessary, appropriate or advisable to effectuate and carry out the
purposes and business of the Company. Consistent with and subject to the
foregoing, the Operating Member shall have all of the rights and powers that may
be possessed by a manager in a limited liability company with managers pursuant
to the Act, and such rights and powers as are otherwise conferred by law or as
may otherwise be necessary, advisable, or convenient to the performance or
discharge of the Operating Member's duties under this Agreement and to the
management of the business and affairs of the Company, including, without
limitation, expending funds of the Company in furtherance of the Company's
business, engaging such persons on behalf of and in the name of the Company as
the Operating Member may deem necessary or advisable to effectuate and carry out
the purposes and business of the Company, and executing, delivering, and
performing on behalf of and in the name of the Company, and without the
signature of any other Member, any agreement, document or instrument that the
Operating Member may deem necessary or desirable to effectuate and carry out the
purposes and business of the Company. Notwithstanding its appointment as
Operating Member, PML shall not be required to devote its full time or attention
to the business and affairs of the Company; provided, that its duties are
discharged with the care an ordinarily prudent person in a like position would
exercise under similar circumstances, and in a manner that PML reasonably
believes to be in the best interests of the Company.
(b) PML shall act as tax matters member pursuant to Code Section
6231(a)(7). Any costs incurred by the tax matters member in the performance of
its duties shall be reimbursed by the Company, or if the Company has dissolved,
by the (former) Members, on a basis in proportion to the Members' respective
Member Interests during the fiscal years at issue.
3.1.2 RESTRICTIONS ON AUTHORITY OF MEMBERS
(a) Neither the Operating Member nor any other Member shall have
authority to do or take any of the following actions without the unanimous
approval of all of the Members:
(1) Amend or restate the Certificate or this Agreement;
(2) Sell, exchange or otherwise dispose of or encumber all or
substantially all of the assets of the Company;
PAGE 5
<PAGE>
(3) Consolidate or merge the Company with any other entity;
(4) File for bankruptcy by or on behalf of the Company;
(5) admit any additional Members;
(6) Except as otherwise provided in Section 4.3, make
distributions of cash or other assets of the Company to one or more Members
other than in proportion to their respective Membership Interests;
(7) Incur any indebtedness in an amount exceeding $50,000 in any
one instance (except in connection with refinancings and renewals of existing
indebtedness that do not involve material increases in liability to the
Company);
(8) Acquire any land or other real property or any lease or other
interest in land or other real property, in any case, material to the business
of the Company (other than any easement, right-of way, or other similar interest
reasonably necessary or desirable, in the opinion of the Operating Member, for
the ownership or operation of the Company's business at the Location);
(9) Demolish all or substantially all of the Company's existing
leasehold improvements to the real property at the Location (the "Property");
(10) Construct any improvements or make any capital improvements,
repairs, alterations, or changes in or to the Property involving an expenditure
in excess of $50,000 in any one instance; or
(11) Execute any assignment, sublease or other arrangement
involving the rental, use, or occupancy of the Property or any material part
thereof for a term in excess of 12 months (other than in the ordinary course of
business).
(b) No Member (other than the Operating Member) shall have the
authority to bind the Company unless duly authorized by the Operating Member in
accordance with Section 3.1.3 or by all of the Members in accordance with this
Agreement. Each Member shall indemnify, defend and hold harmless the Company and
each of the other Members from and against any claims, losses or damages
resulting from the taking of any action by such Member that is not authorized by
this Agreement.
PAGE 6
<PAGE>
3.1.3 DELEGATION BY OPERATING MEMBER
The Operating Member may delegate certain actions or responsibilities,
employ employees, hire agents and appoint officers to act on behalf of the
Company.
3.1.4 MEMBER MEETINGS
The Members shall meet at the times and place as they may from time to
time agree.
3.2 COMPENSATION; EXPENSE REIMBURSEMENT
The Operating Member shall be entitled to compensation for services
rendered to the Company in connection with the management of the Company's
business as provided on Schedule A attached hereto, or as may be unanimously
approved by the Members. The Operating Member shall also be entitled to
reimbursement from the Company for reasonable fees and expenses incurred for or
on behalf of the Company or otherwise in connection with the performance of its
duties hereunder.
3.3 OTHER BUSINESS OF MEMBERS
Except as otherwise may be required by the Act, the Members may engage
in business ventures and activities of any nature and description, independently
or with others and whether or not in competition with the business of the
Company. Neither the Company nor any of the Members shall have any rights in or
to the independent ventures and activities of other Members, or the income or
profits derived therefrom, by reason of their acquisition of an interest in the
Company or their status as Members.
3.4 RIGHT OF COMPANY TO DEAL WITH MEMBERS OR AFFILIATES
The Company may enter into agreements, contracts or arrangements with
one or more of the Members or their affiliates pursuant to which that Member or
affiliate provides financing, goods and/or services to the Company in connection
with the Company's activities; provided, that either (a) the agreements,
contracts or arrangements are (i) on terms no less favorable than the Company
would obtain from an unaffiliated third party and, if such agreements, contracts
or arrangements are material to the business of the Company, the material terms
thereof are disclosed to all Members, or (b) the terms of such agreements,
contracts or arrangements are unanimously approved by all of the Members.
PAGE 7
<PAGE>
4. DISTRIBUTIONS AND ALLOCATIONS
4.1 DISTRIBUTIONS
Except as otherwise provided in Section 4.3, distributions of cash or
other assets of the Company shall be made at such times and in such amounts as
may be unanimously agreed by the Members. Except as otherwise provided in
Section 4.3, any such distribution shall be made among the Members in proportion
to the Membership Interest owned by each Member.
4.2 LIMITATIONS ON DISTRIBUTIONS
No distribution shall be made pursuant to Section 4.1 if, after the
distribution is made (a) the Company would be unable to pay its debts as they
become due or the (b) liabilities of the Company (other than liabilities for
which recourse to creditors is limited to specific assets of the Company) would
exceed the fair market value of the Company's assets (net of any liabilities to
which those assets may be subject).
4.3 TAX DISTRIBUTIONS
Notwithstanding any limitations provided elsewhere in this Agreement,
the Company shall, within 30 days after the close of each fiscal quarter of the
Company, distribute to all Members the Estimated Tax Amount calculated for such
fiscal quarter. Each Member's share of the Estimated Tax Amount shall be based
upon such Member's proportionate share of the Company's taxable income allocated
to such Member during the period to which the distribution relates. Any
distributions made pursuant to this Section 4.3 shall apply against the amounts
distributable to the Member pursuant to Section 4.1.
4.4 ALLOCATION OF PROFITS AND LOSSES
Profits and Losses for any fiscal year or other period shall be
allocated among the Members in proportion to their respective Membership
Interests.
PAGE 8
<PAGE>
5. INDEMNIFICATION
5.1 INDEMNIFICATION
To the fullest extent not prohibited by law, the Company shall
indemnify and hold harmless each Member of the Company from and against any and
all losses, claims, demands, costs, damages, liabilities (joint and several),
expenses of any nature (including attorneys' fees and disbursements), judgments,
fines, settlements, and other amounts arising from any and all claims, demands,
actions, suits, or proceedings, civil, criminal, administrative or
investigative, in which a Member may be involved, or threatened to be involved,
as a party or otherwise, arising out of or incidental to any business of the
Company transacted or occurring while that Member was a Member, regardless of
whether the Member continues to be a Member of the Company at the time any such
liability or expense is paid or incurred.
5.2 NONEXCLUSIVITY OF RIGHTS
The indemnification provided by this Section shall be in addition to
any other rights to which those indemnified may be entitled under any agreement
or vote of the Members, as a matter of law or equity or otherwise, and shall
continue as to a Member who has ceased to serve in that capacity, and shall
inure to the benefit of the heirs, successors, assigns and administrators of the
Member so indemnified.
5.3 INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS
The Operating Member may cause the Company to indemnify and advance
expenses to any officer, employee or agent of the Company to the same extent and
subject to the same conditions under which it may indemnify, and advance
expenses, to Members under this Section 5.
5.4 INSURANCE
The Company may maintain insurance, at its expense, to protect itself
and any Member, or officer, employee or agent of the Company against any
expense, liability or loss whether or not the Company would have the power to
indemnify such person against such expense, liability or loss under the Act.
6. TRANSFERS OF COMPANY INTERESTS
No Member may sell, assign, transfer, pledge or otherwise encumber such
Member's Membership Interest in the Company without the unanimous consent of the
remaining Members.
PAGE 9
<PAGE>
7. DISSOLUTION OF COMPANY; SPECIAL WITHDRAWAL RIGHT
7.1 EVENTS CAUSING DISSOLUTION
The Company shall dissolve upon the happening of any of the following
events:
(i) the Bankruptcy, death, withdrawal, removal or
adjudication of incompetence of a Member unless the remaining
Members, within 120 days of that event, unanimously agree to
continue the Company and, in the event there are fewer than two
remaining Members, admit a new Member;
(ii) the sale or other disposition of all or substantially
all of the assets of the Company and the collection of all
proceeds from that sale or disposition;
(iii) the vote of all Members to dissolve the Company; or
(iv) the expiration of the term of the Company specified in
Section 1.3 above.
7.2 LIQUIDATION
(a) Upon a dissolution of the Company, the Operating Member or a
court-appointed trustee (the "Liquidator") shall take full account of the
Company's assets and liabilities and the Company's property shall be liquidated
as promptly as is consistent with obtaining its fair value. The proceeds from
the liquidation, to the extent they are sufficient, shall be applied and
distributed in the following order and priority:
(i) First, to the payment and discharge of all of the
Company's debts and liabilities (including those to any Members),
including the establishment of any necessary reserves; and
(ii) Thereafter, any remaining property and assets of the
Company shall be distributed among the Members in accordance with
their positive Capital Account balances.
(b) The Capital Account balances of each Member shall be appropriately
adjusted before any distributions are made pursuant to this Section 7.2, to
reflect sales or other dispositions by the Company giving rise to Capital
Account adjustments and to reflect the Capital Account adjustments provided
elsewhere under this Agreement. Profits and Losses resulting from a liquidation,
if any, shall be allocated among the Members as provided for in Section 4.4. If
any assets of the Company are to be distributed in kind, those
PAGE 10
<PAGE>
assets shall be distributed to the Members in the percentages of ownership that
reflect the percentage shares of cash that would have been distributed to each
pursuant to this Section 7.2 had the asset been sold at its fair market value.
(c) Each Member shall look solely to the assets of the Company for all
distributions with respect to the Company, including the return of a Member's
Capital Contributions and a Member's share of cash, and shall have no recourse
therefor, upon dissolution or otherwise, against the Company or any other
Member. No Member shall have any right to demand or receive property other than
cash upon dissolution and termination of the Company.
7.3 DEFICIT CAPITAL ACCOUNTS
Notwithstanding anything to the contrary contained in this Agreement,
and notwithstanding any custom or rule of law to the contrary, to the extent
that a deficit, if any, in the Capital Account of any Member results from or is
attributable to (a) deductions and losses of the Company (including non-cash
items such as depreciation), or (b) distributions of money pursuant to this
Agreement to all Members, upon dissolution of the Company that deficit shall not
be an asset of the Company and that Member shall not be obligated to contribute
that amount to the Company to bring the balance of that Member's Capital Account
to zero.
8. BOOKS, RECORDS AND ACCOUNTING
8.1 BOOKS AND RECORDS
The Operating Member shall maintain records and accounts of all
operations and expenditures of the Company.
8.2 ACCOUNTING
The Company's fiscal year shall be the calendar year. Capital Accounts
and the books of record shall be accounted for using generally accepted
accounting principles. For purposes of filing Federal and State income tax
returns, the Company shall be treated as a partnership and accounted for subject
to Subchapter K of the Code and the regulations promulgated thereunder.
9. AMENDMENT
This Agreement may be amended, restated or modified from time to time
only by a written instrument unanimously adopted by the Members. No Member shall
have any vested rights in this Agreement that may not be modified through an
amendment to this Agreement.
PAGE 11
<PAGE>
10. MISCELLANEOUS
10.1 FURTHER ASSURANCES
Each party agrees, at the request of any other party, at any time and
from time to time after the date hereof, promptly to execute and deliver all
such further documents, and promptly to take and forbear from all such action,
as may be reasonably necessary or appropriate in order to more effectively
confirm or carry out the provisions of this Agreement.
10.2 GOVERNING LAW
The parties intend that this Agreement shall be governed by and
construed in accordance with the laws of the State of Oregon applicable to
contracts made and to be wholly performed within Oregon by persons domiciled in
Oregon.
10.3 CONSTRUCTION
Whenever the singular number is used in this Agreement and when
required by the context, the same shall include the plural and vice versa, and
the masculine gender shall include the feminine and neuter genders and vice
versa.
10.4 HEADINGS
The headings in this Agreement are inserted for convenience only and
are in no way intended to describe, interpret, define, or limit the scope,
extent or intent of this Agreement or any provision hereof.
10.5 EXHIBITS AND SCHEDULES
Exhibits 1.8 and 2.1 and Schedule A are attached to and by this
reference made a part of this Agreement.
10.6 AMENDMENT; WAIVER
This Agreement may not be amended except in writing executed by the
parties. No provision of this Agreement shall be deemed to have been waived
unless such waiver is in writing signed by the waiving party. No failure by any
party to insist upon the strict performance of any provision of this Agreement,
or to exercise any right or remedy consequent upon a breach thereof, shall
constitute a waiver of any such breach, of such provision or of any other
provision. No waiver of any provision of this Agreement shall be deemed a waiver
of any other provision of this Agreement or a waiver of such provision with
respect to any subsequent breach, unless expressly provided in writing.
PAGE 12
<PAGE>
10.7 HEIRS, SUCCESSORS AND ASSIGNS
Each and all of the covenants, terms, provisions and agreements
contained in this Agreement shall be binding upon and inure to the benefit of
the parties hereto and, to the extent permitted by this Agreement, their
respective heirs, legal representatives, successors and assigns.
10.8 ATTORNEYS' FEES
If any suit or action arising out of or related to this Agreement is
brought by any party, the prevailing party or parties shall be entitled to
recover the costs and fees (including, without limitation, reasonable attorneys'
fees, the fees and costs of experts and consultants, copying, courier and
telecommunication costs, and deposition costs and all other costs of discovery)
incurred by such party or parties in such suit or action, including without
limitation any post-trial or appellate proceeding, or in the collection or
enforcement of any judgment or award entered or made in such suit or action.
10.9 SEVERABILITY
Any provision of this Agreement that is deemed invalid or unenforceable
shall be ineffective to the extent of such invalidity or unenforceability,
without rendering invalid or unenforceable the remaining provisions of this
Agreement.
10.10 NOTICES
All notices, requests, demands or other communications required or
permitted to be given under this Agreement shall be in writing. Notices may be
served by certified or registered mail, postage paid with return receipt
requested; by private courier, prepaid; by telex, facsimile, or other
telecommunication device capable of transmitting or creating a written record;
or personally. Mailed notices shall be deemed delivered five (5) days after
mailing, properly addressed. Couriered notices shall be deemed delivered on the
date that the courier warrants that delivery will occur. Telex or
telecommunicated notices shall be deemed delivered when receipt is either
confirmed by confirming transmission equipment or acknowledged by the addressee
or its office. Personal delivery shall be effective when accomplished. Unless a
party changes its address by giving notice to the other party as provided
herein, notices shall be delivered to the parties at the following addresses:
If to PML: PML Investments, LLC
14555 SW Teal Blvd.
Beaverton, OR 97007
Facsimile No.: (503) 579-3426
Attention: Pamela M. Garcia
PAGE 13
<PAGE>
If to United: United Resources, Inc.
6433 SE Lake Road
Milwaukie, OR 97222
Facsimile No.: (503) 833-1962
Attention: George P. Fleming
10.11 EXIT STRATEGIES AND CAPITAL CALLS
The Members agree to negotiate in good faith to agree upon and execute,
on or before April 30, 1996, (1) the terms of additional capital contributions
and (2) a buy-sell agreement or other "exit strategy" with respect to their
interests in the Company, which may address, among other matters, the possible
purchase and sale of interests in the Company in the event of deadlock, or on
the Bankruptcy or dissolution of a Member, or on the death of certain principal
owners of the controlling entities of the Members.
10.12 COUNTERPARTS
This Agreement may be executed by the parties in separate counterparts,
each of which when executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument.
[This space intentionally left blank]
PAGE 14
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this OPERATING
AGREEMENT as of the date first above written.
PML INVESTMENTS, LLC
By
-----------------------------------------------
Name:
Title:
UNITED RESOURCES, INC.
By
-----------------------------------------------
Name:
Title:
PAGE 15
<PAGE>
EXHIBIT 1.8
DEFINED TERMS
The defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Exhibit A. The singular
shall include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, as the context requires.
"Act" means the Oregon Limited Liability Company Act, and any successor
statute, as amended from time to time.
"Agreement" means this Operating Agreement as originally executed and
as amended or restated from time to time.
"Bankruptcy" means, "bankruptcy" as defined in ORS 63.001(3).
"Capital Account," with respect to any Member, means the account
maintained with respect to a Member determined in accordance with Section 2.4.
"Capital Contribution" means, with respect to any Member, the amount of
money and the initial fair market value of any property or the fair market value
of services contributed or to be contributed to the Company with respect to the
interest in the Company held by such Member.
"Certificate" means the Articles of Organization of the Company as
filed with the Secretary of State of Oregon as the same may be amended or
restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended, from time
to time, or any corresponding provision or provisions of any succeeding law and
any reference to a Section of the Code shall be deemed to include a reference to
any successor provision thereto.
"Estimated Tax Amount" means the amount equal to the highest federal
and state statutory marginal tax rate for individuals for a given taxable year
multiplied by the taxable income allocable to the Members for the applicable
fiscal quarter pursuant to Section 4.4.
"Majority Interest" means greater than fifty percent (50%) of the
Membership Interests of all of the Members.
"Member" (collectively, "Members") means each of the parties who
executes a counterpart of this Agreement and any successors or assigns admitted
as members pursuant to this Agreement.
"Membership Interest" means the basic share of limited liability
company interest entitling the holder thereof to all rights and benefits of a
Member under this Agreement.
"Profits" and "Losses" means, for each fiscal year (or other period),
an amount equal to the Company's taxable income or loss for such fiscal year (or
other period), determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
<PAGE>
(a) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses pursuant to this definition of "Profits" and "Losses" shall be
added to such taxable income or loss; and
(b) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Profits or Losses pursuant to this
definition of "Profits" and "Losses" shall be subtracted from such
taxable income or loss.
"Regulations" means temporary and final income tax regulations
promulgated under the Code in effect as of the date of filing the Articles and
the corresponding sections of any regulations subsequently issued that amend or
supersede such regulations, from time to time.
<PAGE>
EXHIBIT 2.1
INTERESTS OF MEMBERS
Initial Membership
Capital Contributions Interest
--------------------- --------
PML Investments, LLC $12,500 80%
United Resources, Inc. $3,125 20%
<PAGE>
SCHEDULE A
MANAGEMENT FEE SCHEDULE -- WEST LINN
PML shall be paid a monthly management fee for services rendered by PML
directly to the Company based upon the annual gross sales of the Company, as
follows:
Annual Gross Sales Management Fee Percentage
------------------ -------------------------
For first $0.00 - $10,000,000.00 1.30%
On next $10,000,000.01 - 1.00%
$50,000,000.00
On amount over - $50,000,000.00 0.75%
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S>> <C>
1. Organization of Company ........................................................... 1
1.1 Name ................................................................. 1
1.2 Certificate of Formation ............................................. 1
1.3 Term ................................................................. 1
1.4 Registered Agent ..................................................... 1
1.5 Purposes and Nature of Business ...................................... 2
1.6 Defects as to Formalities ............................................ 2
1.7 Liability of Members to Third Parties;
Reliance by Third-Party Creditors .................................... 2
1.7.1 Liability of Members ............................................ 2
1.7.2 Reliance by Third Parties ....................................... 2
1.8 Defined Terms ........................................................ 2
2. Capital ........................................................................... 3
2.1 Capital Contributions ................................................ 3
2.2 Company Capital ...................................................... 3
2.3 Loans ................................................................ 3
2.4 Maintenance of Capital Accounts ...................................... 3
3. Member Management ................................................................. 4
3.1 Member Managed ....................................................... 4
3.1.1 Appointment and Authority of Operating
Member; Tax Matters Member ...................................... 5
3.1.2 Restrictions on Authority of Members ............................ 5
3.1.3 Delegation by Operating Member .................................. 7
3.1.4 Member Meetings ................................................. 7
3.2 Compensation; Expense Reimbursement .................................. 7
3.3 Other Business of Members ............................................ 7
3.4 Right of Company to Deal With Members or
Affiliates ........................................................... 7
4. Distributions and Allocations ..................................................... 8
i
<PAGE>
4.1 Distributions ........................................................ 8
4.2 Limitations on Distributions ......................................... 8
4.3 Tax Distributions .................................................... 8
4.4 Allocation of Profits and Losses ..................................... 8
5. Indemnification ................................................................... 8
5.1 Indemnification ...................................................... 8
5.2 Nonexclusivity of Rights ............................................. 9
5.3 Indemnification of Officers, Employees and
Agents ............................................................... 9
5.4 Insurance ............................................................ 9
6. Transfers of Company Interests .................................................... 9
7. Dissolution of Company; Special Withdrawal Right .................................. 9
7.1 Events Causing Dissolution ........................................... 9
7.2 Liquidation .......................................................... 10
7.3 Deficit Capital Accounts ............................................. 11
8. Books, Records and Accounting ..................................................... 11
8.1 Books and Records .................................................... 11
8.2 Accounting ........................................................... 11
9. Amendment ......................................................................... 11
10. Miscellaneous ..................................................................... 12
10.1 Further Assurances ................................................... 12
10.2 Governing Law ........................................................ 12
10.3 Construction ......................................................... 12
10.4 Headings ............................................................. 12
10.5 Exhibits and Schedules ............................................... 12
10.6 Amendment; Waiver .................................................... 12
10.7 Heirs, Successors and Assigns ........................................ 13
10.8 Attorneys' Fees ...................................................... 13
10.9 Severability ......................................................... 13
ii
<PAGE>
10.10 Notices .............................................................. 13
10.11 Exit Strategies and Capital Calls .................................... 14
10.12 Counterparts ......................................................... 14
</TABLE>
iii
1996
UNITED GROCERS
ANNUAL REPORT
MESSAGE FROM
CHAIRMAN AND PRESIDENT
In the future, we'll view 1996 as the beginning of one of the
biggest and most positive transitions United Grocers has ever undertaken. We
made a major acquisition in California; and unprecedented investments in our
distribution centers, Information Services, and other departments.
Given the exceptional goals we aimed for, we knew that it
would be a bumpy road. Growth doesn't come without growing pains. But both
United Grocers California division and United Grocers Portland division accepted
the challenge, because they believed in the benefits that we are already
beginning to see achieved.
Yes, our results for 1996 were modest. Although sales were up,
earnings were down this year. In addition, there were the costs associated with
our investments, our labor and operating expenses increased, and our competition
was very active.
Still, you should feel nothing but pride and optimism. We've
build strong teams to set and implement our goals, and we've worked hard to
attain them. United Grocers is as strong as ever, well positioned for profitable
growth in the future.
With your ongoing commitment and increased support for your
warehouse, United Grocers will continue to prosper. Now let's look forward to
success in 1997.
/s/Peter J. O'Neal /s/Alan C. Jones
Peter J. O'Neal, Alan C. Jones,
Chairman President/CEO
<PAGE>
PHASE ONE:
KNOWING THE MARKET
The first step in creating a successful grocery store is
knowing the customer well. And United Grocers helps our members do just that.
When members initiate the process of building a new store, or expanding a
current one, we start at the beginning.
We assess the existing competition, demographics, and
available sales volume data. With our extensive database and connections to
professional research companies, we are often able to get numbers back
overnight.
We study benchmarks, consider site and market options, compute
a thorough cost analysis, and consult with the owner about store format and
features.
It's a thorough, careful process in which nothing is left to
accident because we know the secret to our success is ensuring our member
stores' success.
<PAGE>
PHASE TWO:
FINDING YOUR SPACE
The "first law" of real estate holds especially true for
supermarkets: It all comes down to location, location, location.
We do extensive site searches, working with developers to get
the best locations. Our reputation for success leads many to offer us available
sites first, enabling us to secure prime locations that often aren't available
for independent retailers.
We work frequently with real estate brokerage firms that
specialize in retail development. Together, we have created compelling real
estate development marketing materials which we use to interest developers in
having a United Grocers member store as a tenant. With the combined benefits of
local United Grocers ownership and our brokers' access to retail opportunity, we
are able to move quickly.
<PAGE>
PHASE THREE:
THE BACKING YOU NEED
After completing a cost analysis on a proposed new store or
existing store remodel, we are able to look at a number of flexible financing
options. We have developed relationships with major financial institutions and
are able to obtain and utilize their funds for our members' projects. In
addition to assisting with store financing packages, we can arrange loans for
improvements, inventory, and fixtures.
United Grocers is dedicated to investing the necessary time,
expertise, and money it takes to help make our members successful and
profitable. Each year, a large portion of the company's annual earnings are
returned to United Grocers member stores in a year-end patronage dividend.
But United Grocers' assistance doesn't end there. The
Northwest Federal Credit Union has a full range of services for store owners,
employees, and their families. Our Retail Accounting Department prepares
financial statements, computes taxes, handles payroll, and advises owners on tax
strategies. Retail operations counseling is available to improve profits,
merchandising, and overall execution of the retail package. And we pull it all
together with state-of-the-art Retail Technology Services that are developed
with the support and involvement of our store owners.
<PAGE>
PHASE FOUR:
MAKING A PLAN
Premiere Consulting has been an invaluable resource for our
members in developing a strategic business plan specific to their markets and
their needs. Through Premiere Consulting, we offer a staff experienced in the
supermarket industry and familiar with its problems and opportunities.
What's more, Premiere offers educational programs that allow
store owners to better develop their human resources, improve communication,
maximize profits, and grow their businesses.
Workshops created especially for the grocery industry are
another part of what Premiere Consulting has to offer. These comprehensive,
dynamic seminars have a big impact in motivating employees to get involved in
the store's success. Accounting, management development, human resource
management, and customer service are but a few of the topics addressed.
United Grocers programs also help store owners stay in
compliance with employment laws; all related personnel and administrative forms
are available to member grocers as well.
<PAGE>
PHASE FIVE:
PUTTING IT ALL TOGETHER
Store Development helps create the facility and image needed
for a store to stay in step with shoppers' needs, wants, and expectations.
Whether an owner wants to expand square footage or build from scratch, United
Grocers is there to help. United Grocers' project manager associates evaluate
the market study and business development, and assist the store owner in
developing a detailed budget, including the plan and design of the project.
Every detail is covered, from architects to contractors, budgets to
merchandising, store layout and design to zoning laws.
United Grocers' experienced team helps each store owner make
the right choices for his individual store. Then, utilizing our network of
suppliers, we're able to apply the same buying power we use for acquiring
groceries to save members money on fixtures and equipment.
<PAGE>
PHASE SIX:
THE FINISHING TOUCHES
United Grocers offers nearly a thousand choices in produce,
not to mention the West's largest selection of meat, dairy, deli, and bakery
items. We also supply national brand groceries as well as our own private label
Western Family and Valley Fare brands, which are number one in customer
acceptance for store brands.
Our members benefit from full-time merchandisers who work
directly with them to train employees and provide expertise in merchandising. We
are currently helping many of our members implement foot courts, which can be
customized by store, and offer a large selection of prepared salads, meats, and
cheeses, designed to service customers who shop "by the meal" rather than by the
week.
Convenient and competitive, our volume buying power keeps
prices down, and then cuts them further with weekly hot sheets, pallet specials,
case incentives, and volume rebates. United Grocers experts also assist store
owners with marketing programs for product selection, preparation,
merchandising, advertising, promotions, and pricing.
<PAGE>
A COMMITTED TEAM
Understanding that independent grocers benefit most in a
partnership with a supportive wholesaler, we at United Grocers are committed to
providing the programs, expertise, and guidance our members need to ensure their
success, now and in the future.
management
Alan C. Jones, President & CEO
Paula M. Anetil, Business Development Manager
Ronald E. Dove, Director of Operations
Ross E. Dwinell, President of Grocers Insurance Group, Inc.
George P. Fleming, Asst. Secretary, President of United Resources, Inc.
Ralph P. Matile III, California Division Manager
R. David May, President of Rich & Rhine, Inc.
Keith A. Miller, Director of Purchasing & Marketing
Susan D. Weber, Director of Human Resources
John W. White, Vice President & CFO
John M. Willis, Director of Foodservice
board of directors
RAYMOND L. NIDIFFER DEAN F. RYAN
C&K Market, Inc. Tops Sentry Market
Chairperson, Facility Planning Committee Member, Facility Planning Committee
Member, Executive Finance Committee Term expires 1998
Term expires 1997
RON L. MANCASOLA
PETER J. O'NEAL, CHAIRMAN Al Mancasola's Grocery Market, Inc.
Quality Food Investments, Inc. Member, Audit Committee
Chairperson, Executive Finance Committee Term expires 1999
Member, Facility Planning Committee
Member, Compensation Committee
Term expires 1997
H. RICHARD LEONARD DAVID D. NEAL
Market Basket Thriftway SMN Company
Chairperson, Audit Committee Chairperson, Nominating Committee
Term expires 1998 Member, Facility Planning Committee
Member, Audit Committee
Term expires 1997
H. LARRY MONTGOMERY
Larry's Markets, Inc.
Member, Executive Finance Committee
Term expires 1999
GORDON E. SMITH, VICE CHAIRMAN
Vernonia Sentry &
Food Basket Select
Member, Executive Finance Committee
Member, Compensation Committee
Term expires 1998
ROBERT A. LAMB
RAL Inc.
Member, Audit Committee
Member, Facility Planning Committee
Member, UGPAC/Legislative Committee
Term expires 1999
HEADQUARTERS: MEDFORD DIVISION: CALIFORNIA DIVISION:
6433 S.E. Lake Road 2195 Sage Road 800 E. Pescadero Avenue
Portland, Oregon 97222 Medford, Oregon 97501 Tracy, California 95376
P.O. Box 22187 P.O. Box 1647 P.O. Box 989
Portland, Oregon 97269 Medford, Oregon 97501 Tracy, California 95378
(503) 833-1000 (541) 773-7383 (209) 832-6200
Fax (503) 833-1962 Fax (541) 773-7383, Ext 263 Fax (209) 832-6255
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS 1996 ANNUAL REPORT
SUMMARY OF NET SALES AND OPERATIONS
(Dollars in thousands)
For Fiscal Year Ended
September 27, September 29, September 30,
1996 1995 1994
Percentage Percentage Percentage
of Total of Total of Total
Product or Service Revenue Revenue Revenue Revenue Revenue Revenue
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Grocery1 $ 670,746 51.54 $ 432,499 42.48 $399,803 41.87
Dairy & Deli 113,094 8.69 105,263 10.34 105,336 11.04
Meat 76,850 5.90 83,227 8.17 86,893 9.11
Produce 48,456 3.72 49,108 4.82 47,709 5.00
Frozen Foods 71,602 5.50 53,992 5.30 53,803 5.64
General Merchandise 48,396 3.72 45,165 4.44 45,285 4.75
Institutional2 232,913 17.90 206,312 20.26 179,422 18.81
Retail Services 18,249 1.40 18,284 1.80 14,169 1.49
Store Finance 2,572 .20 3,117 .30 3,846 .41
Distribution Segment 1,282,878 98.57 996,967 97.91 936,266 98.12
Insurance Segment 18,629 1.43 21,281 2.09 17,954 1.88
TOTAL $1,301,507 100.00 $1,018,248 100.00 $954,220 100.00
===============================================================================================================
</TABLE>
1 Grocery revenues include sales from retail stores operated on a temporary
basis.
2 Institutional revenues include sales of all product lines.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands)
Fiscal Years
Sept. 27, Sept. 29, Sept. 30, Oct. 1, Oct. 2,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement:
Net sales and operations $1,301,507 $1,018,248 $954,220 $876,587 $896,587
Net income 152 1,379 1,563 1,714 2,723
Total assets 384,144 322,456 306,836 285,342 261,289
Long-term liabilities 143,134 115,624 114,669 105,539 104,645
==================================================================================================================
</TABLE>
No dividends on common stock have been declared during any of the fiscal years
presented.
Sales are reported on a 52/53 week year basis. The year ending October 2, 1992
was 53 weeks, all other years are 52 weeks.
ANNUAL 10-K REPORT
Stockholders may obtain a copy of the Company's 1996 Form 10-K Report filed with
the Securities and Exchange Commission without charge by writing to John White,
Vice-President, United Grocers, Inc., Box 22187, Portland, OR 97269.
<PAGE>
A BRIEF REVIEW
United Grocers, Inc. (United) an Oregon corporation organized in 1915, taxed as
a cooperative, is a wholesale grocery distributor. It supplies groceries and
related products to retail grocers located in Oregon, Western Washington, and
California. United's goal is 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 to restaurants, and
other institutional buyers, as well as to retailers who are not members. These
sales are through company-owned Cash and Carry stores located throughout its
marketing area.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
United Grocers, Inc.
We have audited the accompanying consolidated balance sheets of United
Grocers, Inc. and subsidiaries as of September 27, 1996 and September 29, 1995,
and the related consolidated statements of income, members' equity and cash
flows for each of the three years in the period ended September 27, 1996. 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 27, 1996 and September 29, 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended September 27, 1996, in conformity with
generally accepted accounting principles.
As discussed in Note 1.f. to the consolidated financial statements, the
Company changed its method of accounting for postretirement benefits other than
pensions in 1995-96. Also, as discussed in Notes 1.g. and 1.h. respectively, the
Company changed its method of accounting for investments in 1994-95 and for
reinsurance in 1993-94.
/s/ DeLap, White & Raish
DELAP, WHITE & RAISH
Certified Public Accountants
Portland, Oregon
December 12, 1996
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995, AND SEPTEMBER 30, 1994
1996 1995 1994
-------------- -------------- ------------
Net sales and operations $1,301,506,666 $1,018,248,456 $954,220,350
-------------- -------------- ------------
COSTS AND EXPENSES:
Cost of sales (Note 1.i.) 1,127,188,263 870,097,228 816,721,077
Operating expenses 126,205,437 101,029,068 93,991,529
Selling and administrative
expenses 14,989,440 10,872,432 9,533,741
Depreciation (Note 1.k. & 5) 6,629,240 5,952,576 5,609,779
INTEREST:
Interest expense 14,825,357 12,773,947 9,156,822
Interest income (4,162,561) (4,494,053) (3,535,802)
-------------- -------------- ------------
Interest expense, net 10,662,796 8,279,894 5,621,020
-------------- -------------- ------------
Total costs and expenses 1,285,675,176 996,231,198 931,477,146
-------------- -------------- ------------
Income before members' allowances
and patronage dividends, and
income taxes 15,831,490 22,017,258 22,743,204
Members' allowances (11,604,949) (11,513,784) (11,449,305)
Members' patronage dividends
(Note 9) (4,000,000) (8,350,000) (8,730,168)
-------------- ------------- ------------
Income before income taxes 226,541 2,153,474 2,563,731
Provision for income taxes
(Note 8) (74,229) (774,469) (1,000,341)
-------------- ------------- ------------
NET INCOME $ 152,312 $ 1,379,005 $ 1,563,390
============== ============= ============
The accompanying notes are an integral part of this financial statement.
1
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 27, 1996 AND SEPTEMBER 29, 1995
ASSETS
1996 1995
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 16,509,866 $ 13,045,456
Investments maintained for
insurance reserves (Note 1.g. & j.
& 2) 46,828,893 40,809,762
Accounts and notes receivable
(Note 3) 78,571,016 70,706,049
Inventories (Note 1.i.) 105,420,187 81,477,754
Other current assets 4,814,449 3,870,703
Deferred income taxes (Note 8) 2,317,772 2,537,323
------------ ------------
Total current assets 254,462,183 212,447,047
------------ ------------
NON-CURRENT ASSETS:
Notes receivable (Note 3) 24,715,039 21,950,478
Investment in and accounts with
affiliated companies (Note 1.c. & 15) 12,477,107 8,392,281
Other receivables and investments 6,363,865 6,869,895
Other non-current assets (Note 4) 17,223,023 11,668,590
------------ ------------
Total non-current assets 60,779,034 48,881,244
------------ ------------
PROPERTY, PLANT AND EQUIPMENT - (net
of accumulated depreciation) (Note 5) 68,902,737 61,127,772
------------ ------------
TOTAL $384,143,954 $322,456,063
============ ============
LIABILITIES AND MEMBERS' EQUITY
1996 1995
------------ ------------
CURRENT LIABILITIES:
Notes payable - bank (Note 6) $ 61,173,867 $ 48,515,543
Accounts payable 82,076,707 60,461,117
Insurance reserves supported by
investments (Note 1.j. and 2) 29,561,657 29,958,678
Compensation and taxes payable 5,021,977 3,118,827
Other accrued expenses 5,130,182 3,662,495
Members' patronage payable (Note 9) 3,200,110 6,646,867
Current installments of long-term
liabilities (Note 7) 9,073,983 7,573,215
------------ ------------
Total current liabilities 195,238,483 159,936,742
LONG-TERM LIABILITIES (Note 7) 143,134,105 115,623,670
DEFERRED INCOME TAXES (Note 8) 3,312,267 3,651,247
DEFFERED INCOME (Note 13) 1,000,026 886,917
------------ ------------
Total liabilities 342,684,881 280,098,576
------------ ------------
Commitments and contingencies (Note 18)
MEMBERS' EQUITY:
Common stock (authorized, 10,000,000
shares at $5.00 par value; issued and
outstanding, 638,451 shares in 1996 and
655,663 shares in 1995) (shares owned
by a member in excess of 4,000 are
subject to repurchase Note 1.o. & p.) 3,192,255 3,278,315
Additional paid-in capital 24,224,262 23,956,797
Retained earnings 13,842,966 14,923,491
Unrealized gain on investments (Note 2) 199,590 198,884
------------ ------------
Total members' equity 41,459,073 42,357,487
------------ ------------
TOTAL $384,143,954 $322,456,063
============ ============
The accompanying notes are an integral part of this financial statement.
2
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995, AND SEPTEMBER 30, 1994
Additional Unrealized
Common paid-in Retained gain on
stock capital earnings investments Total
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances, 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
----------- ----------- ----------- ----------- -----------
Balances, 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
Change in accounting principle
(Note 1.g.) -- -- -- (45,693) (45,693)
Change in unrealized gain -- -- -- 244,577 244,577
----------- ----------- ----------- ----------- -----------
Balances, September 29, 1995 3,278,315 23,956,797 14,923,491 198,884 42,357,487
Stock:
Issued 93,620 1,059,512 -- -- 1,153,132
Repurchased (244,680) (1,526,937) (1,232,837) -- (3,004,454)
Patronage dividends 65,000 734,890 -- -- 799,890
Net income -- -- 152,312 -- 152,312
Change in unrealized gain -- -- -- 706 706
----------- ----------- ----------- ----------- -----------
Balances, September 27, 1996 $ 3,192,255 $24,224,262 $13,842,966 $ 199,590 $41,459,073
=========== =========== =========== =========== ===========
</TABLE>
Common stock share information:
Number
DESCRIPTION of shares
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
Issued 31,724*
Repurchased (48,936)
---------
Balance, September 27, 1996 638,451
=========
* Includes prior year patronage dividends to be issued.
The accompanying notes are an integral part of this financial statement.
3
<PAGE>
<TABLE>
<CAPTION>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995, AND SEPTEMBER 30, 1994
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 152,312 $ 1,379,005 $ 1,563,390
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 6,629,240 5,952,576 5,609,779
Provision for doubtful accounts
and notes 2,063,041 1,894,189 1,992,589
Patronage dividends payable
in common stock 799,890 1,703,133 1,864,432
Loss on sale of assets 342,092 402,634 174,927
Equity in loss (earnings) of
affiliated companies (567,701) 46,989 191,760
Deferred income taxes (119,429) 181,729 474,889
(Increase) decrease in non-cash
current assets:
Accounts and notes receivable (2,312,952) (11,087,908) (15,343,787)
Inventories (3,146,910) (7,170,332) (441,006)
Other current assets (403,181) 1,496,592 (642,531)
Increase (decrease) in non-cash
current liabilities:
Accounts payable and
insurance reserves 7,858,525 (6,248,023) 5,018,583
Compensation and taxes payable 403,007 166,293 264,397
Other accrued expenses 1,467,687 502,595 (552,204)
Members' patronage payable (3,446,757) (218,869) (349,191)
(Increase) decrease in other
non-current assets (3,564,825) (3,908,777) (2,598,160)
----------- ----------- -----------
Net cash provided by (used in)
operating activities 6,154,039 (14,908,174) (2,772,133)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to members (22,512,203) (18,578,568) (17,768,465)
Collections on loans to members 10,625,597 7,758,425 6,325,619
Proceeds from sale of member loans 10,549,302 20,803,339 8,606,739
Sale of investments 600,798 3,607,299 843,718
Redemption of investments 6,784,264 4,630,686 4,747,745
Purchase of investments (13,403,487) (11,909,285) (8,133,459)
Investment in affiliated companies (267,125) (606,786) (6,094,315)
Sale of property, plant
and equipment 6,883,519 1,738,326 408,777
Purchase of property, plant
and equipment (16,231,137) (10,371,740) (5,254,582)
Purchase of business combination (23,251,791) -- --
----------- ----------- -----------
Net cash used in investing
activities (40,222,263) (2,928,304) (16,318,223)
----------- ----------- -----------
</TABLE>
<TABLE>
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock $ 1,153,132 $ 1,376,104 $ 1,663,746
Repurchase of common stock (3,004,454) (2,724,496) (3,779,113)
Proceeds of long-term liabilities:
Revolving bank lines of credit 1,043,200,000 689,100,000 807,500,000
Mortgages and notes 30,310,851 25,640,393 12,104,717
Redeemable notes and certificates 18,056,500 19,529,600 22,395,400
Repayment of long-term liabilities:
Revolving bank lines of credit (1,030,541,677) (671,605,124) (801,209,733)
Mortgages and notes (6,923,218) (23,925,822) (2,789,206)
Redeemable notes and certificates (14,718,500) (19,492,749) (22,618,900)
----------- ----------- -----------
Net cash provided by
financing activities 37,532,634 17,897,906 13,266,911
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 3,464,410 61,428 (5,823,445)
Cash and cash equivalents:
Beginning of year 13,045,456 12,984,028 18,807,473
----------- ----------- -----------
END OF YEAR $16,509,866 $13,045,456 $12,984,028
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
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 AND NATURE OF OPERATIONS
The Company has two operating segments. See Note 11 for segment details.
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., Premier Consulting, Inc., Western Security Services,
Ltd., and Rich and Rhine, 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 15).
d. BUSINESS COMBINATION
On December 14, 1995 the Company acquired, using the purchase method of
accounting, certain assets of the Market Wholesale (Market) grocery
division operations of Bay Area Foods, Inc. (Bay Area Foods), for a cash
purchase price of approximately $21 million. The Company assumed certain
liabilities including obligations under certain real and personal property
leases relating to Bay Area Foods, including three leased warehouse
locations and leased equipment. The operations of Market are included in
the consolidated statement of income beginning December 3, 1995.
The approximate values allocated to the assets acquired, amount of
liabilities assumed, and net value of assets acquired, are stated below:
Acquired assets Amount
--------------- -----------
Accounts receivable and customer loans $12,290,000
Inventories 20,796,000
Deposits and other assets 1,541,000
Equipment including capitalized leases 5,286,000
Goodwill amortized over 15 years 484,000
-----------
Total acquired assets 40,397,000
-----------
Assumed liabilities
Accounts payable 13,360,000
Customer rebates and employee accruals 1,500,000
Capitalized lease payable 2,286,000
-----------
Total assumed liabilities 17,146,000
-----------
Net value of assets acquired $23,251,000
===========
In connection with the acquisition, the Company entered into a five year
supply agreement with Bay Area Foods and some of their retail stores. The
agreement calls for normal rebates, other than year-end patronage, that is
available to other customers. These retail stores account for
approximately 20 percent of the total warehouse volume of the acquired
operations.
Funding for the acquisition was provided by increased short-term bank
credit. The Company anticipates refinancing the additional bank credit
with new senior debt, or the securitization of eligible trade accounts
receivable.
The assets acquired include all owned warehouse equipment, furniture,
and fixtures of the Market operations, such as forklifts, warehouse
racking, office equipment and computers, and software. The Company intends
to continue to utilize these assets in the wholesale grocery distribution
business in substantially the same manner as used by Bay Area Foods.
e. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
f. ACCOUNTING CHANGES
Beginning in 1995-96, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. SFAS No. 106 requires that
companies accrue the projected future cost of providing postretirement
benefits during the period that employees render the services necessary to
be eligible for such benefits. While the adoption of this standard does
have an impact on the Company's reported net income, it does not impact
the Company's cash
5
<PAGE>
flow because the Company intends to continue its current practice of
paying the cost of postretirement benefits as incurred. The Company has
elected to recognize the effect of the change to SFAS No. 106 by
amortizing the transition obligation of $3,668,682 over 20 years (see
Note 13).
g. 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. The
Company's investments are primarily in non-equity securities and their
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 27, 1996 and September 29, 1995 is $46,966,058
and $41,610,228, respectively (see Note 2).
h. REINSURANCE
Beginning in 1993-94 the Company adopted the Statement of Financial
Accounting Standards (SFAS) No. 113, ACCOUNTING AND REPORTING FOR
REINSURANCE OF SHORT-DURATION AND LONG-DURATION CONTRACTS. 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. There
is no effect or change to the consolidated statement of income as
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.
In the normal course of business, the Company seeks to reduce the
losses 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.
i. INVENTORIES AND COST OF SALES
Inventories relate primarily to the distribution segment 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.
Cost of sales includes primarily the cost of distribution and
insurance operations. The distribution segment 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 segment costs
include losses reported, a provision for losses incurred but not reported
and premium refunds.
j. RESTRICTED ASSETS AND NET ASSETS
Restricted assets and net assets that may not be transferred to the Parent
in the form of loans, advances, or cash dividends by the insurance
subsidiary without the consent of state insurance agencies as of September
27, 1996 are as follows:
Cash and cash equivalents $ 410,903
Investments 16,417,243
-----------
Total $16,828,146
===========
In addition, although not formally restricted, the balance of the
investments of $30,212,060 represent assets that have been accumulated for
the possible payment of claims against the insurance reserves.
k. 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 when
applicable as a component of the cost of significant construction
projects. No interest was capitalized for the three years ended September
27, 1996.
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
l. 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.
m. 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
1996 a valuation allowance of approximately $500,000 was considered
necessary for the insurance reserves and the
6
<PAGE>
state NOL carryovers to reduce the deferred tax asset to the amount
expected to be realized. Income tax expense is the combination of the tax
payable for the year and the change during the year in net deferred tax
assets and liabilities. See Note 9 for details.
n. 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.
o. 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.
p. 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 27, 1996 and September 29, 1995, there were 19,926 and 18,229
shares, respectively, subject to repurchase in the amount of $1,238,202
and $1,084,626, respectively. At September 27, 1996 and September 29,
1995, there were 2,779 and 1,471 shares, respectively, held for possible
redemption in the amount of $172,687 and $87,525, respectively.
q. ADVERTISING COSTS
The Company expenses the production costs of advertising the first time
the advertising takes place. Advertising expense for 1996, 1995 and 1994
was $2,593,450, $1,191,436 and $1,027,214, respectively.
r. 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.
s. RECLASSIFICATIONS
Certain reclassifications have been made to prior year balances to conform
to the current year classification.
2. INVESTMENTS
Investments 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.
The amortized cost and estimated fair 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
--------- ---------- ----------
1996:
United States Government
and its agencies 35,295,000 $35,714,257 $35,918,833
Any state of the United
States and its agencies 2,520,000 2,619,934 2,644,354
Political subdivision of
a state of the United
States and its agencies 4,100,000 4,198,701 4,283,334
Corporate bonds 4,060,000 4,094,930 4,106,350
---------- ---------- -----------
Subtotal - debt securities 46,627,822 46,952,871
Corporate stock 298 1,481 13,187
---------- -----------
Subtotal 46,629,303 46,966,058
Unrealized gain on available-
for-sale securities 199,590 --
---------- -----------
Total $46,828,893 $46,966,058
=========== ===========
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
=========== ===========
7
<PAGE>
Investments of debt securities by classification under SFAS No. 115 at
September 27, 1996 are as follows:
<TABLE>
<CAPTION>
Gross Gross Aggregate
Amortized unrealized unrealized fair
cost gains losses value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Held-to-maturity $36,246,674 $ 502,829 $ 377,370 $36,372,133
Available-for-sale 10,381,148 209,817 10,227 10,580,738
----------- ----------- ----------- -----------
Total $46,627,822 $ 712,646 $ 387,597 $46,952,871
=========== =========== =========== ===========
</TABLE>
For the years ended September 27, 1996 and September 29, 1995 (initial
year of application) the gross proceeds from the sales of securities
available-for-sale were $1,104,720 and $3,607,299, respectively. The gross
realized gains from these sales were $4,226 and $142,257, respectively, and
gross realized losses were nil. 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 the initial year.
During the initial year of 1994-95, because of changing market
conditions, management decided to transfer certain securities from the
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.
<TABLE>
<CAPTION>
1996 1995
------------------------- -------------------------
Amortized Market Amortized Market
cost value cost value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $ 4,929,669 $ 4,915,145 $ 5,210,406 $ 5,303,554
Due after one year
through five years 27,091,870 27,210,376 19,066,319 19,415,921
Due after five years
through ten years 13,445,579 13,658,945 15,783,193 16,324,879
Due after ten years 1,160,704 1,168,405 549,479 557,642
----------- ----------- ----------- -----------
Total $46,627,822 $46,952,871 $40,609,397 $41,601,996
=========== =========== =========== ===========
</TABLE>
When SFAS No. 115 was adopted in 1994-95 it was not applied retroactively
to the prior years' financial statements. The cumulative effect of the change in
accounting principle as of October 1, 1994 was an unrealized loss of $45,693
charged to retained earnings.
3. ACCOUNTS AND NOTES RECEIVABLE
These consist of amounts due principally from members at the balance sheet
date as follows:
1996 1995
----------- -----------
Accounts receivable $64,638,621 $59,229,982
Insurance premiums and related balances 12,237,565 8,509,160
Less allowance for doubtful accounts (1,140,724) (1,176,767)
----------- -----------
Net accounts receivable 75,735,462 66,562,375
----------- -----------
Notes receivable - current portion 3,072,175 4,224,381
Less allowance for doubtful notes (236,621) (80,707)
----------- -----------
Net current notes receivable 2,835,554 4,143,674
----------- -----------
Net current accounts and
notes receivable $78,571,016 $70,706,049
=========== ===========
Notes receivable - non-current portion $25,588,062 $22,378,000
Less allowance for doubtful notes (873,023) (427,522)
----------- -----------
Net non-current notes receivable $24,715,039 $21,950,478
=========== ===========
The notes receivable from members are generally for periods of two years to
ten years at interest rates of 3.00% to 11.00%. The annual maturities for
each of the next five fiscal years following September 27, 1996 are as
follows:
Year Amount
----- -----------
1997 $ 2,325,916
1998 2,666,459
1999 2,890,812
2000 2,933,663
2001 2,825,431
Thereafter 15,017,956
The Company performs ongoing credit evaluations of its members' financial
condition and maintains allowances for potential credit losses. Actual losses
and allowances have been within management's expectations. The provision for
doubtful accounts and notes charged to operating expenses for the three years
ended September 27, 1996 amounted to $2,063,041, $1,894,189, and $1,992,589,
respectively.
8
<PAGE>
4. OTHER NON-CURRENT ASSETS
Other non-current assets at the balance sheet date consists of the following:
1996 1995
----------- -----------
Covenant not to compete - net
of accumulated amortization of
$1,485,557 in 1996 and $1,232,869
in 1995 $ 1,238,727 $ 1,641,813
Software - net of accumulated
amortization of $2,440,207 in
1996 and $1,737,639 in 1995 2,070,007 1,582,531
Loan fees - net of accumulated
amortization of $700,109 in
1996 and $682,199 in 1995 529,818 425,189
Goodwill - net of accumulated
amortization of $291,609 in 1996
and $114,613 in 1995 1,951,246 1,413,557
Software in progress 10,172,326 5,162,152
Deposits 1,082,439 494,252
Other 178,460 949,096
----------- -----------
Total $17,223,023 $11,668,590
=========== ===========
5. PROPERTY, PLANT AND EQUIPMENT (at cost)
Property, plant and equipment as of the balance sheet date consists of the
following:
1996 1995
----------- -----------
Land $ 3,424,677 $ 3,580,477
Buildings and improvements 57,907,740 54,103,086
Warehouse and truck equipment 33,110,049 37,627,830
Office equipment 13,621,540 11,104,702
Construction in progress 4,528,122 1,323,492
----------- -----------
Total property, plant and
equipment 112,592,128 107,739,587
Less accumulated depreciation (43,689,391) (46,611,815)
----------- -----------
Net property, plant and
equipment $68,902,737 $61,127,772
=========== ===========
Depreciation expense for 1996, 1995 and 1994 was $6,629,240, $5,952,576 and
$5,609,779, respectively.
6. NOTES PAYABLE - BANK
Notes payable - bank consists of borrowings on bank lines of credit at a
weighted average interest rate of 6.41% at September 27, 1996 and 6.75% at
September 29, 1995.
At September 27, 1996 and September 29, 1995, the Company had unused
lines of credit totaling $14,400,000 and $24,500,000, respectively.
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.
9
<PAGE>
7. LONG-TERM LIABILITIES
Long-term liabilities at the balance sheet date consists of the following:
1996 1995
------------ -----------
Notes payable - bank:
Credit agreement notes maturing on
April 30, 1998 with interest rates
of 6.24% per annum at September
27, 1996 and 6.70% per annum at
September 29, 1995. The interest
rates ranged from 6.02% to 6.74%
in 1996 and from 5.95% to 7.00% in
1995. $ 44,400,000 $ 17,000,000
Notes payable - insurance companies:
Senior notes payable to seven
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 annually beginning
in 2001, maturing in full 2005.
36,665,000 39,998,000
1996 1995
------------ -----------
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. $ 4,225,006 $ 4,239,958
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. 935,000 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. 951,312 1,022,795
Four notes with interest at 7.50%
per annum payable in monthly
installments of $23,017 beginning
October 1995 (secured by equipment). 951,780 1,217,712
Five notes with interest at 7.50%
per annum payable in monthly
installments of $24,108 beginning
October 1995 (secured by equipment). 997,084 --
Several capitalized equipment
leases, payable in monthly
installments of $43,853 including
interest at 12% to 20% over seven
to ten years until 2005 (secured
by equipment). 2,123,571 --
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). 66,872 85,386
Other note payable -- 2,292
Mortgage notes (secured by real property):
A note payable in monthly
installments of $41,449 including
interest at 9% until 1996. -- 442,243
A note payable in monthly
installments of $31,615 including
interest at 7.25% until 2013. $ 3,710,663 $ 3,816,529
Redeemable notes and certificates:
Capital investment notes
(subordinated), interest ranging
from 6.25% to 8%. Maturity dates
range from 1996 to 2005 which is
ten years from dates of issue. 54,018,200 50,619,400
Registered redeemable building
notes (subordinated), interest
at 8%. No fixed maturity date. 3,138,300 3,199,100
Redeemable transferable notes,
(subordinated), interest at
6.50%. No fixed maturity. 25,300 25,300
------------ ------------
Total 152,208,088 123,196,885
Less current installments (9,073,983) (7,573,215)
------------ ------------
Total long-term liabilities $143,134,105 $115,623,670
============ ============
Total maturities of long-term liabilities in each of the next five fiscal
years are as follows:
Year Amount
---- ------------
1997 $ 9,073,983
1998 50,911,311
1999 6,755,475
2000 7,087,769
2001 9,458,923
The terms of certain financing agreements contain, among other
provisions, requirements for maintaining certain financial ratios. Also, a
minimum amount of equity must be maintained, subordinated debt restrictions
on the sale of assets, and allowable contingent indebtedness. The Company
was not in compliance with the fixed charge coverage covenant as of
September 27, 1996. The Company will be working with its senior creditors to
establish a plan to return to compliance with this ratio and will request
the necessary waivers for noncompliance with this particular covenant.
10
<PAGE>
8. INCOME TAXES
The provision for income taxes for the three years consists of the following:
1996 1995 1994
---------- ---------- ----------
Current payable:
Federal $ 146,016 $ 542,585 $ 439,200
State 47,640 50,156 86,252
Deferred:
Federal (95,036) 113,948 506,977
State (24,391) 67,780 (32,088)
---------- ---------- ----------
Total $ 74,229 $ 774,469 $1,000,341
========== ========== ==========
The effective income tax rate for the three years ended September 27, 1996
does not correspond with the Federal tax rate. The reconciliation of this
rate to the effective income tax rate is as follows:
1996 1995 1994
---------- ---------- ----------
Statutory income tax rate (34%) $ 82,934 $ 732,181 $ 871,668
State income taxes, net of
Federal income tax benefit 31,443 33,103 56,926
Tax exempt interest (97,712) (133,622) (158,673)
Refunds as a result of carrybacks -- (64,954) --
Prior year under accrual -- -- 179,235
Other 57,564 207,761 51,185
---------- ---------- ----------
Income tax expense $ 74,229 $ 774,469 $1,000,341
========== ========== ==========
Effective income tax rate 30.4% 36.0% 39.0%
==== ==== ====
The significant components of the deferred income taxes - current asset and
non-current liability as of the balance sheet date are as follows:
1996 1995
---------- ----------
Deferred income taxes current asset:
Insurance reserves $ 785,964 $1,041,485
Inventories 839,507 746,442
Unearned insurance premiums 571,239 508,089
Allowance for doubtful accounts 294,566 420,530
Other (173,504) (179,223)
---------- ----------
Total $2,317,772 $2,537,323
========== ==========
1996 1995
---------- ----------
Deferred income taxes - non-current liability:
Accumulated depreciation $5,017,128 $5,070,833
Deferred income (634,029) (345,898)
Allowance for doubtful notes (401,818) (233,679)
Deferred compensation (174,550) (174,550)
Alternative minimum tax
(AMT) credit (446,739) (611,439)
Other (47,725) (54,020)
---------- ----------
Total $3,312,267 $3,651,247
========== ==========
Net amount by tax paying component:
Federal $ 597,823 $ 692,860
State 396,672 421,064
---------- ----------
Total $ 994,495 $1,113,924
========== ==========
The significant components of deferred income tax expense for the three
years are as follows:
1996 1995 1994
---------- ---------- ----------
Decrease (increase) in deferred
income taxes - asset $ 219,551 $ 274,590 $ 11,915
(Decrease) increase in
deferred income taxes -
liability after applying
AMT credit (338,980) (92,862) 462,974
---------- ---------- ----------
Total $ (119,429) $ 181,728 $ 474,889
========== ========== ==========
The Company has net operating loss carryovers of approximately $5,000,000
to apply against future years' State income taxes, expiring in years 2007
through 2011. 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.
11
<PAGE>
9. 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:
1996 1995 1994
----------- ----------- -----------
Payable in cash and shown as
a current liability $ 3,200,110 $ 6,646,867 $ 6,865,736
Distributable in the form
of common stock 799,890 1,703,133 1,864,432
----------- ----------- -----------
Total $ 4,000,000 $ 8,350,000 $ 8,730,168
=========== =========== ===========
10. REINSURANCE
Reinsurance amounts reflected in the financial statements are as follows:
1996 1995
----------- -----------
For the balance sheet:
Reinsurance recoverable for
ceded losses $ 6,496,713 $ 5,081,542
Prepaid reinsurance premiums 2,831,215 2,050,101
----------- -----------
Total $ 9,327,928 $ 7,131,643
=========== ===========
1996 1995 1994
----------- ----------- -----------
For the income statement:
Premiums written:
Gross $28,987,953 $27,808,928 $23,992,639
Assumed 567,243 698,280 860,953
Ceded (8,184,619) (7,364,002) (6,652,410)
----------- ----------- -----------
Net premiums written $21,370,577 $21,143,206 $18,201,182
=========== =========== ===========
Percentage of amount assumed
to net 2.65% 3.30% 4.73%
==== ==== ====
Premiums earned:
Gross $26,515,356 $26,719,189 $23,736,321
Assumed 598,048 718,692 829,978
Ceded (7,403,505) (6,708,155) (6,505,887)
----------- ----------- -----------
Net premiums earned $19,709,899 $20,729,726 $18,060,412
=========== =========== ===========
Percentage of amount assumed
to net 3.03% 3.47% 4.60%
==== ==== ====
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.
1996 1995 1994
----------- ----------- -----------
Expenses:
Losses and loss adjustment
expenses $18,051,136 $21,000,749 $15,079,858
Reinsurance recoveries (4,616,616) (5,511,850) (3,389,844)
----------- ----------- -----------
Net losses and loss
adjustment expenses $13,434,520 $15,488,899 $11,690,014
=========== =========== ===========
11. 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.
12
<PAGE>
A summary of information about the Company's operations by segment before
intersegment eliminations for the three years is as follows:
1996 1995 1994
-------------- -------------- --------------
Net sales and operations:
Distribution $1,283,119,244 $ 996,966,961 $ 936,266,067
Insurance 20,095,633 22,794,952 18,788,523
Less intersegment
insurance sales and
expenses (1,708,211) (1,513,457) (834,240)
-------------- -------------- --------------
Total $1,301,506,666 $1,018,248,456 $ 954,220,350
============== ============== ==============
Income before allowances, dividends, income taxes and accounting change:
Distribution $ 13,351,190 $ 18,889,425 $ 19,791,157
Insurance 2,480,300 3,127,833 2,952,047
-------------- -------------- --------------
Total $ 15,831,490 $ 22,017,258 $ 22,743,204
============== ============== ==============
1996 1995 1994
-------------- -------------- --------------
Total assets:
Distribution $ 314,180,675 $ 260,365,677 $ 243,267,148
Insurance 69,963,279 63,698,155 64,923,598
-------------- -------------- --------------
Total $ 384,143,954 $ 324,063,832 $ 308,190,746
============== ============== ==============
Depreciation expense:
Distribution $ 6,442,124 $ 5,770,681 $ 5,408,896
Insurance 187,124 181,895 200,883
-------------- -------------- --------------
Total $ 6,629,248 $ 5,952,576 $ 5,609,779
============== ============== ==============
Capital expenditures:
Distribution $ 16,151,402 $ 10,096,516 $ 5,161,425
Insurance 79,735 275,224 93,157
-------------- -------------- --------------
Total $ 16,231,137 $ 10,371,740 $ 5,254,582
============== ============== ==============
For net sales and operations during the three years ended September 27,
1996, wholesale grocery sales (primarily to members) accounted for
approximately 95% of the distribution total. Premium revenue (primarily
from members) accounted for approximately 95% of the insurance total.
12. RETIREMENT PLANS
TThe 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 No. 87 was an increase of pension expense in the amount of
$191,893 for 1996, and a decrease of $362,794 for 1995 and $546,894 for
1994. The Company's unrecognized net asset resulting from the initial
application of SFAS No. 87 of $3,027,024 is being amortized over eighteen
years with a remaining balance of $1,547,153 as of September 27, 1996.
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%.
13
<PAGE>
Pension costs for all plans for the three years consist of the
following:
1996 1995 1994
----------- ----------- -----------
Company-sponsored:
Service costs of benefits
earned $ 952,126 $ 945,413 $ 918,423
Interest cost on the projected
benefit obligation 1,667,852 1,557,954 1,448,447
Expected return on plan assets (1,932,053) (1,713,673) (1,688,595)
Net amortization of unrecognized
net asset (168,168) (168,168) (168,168)
Unrecognized net gain (37,901) -- (4,414)
Unrecognized prior service
cost 61,478 61,478 73,760
----------- ----------- -----------
Net salaried pension cost 543,334 683,004 579,453
Multi-employer plan costs 3,326,359 2,590,269 2,395,300
Matching costs of 401(k) plans 290,518 384,282 391,605
----------- ----------- -----------
Total pension expense $ 4,160,211 $ 3,657,555 $ 3,366,358
=========== =========== ===========
The following table sets forth the Company-sponsored plan's funded
status as of year end:
1996 1995 1994
----------- ----------- -----------
Actuarial present value of benefit obligations:
Vested $14,458,251 $14,997,208 $13,337,570
Non-vested 985,366 927,101 823,015
----------- ----------- -----------
Accumulated benefit
obligation 15,443,617 15,924,309 14,160,585
Effect of projected future
compensation levels 5,837,535 4,767,286 4,881,117
----------- ----------- -----------
Projected benefit obligation 21,281,152 20,691,595 19,041,702
Plan assets at fair value,
primarily listed stocks, fixed
income, and bond and equity
funds 27,252,210 24,482,376 22,030,725
----------- ----------- -----------
Excess of plan assets over
projected benefit obligation 5,971,058 3,790,781 2,989,023
Unrecognized prior service cost 655,515 716,993 778,471
Unrecognized net gain (4,802,538) (2,745,049) (1,422,307)
Unrecognized net asset, net of
amortization (1,561,167) (1,729,335) (1,897,503)
----------- ----------- -----------
Prepaid pension cost $ 262,868 $ 33,390 $ 447,684
=========== =========== ===========
In addition to providing pension benefits, the Company provides
certain medical benefits for certain salaried retirees, spouse and eligible
dependents. Employees who were hired prior to January 1, 1989, the last
eligibility date, and have met the Company's minimum service requirements,
become eligible for these benefits. The medical benefits available are
non-contributory in nature, and it is the Company's practice to fund these
benefits as incurred.
Postretirement benefit costs for 1996 were $491,993, which is
comprised of $52,361 for service costs, $270,543 for interest cost and
$169,089 for the amortization of the transition obligation. The Company's
unrecognized transition obligation resulting from the initial application
of SFAS No.106 of $3,668,682 is being amortized over twenty years and has a
remaining balance of $3,499,593 as of September 27, 1996. The assumed
health care cost trend used to measure the expected cost of benefits was
10% in year one, decreasing 1% per year to a minimum rate of 4%. Prior to
adopting SFAS No. 106, postretirement benefits were expensed as claims were
paid, and amounted to approximately $349,000 and $356,000 for 1995 and
1994, respectively.
13. LEASES
The Company is obligated under one hundred and twenty-seven significant
leases in 1996. Fifty-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 2022.
Rental expense for the three years consists of the following:
1996 1995 1994
----------- ----------- -----------
Minimum rentals $19,463,073 $15,252,948 $13,690,702
Less sublease income (6,873,099) (6,549,338) (5,971,461)
----------- ----------- -----------
Net rental expense $12,589,974 $ 8,703,610 $ 7,719,241
=========== =========== ===========
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 27, 1996:
Fiscal Minimum Minimum Net
year payments (A) receipts (B) minimum
--------- ------------ ------------ ------------
1996-1997 $ 21,279,652 $ 7,904,468 $ 13,375,184
1997-1998 20,060,119 8,923,638 11,136,481
1998-1999 18,556,581 8,859,209 9,697,372
1999-2000 17,548,978 8,664,809 8,884,169
2000-2001 16,884,746 8,502,442 8,382,304
Later years 143,943,281 94,120,970 49,822,311
------------ ------------ ------------
Total $238,273,357 $136,975,536 $101,297,821
============ ============ ============
14
<PAGE>
Minimum Minimum Net
payments (A) receipts (B) minimum
----------- ----------- -----------
Summary:
Building leases $229,625,277 $136,122,368 $ 93,502,909
Equipment leases 8,648,080 853,168 7,794,912
------------ ------------ ------------
Total $238,273,357 $136,975,536 $101,297,821
============ ============ ============
(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.
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 $3,940,000 over
fourteen years with an annual rental of approximately $310,000.
14. SUPPLEMENTAL CASH FLOW INFORMATION
1996 1995 1994
----------- ----------- -----------
Supplemental disclosures:
Cash paid during the
year for:
Interest $14,546,216 $11,753,143 $ 8,898,144
Income taxes - net
of refunds 278,730 341,836 336,810
Supplemental schedule of noncash investing and financing activities:
Patronage dividends payable
in common stock 799,890 1,703,103 1,864,432
Exchange of member loan
for equity interest in
affiliate 3,250,000 -- --
15. 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.
An approximate summary of accounts aggregate transactions with these
affiliates is as follows:
1996 1995
------------ -----------
For the balance sheet:
Equity interest $ 12,477,000 $ 8,392,000
Accounts receivable 3,800,000 4,820,000
Notes receivable 2,853,000 6,440,000
Accounts payable (5,259,000) (4,930,000)
Undistributed earnings 1,975,000 1,416,000
1996 1995 1994
------------ ----------- -----------
For the income statement:
Increase in equity
investments $ 3,517,000 $ 607,000 $ 6,094,000
Sales (129,855,000) (91,447,000) (22,945,000)
Purchases 111,348,000 97,541,000 89,179,000
Volume incentive rebate (2,931,000) (1,707,000) (1,561,000)
Refunds, rebates and
allowances 2,570,000 3,013,000 701,000
Equity interest
income (loss) 568,000 (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 94%
North State Grocery, Inc. 26%
West Linn Foods Marketplace, L.L.C. 20%
Willamette Foods Marketplace, L.L.C. 49%
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.
16. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the company to significant
concentrations of credit risk consist principally of cash and cash
equivalents, investments, store financing loans and trade accounts
receivable.
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
15
<PAGE>
has stock holdings in the Company as well as patronage rebates which the
Company could apply against account balances.
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 18.a. 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.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair
value amounts have been determined by the Company using available market
information and appropriate valuation methodologies.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS, INVESTMENTS MAINTAINED FOR INSURANCE
RESERVES AND LONG-TERM NOTES RECEIVABLES INCLUDING THE CURRENT PORTION: The
carrying amounts reported in the balance sheet for cash and cash equivalents
and long-term receivables approximate their fair value.
INVESTMENT IN AND ACCOUNTS WITH AFFILIATED COMPANIES: It is not
practicable to estimate the fair value of an investment representing the
common stock of a non-public company because this stock is not traded; that
investment is carried at its original cost plus equity in earnings to date
in the consolidated balance sheet.
NOTES PAYABLE - BANK AND LONG-TERM LIABILITIES, INCLUDING CURRENT
MATURITIES: The carrying amounts of commercial paper and other variable-rate
debt instruments approximate their fair value. The fair values of fixed-rate
long-term debt are estimated using discounted cash flow analyses based on
the Company's incremental borrowing rates for similar types of borrowing
arrangements. The assumed incremental borrowing rates used to determine the
fair value of fixed-rate long-term debt were 7.50% to 8.30% and 7.50% to
8.00% for 1996 and 1995, respectively.
INSURANCE RESERVES SUPPORTED BY INVESTMENTS: The fair value of
insurance accruals, which represent contractual obligations to pay cash in
the future, is estimated based on a discounted cash flow analysis using the
Company's incremental borrowing rate as the discount rate.
The carrying amounts and fair values of the Company's financial
instruments at the balance sheet date are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- ----------------------------
Carrying Fair Carrying Fair
amounts values amounts values
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents $16,509,866 $16,509,866 $13,045,456 $13,045,456
Investments maintained for
insurance reserves 46,828,893 46,966,058 40,809,762 41,610,228
Long-term notes receivable,
including the current
portion 28,660,237 28,165,237 26,602,381 26,302,381
Investment in and accounts
with affiliated companie 12,477,107 12,477,107 8,392,281 8,392,281
Notes payable - bank 61,173,867 61,173,867 48,515,543 48,515,543
Insurance reserves supported
by investments 29,561,657 29,561,657 29,958,678 29,958,678
Long-term liabilities,
including current maturities 152,208,088 153,560,695 123,196,885 124,416,290
</TABLE>
18. COMMITMENT 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 1996, 1995 and
1994, the Company sold notes totaling approximately $10,549,000,
$20,800,000 and $8,600,000, respectively. The balances of transferred
notes that were outstanding and subject to recourse provisions were
approximately $27,426,000, $28,537,000 and $13,652,000 at September
27, 1996, September 29, 1995 and September 30, 1994, respectively.
b. In connection with its loan activities to members, the Company has
approved loan applications totaling approximately $16,528,900 for
which funds have been committed, but not disbursed, as of September
27, 1996.
c. The Company is guarantor of a covenant and a loan by members as of
September 27, 1996 totaling approximately $2,137,000 with annual
payments of approximately $291,000.
d. The Company is in labor negotiations with several of its unions, whose
contract expired in April, 1996. If the Company is unable to reach a
negotiated settlement, it is likely that a strike would occur which
would depress volumes and cause plant efficiencies to suffer.
e. 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.
16
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
During fiscal year 1996 net sales and operations increased 27.8% to $1,301.5
million. This compares to an 6.7% increase in 1995 to $1,018.2 million. Income
before members' allowances, patronage dividends, and income taxes decreased $6.2
million to $15.8 million (1.22% of sales). This compares to $22.0 million (2.16%
of sales) and $22.7 million (2.38% of sales) in 1995 and 1994 respectively.
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. During 1996, gross revenues from the acquired operations were
approximately $249.2 million. Total assets at year end from the acquired
operations amounted to $47.6 million, and the Company's net investment in the
assets was approximately $34.0 million.
During 1996, the increase in net sales and operations was primarily
attributable to the distribution segment which enjoyed increased food service
distribution unit volume and increased sales from the Company's acquisition of
the wholesale business (Market Wholesale Grocery) of Bay Area Foods, Inc. These
gains were off set by decreased premium income in the insurance segment, lower
volume from member owned retail stores, and lower unit volume in the
distribution segment's member business.
In 1996, the Company had increased profits within its distribution segment
from its food service and other nonmember distribution segment operations, and
lower operating losses at company-owned retail stores. Within the insurance
segment, profits increased from the agency and underwriting operations. These
profit gains were offset by increased operating expenses in the distribution
segment due to cost inflation and system integration activities. Profit gains
were also impacted by higher interest expenses due to increased average levels
of debt caused by the Market Wholesale acquisition and increased software
investments.
During 1995, the increase in net sales and operations was primarily
attributable to the distribution segment. 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, increased operating expenses in the distribution segment, and
increased property losses in Grocers Insurance Company.
NET SALES AND OPERATIONS
During 1996, sales of the Company's distribution segment increased 30.5% to
$1,275.0 million. The sales gain was primarily due to volume realized from
acquired operations and increased food service distribution unit volume. Price
changes during 1996 impacted warehouse sales by approximately 2.1%.
Food service distribution increased 15.4% to $271.8 million compared to
$235.5 million in 1995. Sales at new units and business acquired in 1995
contributed 9.1% to the sales increase. Sales at company-owned retail stores,
which are primarily acquired as a result of store finance operations, decreased
$20.1 million to $22.4 million. During the year, the company acquired one store
and disposed of three stores. As a net result, the number of company-owned
retail stores decreased by two stores.
In 1996, the insurance segment's net insurance premiums, commissions, and
fees decreased $2.7 million to $20.1 million. The decrease was primarily
attributed to increased unearned premium reserves in the Company's workman's
compensation business, and increased reinsurance expenses associated with the
increase in business mix towards larger volume accounts. Policy premiums
increased approximately $1.1 million despite declining rates in workman's
compensation, and flat rates in property and casualty lines of business.
GROSS OPERATING INCOME
Gross operating income increased to $174.3 million (13.4% of sales) in 1996 from
$148.2 million (14.6% of sales) in 1995, and $137.5 million (14.4% of sales) in
1994. Gross operating income from the acquired operations of Market Wholesale
contributed $26.6 million to gross operating income. The Company's gross
operating income also increased due to higher unit sales in food service
distribution, and improved loss experience in Grocers Insurance Company. These
improvements were off set by lower gross operating income from retail stores
owned by the Company due to a lower number of stores.
In 1996, loss and loss adjustment expenses were 68.7% of total premium
income, compared to 74.7% and 64.7% in 1995 and 1994, respectively. The
improvement in loss experience resulted from the absence of major property and
casualty losses during the year, and continued improvement in loss experience in
the workman's compensation area.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
In 1996, operating, selling, and administrative expenses increased $29.3 million
to $141.2 million (11.0% of sales). In 1995 and 1994, these expenses were $111.8
million (11.0% of sales), and $103.5 million (10.9% of sales), respectively.
Operating expenses associated with the acquired operations of Market Wholesale
were $23.7 million of the increase.
17
<PAGE>
The components of these expenses are summarized below:
Percent of Total Sales
1996 1995 1994
Salaries & Wages 5.8 6.1 6.0
Rents, Maintenance, and Repairs 1.8 1.8 1.7
Taxes, Other Than Income 0.9 0.8 0.9
Utilities, Supplies, and Services 1.2 1.1 1.6
Other Expenses 1.1 1.0 0.5
Provision for Doubtful Accounts 0.2 0.2 0.2
- --------------------------------------------------------------------------
Total 11.0 11.0 10.9
==========================================================================
During 1996, total operating, selling, and administrative expenses
increased primarily due to higher unit volume in both the distribution and the
insurance segments, and as a result of the acquired operations of Market
Wholesale. Operating expenses associated with the acquired operations of Market
Wholesale were $23.7 million of the increase in total operating, selling, and
administrative expenses. Excluding the impact from Market Wholesale, operating,
selling, and administrative expenses changed due to increases in salaries,
telephone, temporary labor, maintenance and repairs, and other taxes.
Insurance segment operating expenses decreased to 38.5% of segment net
sales and operations. In 1995 and 1994, insurance segment operating expenses
were 32.3% and 36.3% of segment net sales and operations, respectively.
Operating expenses increased due to the opening of new offices in other states
during the year.
Provision for doubtful accounts was $2.1 million (0.2% of sales) in 1996.
This compares to $1.9 million (0.2% of sales) and $2.0 million (0.3% of sales)
in 1995 and 1994, respectively.
Interest expense increased $2.0 million to $14.8 million (1.1% of sales) in
1996. This increase was primarily due to the debt associated with the Market
Wholesale acquisition.
MEMBER ALLOWANCES AND DIVIDENDS
In 1996, total member allowances and dividends decreased $4.3 million to $15.6
million (1.2% of sales). In 1995, total member allowances and dividends
decreased 1.6% to $19.9 million (2.0% of sales).
Total member allowances and dividends as a percent of member sales
decreased to 2.15% in 1996, compared to 2.84% in 1995, and 2.90% in 1994.
NET INCOME AND INCOME TAXES
In 1996, income before taxes was $0.2 million compared to $2.2 million (0.2% of
sales) in 1995 and $2.6 million (0.3% of sales) in 1994.
Net income after taxes was $0.2 million in 1996, a decrease of $1.2 million
from $1.4 million (0.1% of sales) and $1.6 million (0.2% of sales) in 1995 and
1994, respectively.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM OPERATING ACTIVITIES
In 1996, the Company generated $6.2 million in cash in its operating
activities. Increases in accounts receivable, inventories, and information
services platform investments were the major factors contributing to the use of
cash in operations.
CASH FLOW FROM INVESTING ACTIVITIES
In 1996, the Company used $40.2 million in its investing activities, an increase
of $37.3 million from the $2.9 million used in 1995. The acquisition of Market
Wholesale accounted for $34.0 million in 1996. Purchases of property and
equipment increased to $16.2 million in 1996 from $10.4 million in 1995.
In fiscal year 1996, anticipated capital expenditures will approximate $7.0
million, representing $1.0 million in replacement assets, $3.0 million for new
Cash & Carry units, and $3.0 million in continuing investments in upgraded
operations software.
CASH FLOW FROM FINANCING ACTIVITIES
In 1996, the Company provided $37.5 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 27, 1996 September 29, 1995
$000 % $000 %
- -----------------------------------------------------------------------------
Average Short Term Borrowings $ 56,740 22.7 $42,632 20.6
End of Year Amounts:
Senior Term Debt 95,027 38.0 68,135 32.9
Subordinated debt 57,181 22.8 53,844 26.0
Equity 41,259 16.5 42,357 20.5
- -----------------------------------------------------------------------------
Total $250,207 100.0 $206,968 100.0
=============================================================================
In 1996, the Company's working capital increased $6.7 million to $59.2
million. The Company's main sources of funds include earnings, member capital
stock, capital investment notes, bank debt, and note purchase programs. As of
September 27, 1996, the Company had $14.5 million in unused credit lines
available. In addition, the Company had $10.7 million available under its Note
Purchase Agreement.
18
<PAGE>
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 with asset reductions 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, $5.0 million of Grocers Insurance Company's equity may not be paid
as dividends to the Company.
At September 27, 1996, the Company was not in compliance with its fixed
charge financial covenant. That covenant requires the Company maintain a minimum
coverage of fixed charges of 1.4 to 1.0. At September 27, 1996, the fixed charge
coverage ratio was 1.2 to 1.0. The Company will be working with its senior
creditors to establish a plan to return to compliance with this ratio, and will
request the necessary waivers of the covenant. In connection with the above,
certain terms and conditions of the senior credit agreements could change.
19
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION
Board of Directors
United Grocers, Inc.
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 12, 1996. Our audits were made for the
purpose of forming an opinion on those financial statements taken as a whole.
The pro forma consolidated schedules of income for the years ended September 27,
1996 and September 29, 1995 are presented for purposes of additional analysis
and are not a required part of the basic financial statements. Such information
has not been subjected to the auditing procedures applied in the audit of the
basic financial statements and, accordingly, we express no opinion on it.
/s/ DeLap, White & Raish
DELAP, WHITE & RAISH
Certified Public Accountants
Portland, Oregon
December 12, 1996
UNITED GROCERS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED SCHEDULES OF INCOME
YEARS ENDED SEPTEMBER 27, 1996 AND SEPTEMBER 29, 1995
1996 1995
-------------- --------------
Net sales and operations $1,352,302,776 $1,326,522,799
-------------- --------------
COST AND EXPENSES:
Cost of sales 1,172,830,590 1,149,986,553
Operating expenses 130,089,635 126,054,112
Selling and administrative expenses 15,997,692 11,705,432
Depreciation 6,631,292 6,392,862
INTEREST:
Interest expense 14,825,357 14,175,652
Interest income (4,162,561) (4,494,053)
-------------- --------------
Interest expense, net 10,662,796 9,681,599
-------------- --------------
Total costs and expenses 1,336,212,005 1,303,820,558
-------------- --------------
Income before members' allowances and
patronage dividends, and income taxes 16,090,771 22,702,241
Members' allowances (11,604,949) (11,513,784)
Members' patronage dividends (4,000,000) (8,350,000)
-------------- --------------
Income before income taxes 485,822 2,838,457
Provision for income taxes (185,052) (1,021,063)
-------------- --------------
NET INCOME $ 300,770 $ 1,817,394
============== ==============
This pro forma presentation attempts to show United Grocers, Inc. and Market
combined and operating as one business unit using historical financial
statements as if the transaction had been consummated at the beginning of the
year that ended September 29, 1995. (See Note 1.d. of the notes to consolidated
financial statements for more details of this transaction.)
The accompanying independent auditor's report on supplemental information
should be read as part of this schedule.
20
EXHIBIT 23.B
CONSENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference of (i) our
report dated December 12, 1996, with respect to the financial statements of
United Grocers, Inc.; (ii) our report dated December 12, 1996, with respect to
the financial statement schedules; and (iii) our report dated December 12, 1996,
with respect to supplemental information, all of which are included in the
annual report on Form 10-K of United Grocers, Inc., for the year ended September
27, 1997, into the prospectus constituting part of the Registration Statement on
Form S-2 of United Grocers, Inc.
/s/DeLap, White & Raish
DeLAP, WHITE & RAISH
Certified Public Accountants
Portland, Oregon
January 21, 1997
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints ALAN C. JONES and JOHN W. WHITE and each
of them his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of United Grocers,
Inc., for its fiscal year ended September 27, 1996, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or each of
them or their or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF this power of attorney has been signed by the
following persons in the capacities indicated on December 18, 1996.
Signature Title
/s/ HENRY R. (DICK) LEONARD
Henry R. (Dick) Leonard Director
- 1 -
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints ALAN C. JONES and JOHN W. WHITE and each
of them his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of United Grocers,
Inc., for its fiscal year ended September 27, 1996, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or each of
them or their or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF this power of attorney has been signed by the
following persons in the capacities indicated on December 20, 1996.
Signature Title
/S/ GORDON E. SMITH
Gordon E. Smith Director
- 2 -
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints ALAN C. JONES and JOHN W. WHITE and each
of them his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of United Grocers,
Inc., for its fiscal year ended September 27, 1996, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or each of
them or their or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF this power of attorney has been signed by the
following persons in the capacities indicated on December ----, 1996.
Signature Title
/s/ RON L. MANCASOLA
Ron L. Mancasola Director
- 3 -
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints ALAN C. JONES and JOHN W. WHITE and each
of them his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of United Grocers,
Inc., for its fiscal year ended September 27, 1996, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or each of
them or their or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF this power of attorney has been signed by the
following persons in the capacities indicated on December 19, 1996.
Signature Title
/s/ ROBERT A. LAMB
Robert A. Lamb Director
- 4 -
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints ALAN C. JONES and JOHN W. WHITE and each
of them his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of United Grocers,
Inc., for its fiscal year ended September 27, 1996, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or each of
them or their or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF this power of attorney has been signed by the
following persons in the capacities indicated on December 18, 1996.
Signature Title
/s/ H. LARRY MONTGOMERY
H. Larry Montgomery Director
- 5 -
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints ALAN C. JONES and JOHN W. WHITE and each
of them his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign registration statements on Form S-2 relating to
Series K Capital Investment Notes and to Common Stock, $5 par value per share,
of United Grocers, Inc., and any and all amendments (including post-effective
amendments) thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or each of them or their or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF this power of attorney has been signed by the
following persons in the capacities indicated on April 24, 1997.
Signature Title
/s/ GAYLON BAESE
Gaylon Baese Director
- 1 -
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints ALAN C. JONES and JOHN W. WHITE and each
of them his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of United Grocers,
Inc., for its fiscal year ended September 27, 1996, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or each of
them or their or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF this power of attorney has been signed by the
following persons in the capacities indicated on April 25, 1997.
Signature Title
/s/JAMES GLASSEL
James Glassel Director
- 1 -
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints ALAN C. JONES and JOHN W. WHITE and each
of them his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of United Grocers,
Inc., for its fiscal year ended September 27, 1996, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or each of
them or their or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF this power of attorney has been signed by the
following persons in the capacities indicated on ------------, 1997.
Signature Title
/s/ KENNETH W. FINDLEY
Kenneth W. Findley Director
- 1 -
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints ALAN C. JONES and JOHN W. WHITE and each
of them his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K of United Grocers,
Inc., for its fiscal year ended September 27, 1996, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or each of
them or their or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF this power of attorney has been signed by the
following persons in the capacities indicated on April 28, 1997.
Signature Title
/s/ DEAN RYAN
Dean Ryan Director
- 1 -
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------
FORM T-1
Statement of Eligibility and Qualification Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
FIRST TRUST NATIONAL ASSOCIATION
(Exact Name of Trustee as Specified in Its Charter)
United States 91-1587893
(State of Incorporation) (I.R.S. Employer Identification No.)
601 Union Street, Suite 2120
Seattle, WA 98101
(Address of Principal Executive Offices) (Zip Code)
UNITED GROCERS, INC.
(Exact Name of Obligor as Specified in Its Charter)
Oregon 93-0301970
(State of Incorporation) (I.R.S. Employer Identification No.)
6433 S.E. Lake Road
Milwaukie, Oregon 97222
(Address of Principal Executive Office (Zip Code)
CAPITAL INVESTMENT NOTES
(Title of the Indenture Securities)
1. General Information. Furnish the following information as to the
Trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency, Washington DC 20521
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. Affiliations with Obligor and Underwriters. If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each such
affiliation.
None
<PAGE>
See Note following Item 16.
Items 3 - 15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. List of Exhibits. List below all exhibits filed as a part of this statement
of eligibility and qualification. Each of the exhibits listed below is
incorporated by reference from a previous registration. Reference Registration:
Summit Securities, Inc., filed December 1996.
1. Articles of Association of First Trust National Association.
2. Certificate of Authority of First Trust National Association to Commence
Business.
3. Authorization of the Trustee to exercise corporate trust powers.
4. Bylaws of First Trust National Association.
5. Copy of each Indenture referred to in Item 4. Not Applicable.
6. Consents of First Trust National Association required by Section 321(b)
of the Act.
7. Latest Report of Condition of the Trustee published pursuant to law or
the requirements of its supervising or examining authority.
NOTE
The answers to this statement insofar as such answers relate to what persons
have been underwriters for any securities of the obligor within three years
prior to the date of filing this statement, or what persons are owners of 10% or
more of the voting securities of the obligor, or affiliates, are based upon
information furnished to the Trustee by the obligor. While the Trustee has no
reason to doubt the accuracy of such information, it cannot accept any
responsibility therefor.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
First Trust National Association, a national banking association organized under
the laws of the United States, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City of
Portland, and State of Oregon, on the 17th day of January, 1997.
FIRST TRUST NATIONAL ASSOCIATION
[SEAL]
/s/ LINDA A. MCCONKEY
Linda A. McConkey
Assistant Vice President
/s/ LAWRENCE J. BELL
Lawrence J. Bell
Assistant Secretary
<PAGE>
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 in connection with the proposed issuance by United Grocers, Inc. of Capital
Investment Notes, we hereby consent that reports of examinations by federal,
state, territorial and district authorities may be furnished by such authorities
to the Securities and Exchange Commission upon its request therefor.
FIRST TRUST NATIONAL ASSOCIATION
/s/ LINDA A. MCCONKEY
Linda A. McConkey
Assistant Vice President
Dated: January 17, 1997
<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 quarter ended
December 27, 1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-03-1997
<PERIOD-START> SEP-28-1996
<PERIOD-END> DEC-27-1996
<S> <C>
<CASH> 12,902,532
<SECURITIES> 46,857,941
<RECEIVABLES> 77,815,617
<ALLOWANCES> 1,991,123
<INVENTORY> 102,294,073
<CURRENT-ASSETS> 248,643,824
<PP&E> 116,855,706
<DEPRECIATION> 45,869,968
<TOTAL-ASSETS> 381,008,623
<CURRENT-LIABILITIES> 189,268,043
<BONDS> 146,918,512
0
0
<COMMON> 27,227,700
<OTHER-SE> 13,058,213
<TOTAL-LIABILITY-AND-EQUITY> 381,008,623
<SALES> 331,840,876
<TOTAL-REVENUES> 331,840,876
<CGS> 287,785,689
<TOTAL-COSTS> 33,313,640
<OTHER-EXPENSES> 4,254,448
<LOSS-PROVISION> 601,211
<INTEREST-EXPENSE> 4,071,050
<INCOME-PRETAX> (1,080,096)
<INCOME-TAX> ( 378,200)
<INCOME-CONTINUING> ( 701,896)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ( 701,896)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
