UNITED GROCERS INC /OR/, 10-K/A, 1999-09-20

UNITED GROCERS INC /OR/
10-K/A, 1999-09-20
GROCERIES, GENERAL LINE

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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

AMENDMENT NO. 1 TO FORM 10-K
(FORM 10-K/A )

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year ended October 2, 1998
Commission File Number 2-60487

UNITED GROCERS, INC.

OREGON 93-0301970

6433 S.E. Lake Road (Milwaukie, Oregon)
Post Office Box 22187, Portland, Oregon 97222

Registrant's telephone number, including area code: (503) 833-1000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---

State the aggregate market value of the voting stock held by non-affiliates
of the registrant:

$29,046,121 (computed on basis of 1998 adjusted book value and number of
shares outstanding at January 15, 1999).

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:

523,165 shares of common stock, $5 par value, as of January 15, 1999.

Documents incorporated by reference: None.

1
<PAGE>
EXPLANATORY NOTE

United Grocers, Inc.'s financial statements for the fiscal year 1996 have
been restated. For information relating to the restatement and United Grocers,
Inc.'s Forms 10-K and Forms 10-Q for the fiscal years 1991 to 1996 and its Forms
10-Q for the interim periods of fiscal years 1996 and 1997, see United Grocers,
Inc.'s Form 8-K dated September 20, 1999.

<PAGE>

Pursuant to Rule 12b-15, promulgated under the Securities Exchange Act of
1934, the registrant amends each of the following Items of its Annual Report on
Form 10-K for the year ended October 2, 1998, so that, as amended, such Items
read as set forth herein:

Part II

Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.

Part III

Item 11. Executive Compensation
Item 13. Certain Relationships and Related Transactions

Part IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K

<PAGE>
Item 6. Selected Financial Data

The "Statement of Operations" and "Balance Sheet" data for fiscal years 1996,
1997 and 1998 in the five-year period ended October 2, 1998 have been derived
from the audited consolidated financial statements of United. The "Statement of
Operations" and "Balance Sheet" data for fiscal years 1994 and 1995 in the
five-year period ended October 2, 1998 have been derived from the audited
financial statements of United, as adjusted for the effect of the restatement
described in Note 2 to the consolidated financial statements included herein.

The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of United (including the
Notes thereto):
<TABLE>

(In thousands, except book value per share and operating data)

Fiscal Year
-----------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(Unaudited) (Unaudited) (Restated)(1)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Net sales................ $935,432 $995,453 $1,280,453 $1,306,602 $1,175,279
Operating income (loss) (2) 16,244 20,340 9,948 (1,668) 1,327
Patronage dividends...... 8,730 8,350 4,000 0 0
Net earnings (loss)...... 2,044 3,685 (5,569) (8,660) 19,760
Balance Sheet Data
Working capital.......... $ 45,678 $ 53,264 $ 56,329 $ 107,213 $ 31,152
Total assets............. 307,255 323,209 379,264 365,427 233,642
Long-term notes payable.. 114,669 115,624 143,134 187,995 74,434
Members' equity.......... 28,114 32,352 25,733 14,651 31,343
- ----------
</TABLE>

(1) See Note 2 to Notes to Consolidated Financial Statements of United.
(2) Operating income is comprised of net sales less costs and expenses and
members' allowances.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Overview

Fiscal 1998 was a year of major changes for United. These changes were a result
of United's decision to increase the emphasis on the "core" business activity,
grocery product distribution. The result of these changes on the financial
statements is to make some of the results of operations and balance sheet items
less comparable when reviewing years side by side. The effect of these changes
on the financial statements will be described as part of this discussion in the
appropriate sections.

During fiscal 1997, United experienced significant losses from adjustments to
the reserve for uncollectible receivables.

The financial data for fiscal 1996 referenced in this item has been restated.
The changes are summarized in Note 2 of the Notes to Consolidated Financial
Statements following the consolidated financial statements filed in this
document.

4
<PAGE>
Discontinued Operations

In September 1997, United's management and Board of Directors approved a plan
whereby the insurance operations would be sold to an unrelated party.
Accordingly, the results of operations of the insurance segment for the annual
and year-to-date periods have been presented as "discontinued operations" in the
accompanying consolidated statements of operations.

The sale was completed on July 8, 1998 to Orion Capital Corporation. Net
proceeds from the sale of the stock of United's insurance subsidiary totaled
approximately $36 million, resulting in a pre-tax gain of approximately $5.4
million, which was recorded in the fourth quarter of fiscal 1998, and is shown
on the Consolidated Statements of Operations following the heading "Gain on
disposal of insurance segment." Proceeds from the sale were used to reduce
United's long-term debt.

The following is a summary of the assets and liabilities of the insurance
segment as of July 3, 1998:

Assets:
Investments........................................ $45,993,000
Receivables and other current assets............... 28,646,000
Long-term assets................................... 733,000
-------
75,372,000
Liabilities:
Insurance reserves supported by investments........ 27,762,000
Accounts payable and other current liabilities..... 16,393,000
----------

Net investment in insurance segment................ $31,217,000
===========

The sale of the insurance segment is estimated to have a positive effect on the
income of United during fiscal year 1999. In fiscal 1999, United estimates that
there will be a decline in operating income of $3.0 million which will be offset
by a reduction of interest expense related to the reduction in debt levels of
$3.1 million. United estimates that sales will decline approximately $23.9
million in fiscal year 1999 as a result of the sale of the insurance segment.

Sale of Retail Operations

On May 1, 1998, United completed the sale of its Rich and Rhine, Inc. subsidiary
to Kero Corporation. The purchase price consisted of $3.5 million in cash, plus
a promissory note of approximately $1.4 million. The promissory note is
collateralized by a pledge of the common stock of the buyer.

On May 15, 1998, United completed the sale of its Cash & Carry division to Smart
& Final, Inc. The gross sales proceeds consisted of $42.5 million in cash, plus
a $17.5 million, 5-year unsecured note. The gain is shown on the "Gain on sale
of Cash & Carry division" line of the Consolidated Statements of Operations.

In connection with the sale of its Cash & Carry division, United entered into a
five-year supply agreement with Smart & Final, Inc.

5
<PAGE>
Year 2000 Preparations

This section captioned "Year 2000 Preparations" and other statements about Year
2000 issues are "Year 2000 Readiness Disclosures" pursuant to the Year 2000
Information and Readiness Disclosure Act.

United is addressing the possible Year 2000 problems with a systematic approach.
To make a smooth transition into the next century, United has entered into the
"Year 2000 Project," which is comprised of four major areas of concern--(1)
Infrastructure (Hardware & System Operating Software), (2) Applications
Software, (3) Third Party Suppliers (Trading Partners, Banks, Utilities), and
(4) Process Control and Instrumentation (Embedded Systems).

Area -1-- The Infrastructure area consists of hardware and operating system
software. Updating in this area is on schedule and United estimates that
approximately 90 percent of the items identified in this area had been completed
as of November 21, 1998. The testing phase is ongoing as the remaining items are
corrected or replaced.

All infrastructure item tasks are expected to be completed by March 31, 1999.

Area 2--The Application Software area consists of conversion of software that is
not Year 2000 compliant, and where available, the replacement of such software
from the vendor. United has engaged Applied Decisions USA, Inc. to assist in
project management, and in conversion and testing of certain non-compliant
application software code.

United estimates that the conversion phase was 95 percent complete as of
November 21, 1998 and full conversion will be completed by March 31, 1999. The
testing phase is progressing in an organized fashion as the software is repaired
or replaced. The testing is ongoing.

United uses software from The Armature Company for warehousing and purchasing
functions. "Year 2000" compliant software installation was completed on November
21, 1998.

Area 3--The Third Party Suppliers area includes the identification and
prioritizing of critical suppliers, financial institutions, and utilities, and
communicating with them about their plans and progress in addressing the Year
2000 issue. United has identified and contacted 4,324 suppliers requesting
information on their plans and progress on the Year 2000 issue. As of December
4, 1998, United had received a response from 69 percent of the identified
suppliers. Responses from the identified suppliers indicate progress in
addressing the Year 2000 issue, with a majority of the responses expecting full
compliance by September 30, 1999. United has a follow-up plan in place scheduled
through the remainder of 1999. Contingency planning in this area is scheduled to
begin in January 1999, with the completed plan in place by June 30,1999.

Area 4-- The Process Control and Instrumentation area consists of identification
and prioritization of hardware and software associated with embedded chips used
in operation of all facilities of United. United has identified and corrected 80
percent of the identified items. The remaining 20 percent will be completed by
September 30, 1999. Contingency planning in this area is scheduled to begin in
January 1999 and completed by September 30, 1999.

The major phases associated with the Project are: (A) Inventory of potential
Year 2000 items; (B) Assigning priorities to the items identified as material to
United; (C) Assessing the Year 2000 compliance of the inventoried items; (D)
Repairing or replacing material items that are

6
<PAGE>
determined not to be Year 2000 compliant; (E) Testing material
items; and (F) Developing contingency and business continuation plans for each
functional area and location.

On November 21, 1998 the Inventory, Prioritization, and Assessment phases
(phases A, B and C) of the Project were declared completed.

Phase D--Material items are those identified by United that affect the ability
of United to perform its core business functions that support United's customer
base, or affect revenues. All material items have been repaired or replaced as
of December 31, 1998.

Phase E--Full systems testing commenced in January 1999, and completion is
expected by June 30, 1999. Vendor software upgrades continue on schedule.

Phase F--Contingency planning for all areas is ongoing and is expected to be
completed by June 30, 1999.

Cost - The estimated cost of the Year 2000 Project is approximately $5.6
million. The total amount expended on the project through December 31, 1998 was
$2.7 million, of which approximately $2.5 million related to the cost of
conversion or replacement of application software, $150,000 related to the
replacement of hardware, and $50,000 related to the cost of identifying and
communicating with Third Party Suppliers. The estimated future cost of
completing the Year 2000 Project is estimated to be $2.9 million - $2.8 million
for replacement of software and related hardware, and $100,000 to identify and
communicate with Third Party Suppliers, and to repair or replace embedded
systems.

Risks--The failure to correct material Year 2000 issues could result in
interruption in or failure of, key core business processes. The most reasonably
likely worst case scenario is business being partially or totally disrupted for
a period of a few hours to one week. There can be no assurance that actual
results will not differ materially from those projected.

Safety Net Preparation--The Year 2000 team has, as part of their project, been
identifying manual or modified processes that would need to be employed in the
unlikely event that some of the upgrades fail.

Year ended October 2, 1998 ("1998") compared to year ended October 3, 1997
("1997")

Results of Operations

Net Sales and Operations. Net sales and operations decreased to $1,175.3 million
from $1,306.6 million in 1997, a decline of 10.1%. Income from continuing
operations before members' allowances and income taxes increased $46.6 million
to $35.3 million (3.0% of net sales). This compares to a loss of $11.3 million
(0.9% of net sales) in 1997.

During 1998, $131.3 million, or 100%, of the decrease in net sales and
operations was attributable to the distribution segment. The distribution
segment experienced a decline in sales of $50.7 million due to the elimination
of certain unprofitable accounts. United has a supply agreement with the
purchaser of the Cash & Carry operations and does not expect any reduction of
sales volume during fiscal 1999 related to the sale of the Cash & Carry
division. In 1998, United had increased profits within its distribution segment
from one time gains on sales of its Cash & Carry division and other businesses
and properties, and lower operating

7
<PAGE>
losses at United-owned retail stores. These profit gains were partially
offset by increased operating expenses of approximately $17.0 million in
the distribution segment due to cost inflation and system integration
activities.

Gross Operating Income. Gross operating income (net sales less cost of sales and
member allowances) decreased to $145.9 million (12.4% of net sales) in 1998 from
$162.6 million (12.4% of net sales) in 1997. The decline in gross operating
income is consistent with the decline in net sales discussed above. During 1999,
United expects gross operating income to decline slightly as the sales from the
former Cash & Carry division are reported at a wholesale level, which is lower
than the retail sale level, which was used through the time of sale of the
division.

Operating, Selling and Administrative Expenses. In 1998, operating, selling, and
administrative expenses decreased $18.5 million to $134.2 million (11.4% of net
sales). In 1997, these expenses were $152.7 million (11.7% of net sales). The
dispositions of the insurance segment and the retail operations are expected to
have a negligible effect on these expenses in fiscal 1999.

The components of these expenses are summarized below:

Percent of
Net Sales and
Operations
----------
1998 1997
---- ----
Salaries and wages......................... 6.3% 6.0%
Rents, maintenance and repairs............. 2.0 2.0
Taxes, other than income................... 0.8 0.8
Utilities, supplies and services........... 1.0 1.1
Other expenses............................. 1.1 1.0
Provisions for doubtful accounts........... 0.2 0.8
--- ---
Total............................. 11.4% 11.7%
==== ====

During 1998, total operating, selling, and administrative expenses decreased
approximately $10.6 milliondue to lower unit volume in the distribution
segments.

The provision for doubtful accounts was $2.4 million (0.2% of net sales) in
1998. This compares to $10.8 million (0.8% of net sales) in 1997. The decrease
in the provision from 1997 to 1998 relates to one-time adjustments recorded in
fiscal 1997 to the reserve for uncollectible accounts.

Interest expense decreased $2.7 million to $13.6 million (1.2% of net sales) in
1998. This decrease was due to lower debt levels associated with sales of assets
and the insurance segment and reduced inventory levels.

Net income from continuing operations before income taxes was $21.2 million
compared to a loss of $21.6 million in 1997. The increase is due to the
gain on sale of the Cash & Carry Division of $29.0 million, a $2.7 million
decrease in interest expense and a gain on the disposition of assets of
$2.2 million in 1998 as compared to a loss of $5.2 million in 1997.

Discontinued operations include net income from the operations of the insurance
segment, which decreased from $2.5 million in 1997 to $1.4 million in 1998, due
to the sale of the insurance operations in July 1998. In addition, a $3.4
million net gain was realized in 1998 as a result of the sale.

8
<PAGE>
In 1998, United recognized $1.7 million, net of income taxes of $1.2 million, as
the cumulative effect on prior years of changing the method of amortizing the
unrecognized net gain on United's defined benefit pension plan. This change was
recorded in the fourth quarter of fiscal 1998 in connection with United's
decision to utilize a 3-year amortization of the unrecognized gain, versus the
minimum allowed under generally accepted accounting principles. United believes
the change more currently recognizes the effects of changes in the actuarial
assumptions and differences between the assumptions used and the actual
experience. The effect of this change on 1998 results of operations was to
increase net income before cumulative effect of change in accounting principles
by $996,000.

Net income was $19.8 million (1.7% of net sales) in 1998, an increase of $28.4
million from a loss of $8.7 million (0.7% of net sales) in 1997.

The effective income tax rate changed from a 50.4% benefit in 1997 to a 37.8%
provision in 1998. The higher effective rate in 1997 was due to the reversal of
a valuation allowance in 1997, due to the implementation of a tax planning
strategy.

Liquidity and Capital Resources

Cash Flows From Operating Activities. In 1998, United used $13.5 million in cash
in its operating activities. A decrease in accounts payable partially offset by
a decrease in inventory were the major factors involved. In 1997, United was
provided $12.9 million from operating activities. The major components were loss
on disposition of assets and increase in accounts payable.

Cash Flows From Investing Activities. In 1998, United was provided $88.2 million
from its investing activities, with the sale of business units, investments and
other assets being the biggest factors. In 1997, United used $1.9 million in
investing, with the proceeds of asset sales being offset with purchases of
property, plant and equipment.

Cash Flows From Financing Activities. In 1998, United used $83.7 million in its
financing activities. Repayments of debt in 1998 totaled $82.6 million, $64.8
million of which was repaid using proceeds from sales of the insurance segment
and Cash & Carry division. In 1997, United used $17.3 million in similar
efforts.

Capital Resources. In 1998, United's working capital decreased $76.1 million
from $107.2 million at October 3, 1997 to $31.2 million at October 2, 1998. The
reasons for the decrease were the sale of the insurance segment and the Cash &
Carry division, the proceeds from which were used to reduce debt, and the
reclassification of an additional $31.0 million of long-term debt as notes
payable under current liabilities.

As of October 2, 1998, United had $36.1 million in unused credit lines
available. Amounts available under the Company's credit facilities are subject
to reduction by the lender being permitted to establish availability reserves
based upon certain events, conditions, contingencies or risks which it may in
good faith determine.

At October 2, 1998, United was in compliance with all financial covenants with
its lenders.

9
<PAGE>
Year ended October 3, 1997 ("1997") compared to year ended September 27, 1996
("1996")

Results of Operations

Net Sales and Operations. Net sales and operations increased 2.0% in 1997 to
$1,306.6 million from $1,280.5 million in 1996. The increase included $24.0
million attributable to the distribution segment, which experienced an increase
in sales due to the addition of volume in California with the purchase of Market
Wholesale. Income from continuing operations before members' allowances and
income taxes decreased $18.8 million to a loss of $11.3 million (0.86 % of
sales). This compares to an income of $7.6 million (0.59% of net sales) in 1996.
During fiscal 1997, United experienced significant losses of $10.8 million from
adjustments in the reserve for uncollectible receivables.

Gross Operating Income. Gross operating income (net sales less cost of sales and
member allowances) increased $9.5 million to $162.6 million from the 1996 gross
operating income of $153.1 million.

Operating, Selling and Administrative Expenses. Operating, selling, and
administrative expenses increased $17.6 million to $152.7 million (11.7% of
sales) from the 1996 level of $135.1 million (10.6% of sales).

The components of these expenses are summarized below:

Percent of
Net Sales and
Operations
----------
1998 1997
---- ----
Salaries and wages......................... 6.0% 5.5%
Rents, maintenance and repairs............. 2.0 1.3
Taxes, other than income................... 0.8 0.9
Utilities, supplies and services........... 1.1 1.2
Other expenses............................. 1.0 1.1
Provisions for doubtful accounts........... 0.8 0.6
--- ---
Total............................. 11.7% 10.6%
==== ====

During 1997 the operating, selling, and administrative expenses increased due to
increases in the provision for doubtful accounts of $3.5 million, increases in
salaries and wages of $8.1 million and increases in rents, maintenance and
repairs of $6.0 million.

The provision for doubtful accounts was $10.8 million (0.8% of net sales)
in 1997. This compares to $7.3 million (0.6% of net sales) in 1996. The
increase in the provision relates to additional adjustments of $3.5 million
recorded in fiscal 1997 to reserve for uncollectible accounts.

In 1997 interest expense increased $1.5 million to $16.3 million (1.2% of net
sales) due to increases in debt borrowings during the year.

Net income from continuing operations before taxes was a loss of $21.6 million
in 1997 compared to a loss of $8.0 million in 1996. The increased loss was due
to additional operating, selling and administrative expenses of $17.6 million, a
$3.5 million increase in depreciation and amortization expense, a $1.5 million
increase in interest expense and an increase of $4.4 million in losses or
write-down on disposition of assets, which was offset by a $4.0 million
reduction in

10
<PAGE>
patronage dividends and a $9.5 million increase in gross operating income.

In 1996, United recorded a valuation allowance which resulted in no income tax
benefit. In 1997 the valuation allowance was reversed due to the implementation
of a tax planning strategy and a tax benefit of $10.5 million was recognized.

Net loss was $8.7 million (0.7% of net sales) in 1997 and $5.6 million (0.4% of
net sales) in 1996. The net loss in 1997 increased due to the changes noted
above for net income from continuing operations affected by the increased tax
benefit.

Liquidity and Capital Resources

Cash Flows From Operating Activities. In 1997, United was provided $12.9 million
by its operating activities, compared to $12.6 million provided in 1996. The
major factor in both years was the increase in accounts payable.

Cash Flows From Investing Activities. In 1997, United used $1.9 million in
investing activities, with the proceeds of asset sales being offset with
purchases of property, plant and equipment and other assets. In 1996, United
used $46.6 million in investing, including $16.2 million for purchases of
property, plant and equipment and other assets, and $23.3 million for the
acquisition of the California operations.

Cash Flows From Financing Activities. In 1997, United used $17.3 million in its
financing activities, including $15.2 for the net repayment of notes payable. In
1996, United was provided with $37.5 million from financing activities,
including $39.4 million provided by net increases in notes payable, which was
offset by $1.9 million, net, used in repurchasing common stock.

Recent Accounting Pronouncements

During the first quarter of 1998, United adopted Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income," which establishes requirements for disclosure
of comprehensive income. The objective of SFAS No. 130 is to report a measure of
all changes in equity that result from transactions and economic events other
than transactions with owners. Comprehensive income is the total of net income
and all other non-owner changes in equity. Comprehensive income did not differ
significantly from reported net income in the period presented.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement will change the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports issued to shareholders. It also requires entity-wide
disclosures about the products and services an entity provides, the material
countries in which it holds assets and earns revenues, and its major customers.
The statement is effective for fiscal years beginning after December 15, 1997.

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pension and Other Postretirement Benefits." This statement revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. The statement suggests
combined formats for presentation of pension and other postretirement benefit
disclosures. The statement is effective for fiscal years beginning after

11
<PAGE>
December 15, 1997, but is not required to be presented in interim financial
information in the year of adoption.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheets as either an asset or liability measured at its fair market
value. SFAS No. 133 also requires that changes in the derivative instrument's
fair market value be recognized currently in results of operations unless
specific hedge accounting criteria are met. SFAS No. 133, as amended by SFAS No.
137, is effective for fiscal years beginning after June 15, 2000.

United's management has studied the implications of SFAS Nos. 131 and 132, and
based on the initial evaluation, expects the adoption to have no impact on
United's financial condition or results of operations, but will require revised
disclosures when the respective statements become effective. United's management
has studied the implications of SFAS No. 133 and based on the initial
evaluation, expects the adoption to have no impact on United's financial
condition or the results of operations.

Forward-looking Statements

Statements above and elsewhere in this document regarding future events or
performance are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. As with all forward-looking
statements, the forward-looking statements made by United herein are subject to
uncertainties that could cause actual results to differ materially from those
projected, including without limitation, uncertainties inherent in business
plans and the changing of business methods, uncertainties related to the
response of customers and suppliers to changing business strategies, and
uncertainties concerning the outcome of sales of subsidiaries or divisions.

Item 8. Financial Statements and Supplementary Data

Reference is made to United's Consolidated Financial Statements and related
Notes and supplemental data under Item 14 of this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

DeLap, White & Raish, the independent accounting firm that was previously
engaged as the principal accountants to audit United's financial statements, was
dismissed effective June 17, 1997. The Board of Directors of United recommended
and approved the change of accountants.

None of the reports of DeLap, White & Raish for the past two years contained any
adverse opinion or disclaimer of opinion or was qualified or modified as to
uncertainty, audit scope, or accounting principles.

During United's two most recent fiscal years and subsequent interim periods
preceding the dismissal of DeLap, White & Raish, there were no disagreements
between United and DeLap, White & Raish on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
which, if not resolved to the satisfaction of DeLap,

12
<PAGE>
White & Raish, would have caused DeLap, White & Raish to make reference to
the subject matter of the disagreement or disagreements in its report.

After the completion of the audit for the fiscal year ended September 27, 1996,
United and DeLap, White & Raish learned additional information concerning the
collectibility of certain advertising notes receivable that led both United and
DeLap, White & Raish to believe further information was required to determine
the appropriate treatment of those items for financial statements for subsequent
periods. At the time Delap, White & Raish was dismissed, such further
information had not been obtained and, accordingly, constituted unresolved
material items as of the date of dismissal.

Except as set forth in the preceding paragraph, during United's two most recent
fiscal years and subsequent interim periods preceding its dismissal, DeLap,
White & Raish, did not:

o Advise United that the internal controls necessary for United to
develop reliable financial statements did not exist;

o Advise United that information had come to DeLap, White & Raish's
attention that led it to no longer be able to rely on management's
representations or made it unwilling to be associated with the
financial statements prepared by management;

o Advise United of the need to expand significantly the scope of its
audit, in a case where the scope of its audit was not subsequently
expanded;

o Advise United that information had come to DeLap, White & Raish's
attention within United's two most recent fiscal years and succeeding
period that if further investigated may have:

o Materially impacted the fairness or reliability of either a
previously issued report or the underlying financial statements
or subsequent financial statements issued or to be issued and
covered by an audit report; or

o Caused DeLap, White & Raish to be unwilling to rely on
management's representations or be associated with United's
financial statements, in a case where DeLap, White & Raish did
not conduct such further investigation; or

o Advise United that information had come to DeLap, White & Raish's
attention that it concluded materially impacted the fairness or
reliability of either a previously issued audit report or the
underlying financial statements or subsequent financial statements
issued or to be issued and covered by an audit report, which issue was
not resolved to DeLap, White & Raish's satisfaction prior to its
dismissal.

Effective June 17, 1997, United engaged PricewaterhouseCoopers LLP (formerly
Coopers & Lybrand L.L.P.) as its principal accountants to audit United's
financial statements. During United's two most recent fiscal years and
subsequent interim periods prior to the engagement of PricewaterhouseCoopers
LLP, United did not, nor did anyone on United's behalf, consult
PricewaterhouseCoopers LLP regarding either:

o The application of accounting principles to a specified completed or
proposed transaction, or the type of audit opinion that might be
rendered on United's financial

13
<PAGE>
statements as to which a written report
or oral advice was provided to United that was an important factor
considered by United in reaching a decision as to an accounting,
auditing or financial reporting issue; or

o Any matter that was the subject of a disagreement between United and
DeLap, White & Raish or a reportable event under the preceding
paragraph.

United provided DeLap, White & Raish with a copy of the above disclosures.
United requested that DeLap, White & Raish furnish United with a letter
addressed to the SEC stating whether DeLap, White & Raish agrees with the
statements made by United in the above disclosures and, if not, stating the
respects in which it does not agree. The letter subsequently furnished by DeLap,
White & Raish was included as Exhibit 16 to the Form 8-K of the Company filed on
June 24, 1997.

14
<PAGE>
Item 11. Executive Compensation

Summary Compensation Table

The following table shows the compensation, during each of the fiscal years in
the three year period ended October 2, 1998, earned by the chief executive
officer and the four most highly compensated executive officers of United whose
total annual salary and bonus for any such year exceeded $100,000. The table
excludes individuals who were not officers at fiscal year end but includes
individuals who served as chief executive officer at any time during fiscal
1998. United does not provide long term compensation to its executive officers
other than retirement benefits, as discussed below.
<TABLE>

Annual Compensation
All Other
Name of Individual and Principal Position Year Salary Bonus Compensation(1)
----------------------------------------- ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Charles E. Carlbom.......................... 1998 $180,000 $200,000 $2,908
President, Secretary, 1997 55,385 -0- -0-
Treasurer and Chief Executive Officer 1996(2) -0- -0- -0-

Terrence W. Olsen........................... 1998 150,000 25,000 3,462
Executive Vice President and Chief 1997 11,077 -0- -0-
Operating Officer 1996(2) -0- -0- -0-

Mark Tweedie 1998 120,000 18,067 -0-
Chief Financial Officer and Vice 1997 79,644 -0- -0-
President 1996(2) -0- -0- -0-

Ron McKillip................................ 1998 122,692 -0- 2,213
Vice President/Distribution 1997 34,615 -0- 1,131
Operations 1996(2) -0- -0- -0-

Keith A. Miller 1998 100,154 18,067 2,328
Vice President/Business Strategy 1997 96,575 -0- 1,871
1996 94,962 20,000 2,020

Paula Anctil................................ 1998 114,385 -0- 1,917
Senior Vice President 1997 92,111 -0- -0-
1996 43,077 12,000 840

Alan Jones(3)............................... 1998 -0- -0- 325,877
Former Secretary 1997 229,200 -0- 119,457
Treasurer and Chief 1996 268,676 60,000 37,228
Executive Officer
</TABLE>

(1) Includes amounts paid pursuant to programs generally available to employees
of United, including 401(k) matching contributions. Also includes $43,700
paid in 1998, $43,700 paid in 1997, and $30,000 paid in 1996 for the
benefit of Mr. Jones as insurance benefits. United provides Mr. Jones with
a company car and provided him with a social membership at a local golf
club through 1997. See note (3) below.

(2) Was not employed by United during the fiscal year.

(3) Mr. Jones' employment terminated in July 1997. He received payments in the
amount of $275,000 in 1998 and $45,000 in 1997 pursuant to the severance
provisions of an employment contract in place at the time his employment
ceased, which amounts are included under "All Other Compensation" above.
Beginning October 3, 1998, United is obligated to pay Mr. Jones
approximately $137,500 per year through February 2004, plus certain
insurance benefits.

15
<PAGE>
Retirement Plan

United's retirement plan is an actuarially funded defined benefit plan. The
following table shows the estimated annual benefits payable upon retirement
(assuming normal retirement at age 65) for employees at specified annual salary
levels (based upon the highest average of five consecutive years) with various
years of service.
<TABLE>

Years of Service(1)
-----------------------------------------------------------------------------------
Annual
Remuneration 10 15 20 25 30 35
- ------------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $7,432 $11,148 $14,863 $18,579 $22,395 $26,011
75,000 12,057 18,085 24,113 30,142 36,170 42,198
100,000 16,682 25,022 33,363 41,704 50,045 58,386
125,000 21,306 31,960 42,613 53,267 63,920 74,573
150,000 25,932 38,898 51,863 64,829 77,795 90,791
</TABLE>

(1) Under the present terms of United's retirement plan, the
maximum salary level and number of years of service considered
for the purposes of determining benefits are $150,000 and 35
years, respectively.

The number of years of service under the plan for the officers listed above is
as follows:

Years of
Name Service
---- -------
Charles E. Carlbom ............................ 2
Terrence W. Olsen ............................. 2
Mark Tweedie .................................. 2
Ron McKillip .................................. 2
Keith A. Miller ............................... 10
Paula Anctil .................................. 3

The amount of compensation used in the calculation of pension benefits for all
officers is the dollar amount shown above, subject to plan limitations. Amounts
payable under the plan are not subject to deduction for social security or other
offset amounts.

Employment Agreements

United has an employment agreement with Charles E. Carlbom. Set out below is a
summary of the terms of the employment agreement.

Position: President and Chief Executive Officer.

Compensation: Mr. Carlbom receives a base salary of $180,000, subject to mutual
adjustment, and participates in benefits generally available to key employees,
any supplemental pension or bonus plan available to key employees, and receives
other specified benefits.

Term of employment: Mr. Carlbom's term began on July 1, 1997 and will continue
through August 30, 1999.

16
<PAGE>
Termination by United: Mr. Carlbom may be terminated with or without cause by a
two-thirds vote of the Board of Directors. If Mr. Carlbom is terminated without
cause he will receive his base compensation for a period of six months following
termination.

Nondisclosure: Mr. Carlbom is prohibited from disclosing any confidential
information concerning United during the term of his employment and until five
years after his employment is terminated.

Remuneration of Directors

Directors, except the Chairman of the Board, received $10, plus expenses, for
each board meeting attended. The Chairman received $25, plus expenses, for each
board meeting attended and for each additional day spent on the conduct of
United's business.

Item 13. Certain Relationships and Related Transactions

Each of the transactions described below was approved by the board of directors
of United and was made on terms comparable to what United might obtain from
unaffiliated parties.

Transactions with Management and Others

All directors (or their firms), as members of United, purchase groceries and
related products from United in the ordinary course of business at prices
available to members generally.

In the ordinary course of business, United enters into prime leases and
subleases property to qualified members. United presently is a party to
subleases with entities affiliated with Richard L. Wright and Gaylon Baese,
directors of United, and Robert Lamb, a former director of United. At October 2,
1998, monthly payments due pursuant to the subleases were $62,903, $20,625 and
$95,452, respectively.

Pursuant to a stock purchase agreement dated September 17, 1997, United sold
145,256 shares of stock of C & K Market, Inc. ("C&K") to C&K for $6,023,000. The
purchase price was determined by negotiation between United and C&K. United had
acquired the shares from C&K in 1994 for $5,750,000. Raymond L. Nidiffer, a
holder of more than five percent of United's Common Stock, is a controlling
shareholder of C&K.

United sold a retail store and real property in Cloverdale, California to C&K
pursuant to an agreement dated September 17, 1997, for a net purchase price of
approximately $4.7 million. The purchase price was determined by negotiation
between United and C&K. United had acquired the real property in 1994 and had
constructed the store and related improvements. United recognized a loss of
approximately $500,000 in connection with the transaction in fiscal year 1997.

Certain Business Relationships

During fiscal year 1998, RAF, LLC, a company controlled by Wright's Foodliner,
Inc. and United, purchased groceries and other products in the ordinary course
of business from United in the amount of $2,933,180. The terms of sale for these
products were identical to terms offered to all members of United. United owns a
94% equity interest in RAF, LLC. Wright's Foodliner, Inc. is controlled by
Richard L. Wright, a director of United.

17
<PAGE>
Indebtedness of Management

The following directors, officers, or related persons or entities were indebted
to United during the fiscal year ended October 2, 1998 as follows:

<TABLE>

Largest aggregate amount of debt
outstanding during year ended Balance at Rate of
Name of Debtor October 2, 1998 November 30, 1998 Interest
-------------- --------------- ----------------- --------
<S> <C> <C> <C>
Lambko, LLC* $184,000 $156,328 Variable,
Robert Lamb, prime plus
Former Director 2%
</TABLE>

* Robert Lamb, a former director of United who served during fiscal year 1998,
controls Lambko, LLC.

The above loan was for purchase of equipment and is collateralized by real
estate.

United guarantees a commercial loan from a bank to Garden Home Enterprises, Inc.
in the original amount of approximately $4.9 million. The loan is also
guaranteed by Lambs, Inc. and certain relatives of Robert Lamb. Robert Lamb
controls Lambs, Inc. The loan proceeds were used to remodel a shopping complex
owned by Garden Home Enterprises, Inc., including grocery store space leased by
Lambs, Inc. Remodeling the grocery store space allowed Lambs, Inc. to increase
its purchases from United. In addition, United guarantees an equipment lease
between a commercial equipment lessor and Garden Home Enterprises, Inc. for
approximately $2 million worth of equipment used by Lambs, Inc. In order to
protect its obligations under the guaranties, United has certain rights to cure
a breach of the equipment lease by Garden Home Enterprises, Inc.

United has entered into various agreements under which it sells certain of its
notes receivable from members, including directors, subject to limited recourse
provisions. These notes are collateralized by real and personal property,
securities and guaranties. United is currently subject to limited recourse
liability on two loans owed by Peter O'Neal to National Consumer Cooperative
Bank. The balance of the loans as of January 20, 1999 was $1,074,554.
Peter O'Neal is a director of United.

18
<PAGE>
PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) Documents filed as part of the report

1. The following are filed as part of this report:

Report of Independent Accountants on Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Members' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

2. No financial statement schedules are required to be filed as part of this
report.

3. Exhibits. The Exhibit Index of United's Annual Report on Form 10-K for the
fiscal year ended October 2, 1998, filed on January 20, 1999, which lists
the exhibits that are filed as part of this report is incorporated by
reference, except for the following changes:

The following additional exhibits are filed as part of this report:

Exhibit 16. Letter regarding change in certifying accountant
(incorporated by reference to Exhibit 16 to the registrant's Form 8-K
filed on June 24, 1997).

The following exhibit (filed as part of this report) replaces Exhibits
4.D1, 4.D2 and 4.D3 contained in United's Annual Report on Form 10-K for
the fiscal year ended October 2, 1998, filed on January 20, 1999:

Exhibit 4.D1. Amended and Restated Loan Purchase Agreement (Existing
Program) among United Resources, Inc., the registrant and National
Consumer Cooperative Bank dated January 30, 1998.

The following exhibit (filed as part of this report) replaces Exhibit 4.D4
contained in United's Annual Report on Form 10-K for the fiscal year ended
October 2, 1998, filed on January 20, 1999:

Exhibit 4.D2. Amended and Restated Loan Purchase Agreement (Holdback
Program) among United Resources, Inc., the registrant and National
Consumer Cooperative Bank dated January 30, 1998.

(b) Reports on Form 8-K None.

19
<PAGE>
<TABLE>
INDEX TO FINANCIAL STATEMENTS

<S> <C>
Report of Independent Accountants.............................................................. F-2
Consolidated Balance Sheets at October 3, 1997 and October 2, 1998............................. F-3
Consolidated Statements of Operations for the years ended September 27, 1996 (as restated),
October 3, 1997 and October 2, 1998 ...................................................... F-4
Consolidated Statements of Members' Equity for the years ended September 7, 1996 (as
restated), October 3, 1997 and October 2, 1998............................................ F-5
Consolidated Statements of Cash Flows for the years ended September 27, 1996 (as
restated), October 3, 1997 and October 2, 1998............................................ F-6
Notes to Consolidated Financial Statements..................................................... F-7
</TABLE>

F-1

<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
United Grocers, Inc.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, members' equity and cash flows,
present fairly, in all material respects, the financial position of United
Grocers, Inc. and Subsidiaries (United) at October 3, 1997 and October 2, 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended October 2, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
United's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

As discussed in Note 1 to the consolidated financial statements, during
the year ended October 2, 1998, United changed its method of amortizing the
unrecognized gains and losses in connection with its defined benefit plan.

As discussed in Note 2 to the consolidated financial statements,
results of operations for the year ended September 27, 1996 and members' equity
as of September 29, 1995 and September 27, 1996 have been restated.

/s/PricewaterhouseCoopers LLP

Portland, Oregon
April 30, 1999

F-2
<PAGE>
United Grocers, Inc. and Subsidiaries
<TABLE>
Consolidated Balance Sheets
(dollars in thousands, except share data)

October 3, October 2,
1997 1998
---- ----

ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................ $ 10,223 $ 1,294
Investments restricted or maintained for insurance
reserves ................................................. 51,513 --
Accounts and notes receivable, net ....................... 78,537 67,269
Inventories .............................................. 102,333 68,898
Other current assets ..................................... 7,037 5,115
Deferred income taxes .................................... 8,147 1,526
-------- --------
Total current assets .............................. 257,790 144,102
Notes receivable, net ........................................... 16,498 29,201
Investments in affiliated companies.............................. 6,971 3,360
Other receivables................................................ 4,837 3,033
Deferred income taxes............................................ 553 --
Other assets, net 17,335 16,032
Property, plant and equipment, net............................... 61,443 37,914
-------- --------
$365,427 $233,642
======== ========

LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Notes payable, current portion ........................... $ 10,191 $ 41,159
Accounts payable.......................................... 97,587 59,676
Insurance reserves ....................................... 26,356 --
Compensation and taxes payable............................ 8,328 6,335
Other current liabilities................................. 8,115 5,780
-------- --------
Total current liabilities ......................... 150,577 112,950
Notes payable, net of current portion............................ 187,995 74,434
Deferred gains on sale-leaseback transactions.................... 3,650 1,257
Deferred income taxes............................................ -- 2,233
Other liabilities................................................ 7,434 7,520
-------- --------
Total liabilities.................................. 349,656 198,394
-------- --------
Commitments and contingencies
Redeemable members' equity....................................... 1,120 3,905
-------- --------
Members' equity:
Common stock--authorized, 10,000,000 shares at $5.00
par value; issued and outstanding, 586,834 and 523,955
shares, respectively ................................... 2,934 2,620
Additional paid-in capital................................ 22,886 20,394
Retained earnings (accumulated deficit) .................. (11,431) 8,329
Unrealized gain on investments............................ 262 --
-------- --------
Total members' equity.............................. 14,651 31,343
-------- --------
$365,427 $233,642
======== ========

The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

F-3

<PAGE>
United Grocers, Inc. and Subsidiaries
<TABLE>
Consolidated Statements of Operations
(dollars in thousands)

Years Ended
-----------
September 27,
1996 October 3, October 2,
(Restated) 1997 1998
---------- ---- ----
<S> <C> <C> <C>
Net sales and operations....................... $1,280,453 $1,306,602 $1,175,279
---------- ---------- ----------
Costs and expenses:
Cost of sales............................... 1,115,735 1,133,690 1,015,268
Operating expenses.......................... 119,785 130,323 114,595
Selling and administrative expenses......... 15,365 22,425 19,565
Depreciation and amortization 8,015 11,483 10,416
---------- ---------- ----------
1,258,900 1,297,921 1,159,844
--------- --------- ---------
Other income (expense):
Interest expense............................ (14,825) (16,307) (13,585)
Interest income............................. 828 733 2,206
Gain on sale of Cash & Carry division....... -- -- 29,033
Gain (loss) on write-down or disposition of assets,
net......................................... -- (4,385) 2,213
(13,997) (19,959) 19,867
--------- --------- ---------

Income (loss) from continuing operations before
members' allowances, members' patronage
dividends, cumulative effect on prior years of a
change in accounting principle and income taxes 7,556 (11,278) 35,302
Members' allowances............................ (11,605) (10,349) (14,108)
Members' patronage dividends................... (4,000) --- ---
--------- --------- ---------
Income (loss) from continuing operations
before cumulative effect on prior years
of a change in accounting principle and (8,049) (21,627) 21,194
income taxes..............................
Income tax benefit (provision)................. --- 10,466 (7,939)
--------- --------- ---------
Net income (loss) from continuing
operations, before cumulative effect of a
change in accounting principle............ (8,049) (11,161) 13,255
Discontinued operations:

Income from operations of insurance segment 2,480
(less income taxes of $0, $1,666 and $903, 2,501 1,355
respectively)...............................
Gain on disposal of insurance segment (less
income taxes of $2,000 for 1998)............ --- --- 3,403
--------- --------- ---------
Net income (loss) before cumulative
effect of a change in accounting principle (5,569) (8,660) 18,013

Cumulative effect on prior years (to October 3, 1997)
of changing methods of amortizing the unrecognized
net gain in the Company's defined benefit pension
plan (less income taxes of $1,165 for 1998) --- --- 1,747
--------- --------- ---------
Net income (loss)......................... $(5,569) $ (8,660) $19,760
======== ========= =======
Pro forma net income (loss), assuming the
new amortization method is applied retroactively $ (4,877) $ (8,342) $18,013
========= ========= =======

The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

F-4
<PAGE>
United Grocers, Inc. and Subsidiaries
<TABLE>
Consolidated Statements of Members' Equity
(dollars in thousands, except for share data)

Common Retained
Stock Additional Earnings Unrealized
Shares Paid-in (Accumulated Gain on
Amount Capital Deficit) Investments Total
-------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 29, 1995 (restated)...... 655,663 $3,278 $23,957 $ 4,918 $ 199 $32,352
Common stock issued......................... 18,724 94 1,059 --- --- 1,153
Repurchase of common stock.................. (48,936) (245) (1,527) (1,232) --- (3,004)
Patronage dividends......................... 13,000 65 735 --- --- 800
Net loss (restated)......................... --- --- --- (5,569) --- (5,569)
Changes in unrealized gains on investments.. --- --- --- --- 1 1
-------- ------- ------- -------- ------- --------
Balance, September 27, 1996 (restated) 638,451 3,192 24,224 (1,883) 200 25,733
Common stock issued......................... 13,775 69 780 --- --- 849
Repurchase of common stock.................. (34,609) (173) (1,152) (888) --- (2,213)
Redemptions pending......................... (30,783) (154) (966) --- --- (1,120)
Net loss.................................... --- --- --- (8,660) --- (8,660)
Change in unrealized gain on investments.... --- --- --- --- 62
-------- ------- ------- -------- ------- --------
Balance, October 3, 1997.................... 586,834 2,934 22,886 (11,431) 262 14,651
Repurchase of common stock.................. (577) (3) (18) --- --- (21)
Redemptions pending......................... (62,302) (311) (2,474) --- --- (2,785)
Net income.................................. --- --- --- 19,760 --- 19,760
Change in unrealized gain on investments.... --- --- --- --- (262) (262)
------- ------- ------- ---------- -------- -------
Balance, October 2, 1998.................... 523,955 $2,620 $20,394 $8,329 $--- $31,343
======= ====== ======= ====== ==== =======

The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

F-5

<PAGE>
United Grocers, Inc. and Subsidiaries
<TABLE>
Consolidated Statements of Cash Flows
(dollars in thousands)

Years Ended
--------------------------------------
September
27, 1996 October 3, October 2,
(Restated) 1997 1998
---------- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $ (5,569) $ (8,660) $ 19,760
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................ 8,202 11,842 10,522
Patronage dividends paid in common stock............. 800 --- ---
Loss (gain) on write-down or disposition of assets... -- 4,385 (2,213)
Gain on disposal of discontinued operations.......... -- --- (5,403)
Gain on sale of Cash & Carry division................ -- --- (29,033)
Equity in earnings of affiliated companies........... (568) (107) (41)
Deferred income taxes................................ --- (8,700) 9,407
Changes in assets and liabilities:
Accounts receivable................................ 4,731 (2,133) (6,932)
Inventories........................................ (2,631) 2,312 7,900
Other assets....................................... 1,354 (96) (1,731)
Accounts payable................................... 8,902 14,864 (11,465)
Insurance reserves................................. (397) (3,206) 1,406
Compensation and taxes payable..................... 403 3,306 (1,850)
Other liabilities.................................. 791 (1,117) (1,418)
Members' patronage payable......................... (3,447) (2,427) ---
Deferred gains on sale leaseback transactions...... --- 2,650 (2,393)
---------- ---------- -----------
Net cash flows provided by (used in) operating
activities........................................... 12,571 12,913 (13,484)
---------- ---------- -----------
Cash flows from investing activities:
Loans to members....................................... (22,512) (10,396) (2,416)
Collections on member loans............................ 10,626 4,988 3,798
Proceeds from sale of member loans..................... 10,549 13,205 2,918
Sale of investment in affiliated company............... --- 6,023 ---
Purchase of investments restricted or maintained for
insurance reserves................................... (13,404) (10,226) (3,167)
Sale of investments restricted or maintained for
insurance reserves................................... 7,385 5,604 8,685
Investment in affiliated companies..................... (267) (48) ---
Proceeds from disposition of assets.................... 6,884 11,036 18,313
Purchase of property, plant and equipment.............. (16,231) (15,607) (3,677)
Purchase of other assets............................... (6,417) (6,446) (1,011)
Acquisition of California operations................... (23,252) --- ---
Proceeds from sale of discontinued operations, net..... --- --- 26,813
Proceeds from sale of Cash & Carry division............ --- --- 37,986
------------ ------------ -----------
Net cash flows provided by (used in) investing
activities (46,639) (1,867) 88,242
------------ ------------ -----------
Cash flows from financing activities:
Sale of common stock................................... 1,153 76 ---
Repurchase of common stock............................. (3,004) (2,213) (21)
Proceeds from notes payable............................ 1,091,567 932,370 1,171,161
Repayments of notes payable............................ (1,052,183) (947,566) (1,253,754)
Payment of debt issuance costs......................... --- --- (1,073)
------------ ------------ -----------
Net cash flows provided by (used in) financing
activities......................................... 37,533 (17,333) (83,687)
------------ ------------ -----------
Net increase (decrease) in cash and cash equivalents 3,465 (6,287) (8,929)
Cash and cash equivalents, beginning of year.............. 13,045 16,510 10,223
------------ ------------ -----------
Cash and cash equivalents, end of year.................... $ 16,510 $ 10,223 $ 1,294
============ ========== ===========

The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

F-6

<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Operations and Summary of Significant Accounting Policies:

Organization and Nature of Operations

United Grocers, Inc. and subsidiaries (United) operates a distribution
business primarily in Oregon, Southern Washington and Northern California. The
distribution business includes all operations relating to wholesale grocery and
related product sales, service department revenues and financing income and
fees. Through July 1998, United had an additional operating segment, which
included all operations relating to insurance underwriting, commissions and
reinsurance, primarily to provide workers' compensation and property-casualty
coverage. As discussed in Note 9, the insurance operations were sold in July
1998 and those operations discontinued by United.

Its member customers own United's stock. Sales to these members
accounted for approximately 80%, 56% and 57% of sales from continuing operations
for the years ended September 27, 1996, October 3, 1997 and October 2, 1998,
respectively.

Fiscal Year

United reports on a fiscal year of 52 or 53 weeks, which is the fiscal
year of the distribution segment. United's fiscal closing date is the Friday
nearest September 30. The fiscal year of the subsidiaries included in the
insurance segment ended on September 30.

Principles of Consolidation

The consolidated financial statements include the accounts of United
Grocers, Inc. and its wholly-owned subsidiaries as follows: Western Passage
Express, Inc.; Northwest Process, Inc.; UG Resources, Inc.; United Resources,
Inc.; Western Security Services, Ltd.; R&R Liquidating Corporation; and Bergrens
Market, Inc. The consolidated financial statements also include: Grocers
Insurance Group, Inc.; Grocers Insurance Agency, Inc., UGIC Ltd., Grocers
Insurance Company and United Workplace Consultants, Inc. (collectively, the
insurance segment) through July 1998 (see Notes 9 and 13); and Rich and Rhine,
Inc. through May 1998. All intercompany balances and transactions have been
eliminated upon consolidation.

Cash and Cash Equivalents

United considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.

Investments

Investments, which were held by subsidiaries within the insurance
segment, were classified and accounted for as follows:

o held-to-maturity securities were reported at amortized cost.

o available-for-sale securities were reported at fair value, with
unrealized gains and losses excluded from earnings and reported in
a separate component of members' equity.

The cost of investments used in computing realized gains or losses was
determined using the specific identification method.

F-7
<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

Reinsurance

United accounted for reinsurance transactions in accordance with
Statement of Financial Accounting Standards (SFAS) No. 113, Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration Contracts. SFAS
No. 113 requires that transactions relating to reinsurance transactions be
reported at gross amounts rather than net amounts. Net premiums earned are
reported as net sales and operations while net losses and loss adjustment
expenses are reported as cost of sales.

In the normal course of business, United sought to reduce the losses
that may have resulted from catastrophes or other events that would 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 were estimated in a manner consistent with the claim
liability associated with the reinsured policy. Amounts paid for prospective
reinsurance were reported as prepaid reinsurance premiums and amortized over the
remaining contract period in proportion to the amount of insurance protection
provided.

Inventories and Cost of Sales

Inventories are stated at the lower of cost or market. The cost of
these inventories is determined under the first-in, first-out (FIFO) method or
other methods that approximate FIFO.

Cost of sales includes primarily the costs of distribution, which
include the purchases of product, net of allowances paid and received and the
net advertising department margins, plus the handling allowances made to members
based upon the cost of servicing their accounts.

Restricted Assets and Net Assets

Restricted assets and net assets that could not be transferred to the
parent company in the form of loans, advances or cash dividends by the insurance
subsidiary without the consent of state insurance agencies as of October 3, 1997
were as follows:

Restricted cash........................... $ 401,000
Investments............................... 18,486,000
-----------
Total.................................. $18,887,000
===========

In addition, the balance of the investments of $32,626,000 represented
assets that had been accumulated for the possible payment of claims against the
insurance reserves.

Investments in Affiliated Companies

Investments in affiliated companies represent United's ownership in
entities in which it does not have a controlling interest. The investments are
accounted for using the equity method, in which carrying value represents cost
plus United's share of earnings since acquisition, less distributions received.

Other Assets

Software costs, non-competition agreements and other intangibles,
included in other assets in the accompanying balance sheets, are stated at cost
and are being amortized and charged to operating expenses on a straight-line
basis over the estimated or contractual lives of three to five years.

F-8
<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

Property, Plant and Equipment

Property, plant and equipment are stated at cost and include
expenditures for new facilities and those that substantially increase the useful
lives of the existing plant and equipment. United capitalizes interest when
applicable as a component of the cost of significant construction projects. No
interest was capitalized for the years ended September 27, 1996, October 3, 1997
and October 2, 1998.

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 and improvements................... 4-75 years
Warehouse equipment.......................... 5-20 years
Truck equipment.............................. 3-8 years
Office equipment............................. 3-10 years

Maintenance and repairs are charged to expense as incurred. Upon the
sale or retirement of property, plant and equipment, any gain or loss on
disposition is reflected in the consolidated statement of operations and the
related asset cost and accumulated depreciation are removed from the respective
accounts.

Recoverability of Long-Term Assets

Management of United reviews the carrying value of long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate the carrying amount of an asset may not be
recoverable.

Debt Classification

United classifies as current liabilities any line of credit
arrangements that contain a subjective acceleration clause and a lock-box
arrangement.

Income Taxes

United files a consolidated income tax return. United operates and is
taxed as a cooperative. Accordingly, amounts distributed as qualified patronage
dividends are not included in its taxable income but are instead taxed to the
patrons receiving the patronage dividends. Deferred income taxes are recorded to
reflect the tax consequences on future years of the non-patronage portion of
temporary 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. Valuation allowances are established when
necessary to reduce deferred income tax assets 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.

Earnings per Common Share

United's policy is to distribute earnings only in the form of patronage
dividends. No dividends have ever been declared on the common stock of United
and all earnings not distributed as patronage dividends have been retained. In
accordance with generally accepted accounting principles, earnings per share
information is not presented because United does not have publicly held common
stock.

F-9
<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

Common Stock

United's Board of Directors' policy, subject to change without notice,
requires United to repurchase on request the number of shares a member owns in
excess of 4,000 shares. The excess shares are redeemed in exchange for cash or
capital stock residual notes, payable over a five-year period. In fiscal 1998,
United's Board of Directors temporarily suspended redemptions of members'
capital stock. Future redemptions are at the discretion of the Board of
Directors.

At October 3, 1997 and October 2, 1998, there were 30,783 and 93,085
shares in the amounts of $1,120,000 and $3,905,000, respectively, which have
been presented by members for redemption, but which had not yet been redeemed.
These shares are included in redeemable members' equity in the accompanying
consolidated balance sheet.

As of October 2, 1998, United holds $111,000 to be used for issuance of
5,400 shares to new members.

Advertising Costs

United expenses the costs of advertising the first time the advertising
takes place. Advertising expense for the years ended September 27, 1996, October
3, 1997 and October 2, 1998 was $2,593,000, $1,734,000 and $444,000,
respectively, exclusive of costs incurred on behalf of members for which United
is reimbursed.

Members' Allowances

United makes rebates to members based on the respective members' volume
of purchases over defined periods of time.

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.

Change in Method of Accounting for Net Periodic Pension Costs

For the year ended October 2, 1998, United began amortizing its
unrecognized net gains and losses in connection with its defined benefit pension
plan (see Note 14) over a three-year period. In previous years United used the
minimum amortization allowed by SFAS No. 87, Employer's Accounting for Pensions.
The new method was adopted to more currently recognize the effects of changes in
actuarial assumptions and differences between the assumptions used and the
actual experience. The pro forma amounts in the statement of operations have
been adjusted for the effect of the retroactive application of the change on
operating expenses and related income taxes. The effect of the change on the
statement of operations for the year ended October 2, 1998 was to increase net
income before the cumulative effect of the change in accounting method by
approximately $996,000.

Transfers and Servicing of Financial Assets

The Financial Accounting Standards Board (FASB) issued SFAS No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, which United adopted in 1997. The Statement provides for
standards that are based on consistent application of a financial-

F-10

<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

components approach that focuses on control. Under that approach, after a
transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This Statement provides
consistent standards for distinguishing transfers of financial assets that
are sales from transfers that are secured borrowings. Accordingly, United
conformed to the new requirements of SFAS No. 125 for transactions
involving the sale of member loans receivable for applicable transactions
occurring after December 31, 1996.

Accounting Pronouncements

During the first quarter of 1998, United adopted FASB SFAS No. 130,
Reporting Comprehensive Income, which establishes requirements for disclosure of
comprehensive income. The objective of SFAS No. 130 is to report a measure of
all changes in equity that result from transactions and economic events other
than transactions with owners. Comprehensive income is the total of net income
and all other non-owner changes in equity. Comprehensive income did not differ
significantly from reported net income or loss in the periods presented.

In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. This statement will change the way
public companies report information about segments of their business in their
annual financial statements and requires them to report selected segment
information in their quarterly reports issued to shareholders. It also requires
entity-wide disclosures about the products and services an entity provides, the
material countries in which it holds assets and earns revenues and its major
customers. The statement is effective for fiscal years beginning after December
15, 1997.

In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures
about Pensions and Other Postretirement Benefits. This statement revises
employers' disclosures about pension and other post-retirement benefit plans. It
does not change the measurement or recognition of those plans. The statement
suggests combined formats for presentation of pension and other post-retirement
benefit disclosures. The statement is effective for fiscal years beginning after
December 15, 1997.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 also requires that changes in the derivative instrument's fair
value be recognized currently in results of operations unless specific hedge
accounting criteria are met.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999.

United's management has studied the implications of SFAS Nos. 131 and
132, and based on the initial evaluation, expects the adoption to have no impact
on United's financial condition or results of operations, but will require
revised disclosures when the respective statements become effective. United's
management has studied the implications of SFAS No. 133 and based on the initial
evaluation, expects the adoption to have no impact on United's financial
condition or results of operations.

F-11

<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

2. Restatement:

United previously reported retained earnings as of September 29, 1995
and September 27, 1996 of $14,923,000 and $13,843,000, respectively. These
amounts have been restated to retained earnings of $4,918,000 as of September
29, 1995 and an accumulated deficit of $1,883,000 as of September 27, 1996 in
the accompanying consolidated statements of members' equity. The adjustments
which necessitated the restatement, and their effect on United's net income for
the year ended September 27, 1996 and members' equity as of September 29, 1995
are summarized as follows:
<TABLE>

Decrease (Increase) In:
--------------------------------------
Members' Equity
Fiscal 1996 September 29,
Net Income 1995
------------ -------------
<S> <C> <C>
Accruals for losses on lease/sublease arrangements..................... $(2,258,000) $11,872,000
Write-off of advertising and other receivables......................... 3,561,000 ---
Accrual of vendor trust account liabilities............................ 1,581,000 ---
Adjustment of carrying value of used store equipment to net realizable
value............................................................. 1,309,000 ---
Income taxes........................................................... (74,000) (2,126,000)
Other.................................................................. 1,602,000 259,000
------------ -------------
Net restatement................................................... $ 5,721,000 $10,005,000
=========== ===========
</TABLE>
3. Investments Restricted or Maintained for Insurance Reserves:

The amortized costs and estimated fair values of investments in debt
securities and other investments at October 3, 1997 are as follows:
<TABLE>

Gross Gross
Amortized Unrealized Unrealized
Available-for-sale securities Cost Gains Losses Fair Value
- ----------------------------- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities.................... $ 3,512,000 $ 103,000 $ --- $ 3,615,000
Obligations of states, political subdivisions
and government agencies................... 4,410,000 134,000 --- 4,544,000
Corporate securities........................ 1,026,000 25,000 --- 1,051,000
----------- ----------- ------------ -----------
Subtotal............................... 8,948,000 262,000 --- 9,210,000
Common stocks............................... 225,000 --- 225,000
------------ ------------ ------------ ----------
---
Total.................................. $ 9,173,000 $ 262,000 $ --- $ 9,435,000
=========== ========== ============ ===========

Held-to-maturity securities
- ---------------------------
U.S. Treasury securities.................... $16,547,000 $ 848,000 $ (42,000) $17,353,000
Obligations of states, political subdivisions
and government agencies................... 19,154,000 255,000 (66,000) 19,343,000
Corporate securities........................ 5,976,000 141,000 (19,000) 6,098,000
----------- ---------- ---------- -----------
Total.................................. $41,677,000 $1,244,000 $(127,000) $42,794,000
=========== ========== ========== ===========

Restricted assets
- -----------------
Cash and cash equivalents................... $ 401,000 $ $ --- $ 401,000
============ ============= =============== ===========
---

Reconciliation to balance sheet:
Available-for-sale securities, at fair value $ 9,435,000
Held-to-maturity securities, at amortized
cost..................................... 41,677,000
Restricted assets, at fair value......... 401,000
-----------
Total investments.................. $51,513,000
===========
</TABLE>
F-12
<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

Gross realized gains of $3,000 were realized in the year ended October
3, 1997 from the maturity and redemption of held-to-maturity securities being
called by the issuers. The amortized cost of these securities at the time of
call was $4,470,000. There were no realized losses.

Proceeds from the sale of available-for-sale securities were $1,105,000
and $1,131,000 in the years ended September 27, 1996 and October 3, 1997,
respectively. The gross realized gains on these sales were $4,226 in the year
ended September 27, 1996 and losses on these sales were $9,000 in the year ended
October 3, 1997.

4. Accounts and Notes Receivable:

These consist of amounts due principally from members at the balance
sheet date as follows:

<TABLE>
Year Ended
----------
October 3, October 2,
1997 1998
---- ----
<S> <C> <C>
Accounts receivable.................................... $69,778,000 $60,503,000
Insurance premiums receivable and related balances..... 14,521,000 ---
Less allowance for doubtful accounts................... (7,598,000) (1,236,000)
------------ ------------
Net accounts receivable........................... 76,701,000 59,267,000
------------ ------------
Notes receivable, current portion...................... 1,977,000 8,002,000
Less allowance for doubtful notes...................... (141,000) ---
------------ ------------
Net current notes receivable...................... 1,836,000 8,002,000
------------ ------------
Net accounts and current notes receivable......... $78,537,000 $67,269,000
============ ============
Notes receivable, non-current portion.................. $18,886,000 $29,515,000
Less allowance for doubtful accounts................... (2,388,000) (314,000)
------------ ------------
Net non-current notes receivable.................. $16,498,000 $29,201,000
============ ============
</TABLE>

During the year ended October 2, 1998, United wrote off approximately
$11 million of accounts and notes receivable, and adjusted the related allowance
for doubtful accounts, for amounts determined to be uncollectible.

The notes receivable from members are generally for periods of two to
ten years at annual interest rates of 3% to 11%. The notes receivable as of
October 2, 1998 include $17.5 million in connection with the sale of the Cash &
Carry division (see Note 10). This note carries an annual interest rate of 6.5%.
The annual maturities of notes receivable for each of the next five fiscal years
following October 2, 1998 are as follows:

1999........................................ $ 8,002,000
2000........................................ 4,349,000
2001........................................ 6,859,000
2002........................................ 6,632,000
2003........................................ 6,562,000
Thereafter 5,113,000
------------
$37,517,000

F-13

<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

Changes in the allowance for doubtful accounts for the years ended
September 27, 1996, October 3, 1997 and October 2, 1998 are summarized as
follows:
<TABLE>
Balance at Charged to Balance at
beginning costs and end of
Description of year expenses Deductions year
----------- ------- -------- ---------- ----

<S> <C> <C> <C> <C>
1996:
- ----
Allowance for doubtful accounts for:
Accounts receivable............... $ 1,177,000 $ 6,213,000 $ (6,250,000) $ 1,140,000
Notes receivable.................. 508,000 1,062,000 (460,000) 1,110,000
----------------- ----------------- ---------------- -----------------
Total......................... $ 1,685,000 $ 7,275,000 $ (6,710,000) $ 2,250,000
================= ================= ================ =================
1997:
- ----
Allowance for doubtful accounts for:
Accounts receivable............... $ 1,140,000 $ 7,829,000 $ (1,371,000) $ 7,598,000
Notes receivable.................. 1,110,000 2,943,000 (1,524,000) 2,529,000
----------------- ----------------- ---------------- -----------------
Total......................... $ 2,250,000 $ 10,772,000 $ (2,895,000) $ 10,127,000
================= ================= ================ =================
1998:
- ----
Allowance for doubtful accounts for:
Accounts receivable............... $ 7,598,000 $ 1,440,000 $ (7,802,000) $ 1,236,000
Notes receivable.................. 2,529,000 1,000,000 (3,215,000) 314,000
----------------- ----------------- ---------------- -----------------
Total......................... $ 10,127,000 $ 2,440,000 $ (11,017,000) $ 1,550,000
================= ================= ================ =================
</TABLE>

5. Other Assets:

Other assets consist of the following:
<TABLE>

Year Ended
October 3, October 2,
1997 1998
---- ----
<S> <C> <C>
Software.............................. $ 18,356,000 $ 19,999,000
Prepaid loan fees..................... -- 1,073,000
Other................................. 2,570,000 1,941,000
----------------- -----------------
Subtotal......................... 20,926,000 23,013,000
Less accumulated amortization......... (3,591,000) (6,981,000)
----------------- -----------------
Total other assets, net.......... $ 17,335,000 $ 16,032,000
================= =================
</TABLE>

Amortization expense for the years ended September 27, 1996, October 3,
1997 and October 2, 1998 was $1,573,000, $4,152,000 and $4,143,000,
respectively.

F-14

<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

6. Property, Plant and Equipment:

Property, plant and equipment consists of the following:
<TABLE>

Year Ended
October 3, October 2,
1997 1998
---- ----
<S> <C> <C>
Land...................................... $ 3,865,000 $ 2,163,000
Buildings and improvements................ 55,999,000 42,996,000
Warehouse and truck equipment............. 31,316,000 24,022,000
Office equipment.......................... 14,185,000 14,432,000
Construction in progress.................. 5,069,000 466,000
----------------- -----------------
Total property, plant and equipment.. 110,434,000 84,079,000
Less accumulated depreciation............. (48,991,000) (46,165,000)
----------------- -----------------
Property, plant and equipment, net... $ 61,443,000 $ 37,914,000
================= =================
</TABLE>

Depreciation expense for the years ended September 27, 1996, October 3, 1997 and
October 2, 1998 was $6,629,000, $7,690,000 and $6,379,000, respectively,
including $187,000, $359,000 and $160,000, respectively, related to discontinued
operations. Due to operating losses incurred by a retail store in Sacramento,
California, United recorded during the year ended October 3, 1997 a write-down
of approximately $1.8 million to reduce the carrying cost of the store's assets
to estimated net realizable value. The loss is included in "gain/loss on
write-down or disposition of assets, net" in the accompanying statements of
operations. The store incurred losses for the years ended September 27, 1996,
October 3, 1997 and October 2, 1998 of $601,000, $520,000 and $562,000,
respectively. The carrying value of the store's assets at October 2, 1998 is
$10,000. The store is being operated but is being held for sale.

F-15

<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

7. Notes Payable:

Notes payable consists of the following:
<TABLE>

Year Ended
October 3, October 2,
1997 1998
---- ----
<S> <C> <C>
Line of credit with financial institution................. $ 69,000,000 $ 34,315,000
Notes payable with financial institution:
Term loan, interest at 7.344%, payable in four equal
annual payments beginning May 1999................. -- 10,000,000
Real estate term loan, interest at 7.344%, payable in
120 equal monthly principal and interest payments
beginning February 1999............................ -- 25,000,000
Notes payable, other:
Capital stock residual notes, payable in 20 quarterly
installments plus interest at a variable interest
rate based on the current capital investment note 4,071,000 2,327,000
rate...............................................
Capitalized equipment leases, payable in monthly
installments of $43,853, including interest at 12%
to 20% through 2005 (collateralized by equipment).. 2,276,000 1,563,000
Other notes payable.................................. 1,495,000 281,000
Redeemable notes and certificates:
Capital investment notes (subordinated), interest at
7.5%, maturity dates through 2005.................. 41,745,000 39,277,000
Registered redeemable building notes (subordinated),
interest at 8%, not fixed maturity date............ 3,088,000 2,830,000
Credit agreement notes, interest from 7.0875% to
7.1875%............................................ 42,915,000 --
Senior notes payable to insurance companies, interest at
8.42% and 9.15%......................................... 29,999,000 --
Mortgage notes payable, interest at 7.25%................. 3,597,000 --
----------------- -----------------
Total................................................ 198,186,000 115,593,000
Less current portion...................................... (10,191,000) (41,159,000)
----------------- -----------------
Total notes payable, net of current portion.......... $ 187,995,000 $ 74,434,000
================= =================
</TABLE>

Maturities of notes payable subsequent to October 2, 1998 are as
follows:
<TABLE>

<S> <C>
1999..................................................................... $ 41,159,000
2000..................................................................... 7,942,000
2001..................................................................... 9,984,000
2002..................................................................... 9,206,000
2003..................................................................... 6,200,000
Thereafter 41,102,000
-----------------
$ 115,593,000
=================
</TABLE>

United has a credit agreement with a financial institution providing
for a line of credit of $100 million for revolving loans and $35 million for
term loan facilities. The agreement was entered into in August 1998 and matures
in February 2002. The agreement provides for letter of credit accommodations up
to $1 million.

The amount of borrowings available under the revolving line of credit,
based upon a lending formula applied to accounts and notes receivable and
inventory, was $70.4 million as of October 2, 1998. The revolving line of credit
bears interest at LIBOR plus 1.75% or at prime rate (7.125% and 8.5%,
respectively, at October 2, 1998). United had $34.3 million outstanding under
the revolving loans, $20 million at LIBOR and $14.3 million at prime. The term
loans bear interest at LIBOR plus 1.75% as of

F-16
<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

October 2, 1998. The revolving line of credit and term loans are
collateralized by account receivables, inventory and other assets.

As of October 2, 1998, United had letters of credit totaling $11
million, $1 million required by certain real property leases and $10 million
required under its cash management agreement with a bank. The revolving and term
loans and letters of credit are cross-collateralized by essentially all assets
of the borrowers (United Grocers, Inc. and United Resources, Inc.) and are
guaranteed by all subsidiaries.

United's most restrictive covenants require it to maintain certain
minimum adjusted net worth, minimum accounts receivable turnover and fill rates
(as defined). United is in compliance with covenants related to its credit
agreements as of October 2, 1998.

Amounts available under the credit agreement and letter of credit
accommodations are subject to reduction by the lender being permitted to
establish availability reserves based upon certain events, conditions,
contingencies or risks which it may in good faith determine.

8. Income Taxes:

The income tax (provision) benefit, including amounts associated with
discontinued operations and the cumulative effect of a change in accounting
method, for the years ended September 27, 1996, October 3, 1997 and October 2,
1998 consists of the following:

1996 1997 1998
---- ---- ----
Current:
Federal....... $ --- $ 100,000 $ (2,600,000)
------------ ----------- -------------
Deferred:
Federal....... --- 7,493,000 (8,135,000)
State......... --- 1,207,000 (1,272,000)
------------- ----------- -------------
--- 8,700,000 (9,407,000)
------------- ----------- -------------
$ --- $8,800,000 $(12,007,000)
============ ========== =============

The current provision for the year ended October 2, 1998 primarily
relates to the gain on disposal of the insurance segment.

The reconciliation of the statutory Federal tax rate to the effective
income tax rate for the years ended September 27, 1996, October 3, 1997 and
October 2, 1998 is as follows:
<TABLE>

1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Statutory income tax rate (34%)............... $ 1,893,000 $ 5,937,000 $ (10,801,000)
State income taxes, net of Federal income tax
benefit..................................... 223,000 797,000 (1,272,000)
Tax exempt interest........................... 98,000 -- --
Establishment of valuation allowance.......... (2,156,000) -- --
Reversal of valuation allowance due to tax
planning strategy........................... -- 3,568,000 --
Patronage-related book/tax differences........ -- (1,502,000) --
Other......................................... (58,000) -- 66,000
----------------- ----------------- -----------------
Total.................................... $ -- $ 8,800,000 $ (12,007,000)
================= ================= =================
</TABLE>

F-17

<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

The significant components of deferred income taxes as of October 3,
1997 and October 2, 1998 is as follows:
<TABLE>

1997 1998
---- ----
<S> <C> <C>
Deferred income taxes, current asset:
Insurance reserves..................................... $ 1,359,000
Inventories............................................ 362,000 $ 309,000
Allowance for doubtful accounts........................ 1,650,000 253,000
Accrued employee benefits.............................. 192,000 168,000
Capitalized lease insurance............................ 244,000 244,000
Nonpatronage net operating loss carryforward........... 4,128,000 --
Alternative minimum tax credit......................... 150,000 178,000
Other.................................................. 62,000 374,000
----------------- -----------------
Net current deferred tax asset..................... 8,147,000 1,526,000
----------------- -----------------
Deferred income taxes, non-current asset (liability):
Accumulated depreciation............................... (2,561,000) (3,088,000)
Impairment reserve..................................... 689,000 --
Lease accrual.......................................... 1,474,000 1,302,000
Prepaid pension cost................................... -- (738,000)
Deferred income on sale-leaseback transactions......... 845,000 --
Deferred compensation.................................. 106,000 291,000
----------------- -----------------
Net non-current deferred tax asset (liability)..... 553,000 (2,233,000)
----------------- -----------------
Total.............................................. $ 8,700,000 $ (707,000)
================= =================
</TABLE>

9. Discontinued Operations:

In September 1997, United's management and board of directors approved
a plan whereby the insurance operations would be sold to an unrelated party. The
sale of the insurance operations was completed in July 1998. Accordingly, the
results of operations of the insurance segment for the years ended September 27,
1996, October 3, 1997 and October 2, 1998 have been presented as "discontinued
operations" in the accompanying statements of operations.

The following is a summary of the assets and liabilities of the
insurance segment as of October 3, 1997:
<TABLE>

<S> <C>
Assets:
Investments......................................................... $ 51,513,000
Receivables and other current assets................................ 22,070,000
Long-term assets.................................................... 1,328,000
-----------------
74,911,000
Liabilities:
Insurance reserves supported by investments......................... 26,356,000
Accounts payable and other current liabilities...................... 19,544,000
-----------------
Net investment in insurance segment................................. $ 29,011,000
=================
</TABLE>

F-18

<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

10. Sale of Cash & Carry Division:

On May 15, 1998, United sold to an unrelated party the assets and
liabilities of its Cash & Carry division, consisting of 40 wholesale grocery
stores. The net sales proceeds included a $17,500,000 note from the buyer.
United realized a gain on the sale, as follows:
<TABLE>
<S> <C>
Net sales proceeds....................................................... $ 55,486,000
-----------------
Net investment in Cash & Carry division:
Current assets...................................................... 26,589,000
Non-current assets.................................................. 5,864,000
Current liabilities................................................. (6,000,000)
-----------------
26,453,000
$ 29,033,000
</TABLE>

The accompanying consolidated statements of operations for the years
ended September 27, 1996, October 3, 1997 and October 2, 1998 (through May 15,
1998) include the following amounts with respect to the Cash & Carry division:
<TABLE>

1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Net sales and operations..................... $ 32,882,000 $ 37,530,000 $ 22,797,000
Costs and expenses........................... (32,133,000) (34,551,000) (22,380,000)
Other income................................. 1,707,000 1,179,000 1,519,000
--------------- --------------- --------------
Income before income taxes.............. $ 2,456,000 $ 4,158,000 $ 1,936,000
=============== =============== ==============
</TABLE>

11. Members' Patronage Dividends:

United'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. For the year
ended September 27, 1996, the Board of Directors voted to distribute $4 million
in patronage dividends, approximately $3.2 million which was paid in cash and
approximately $800,000 which was distributable in the form of common stock. No
patronage earnings were available to pay patronage dividends for the years ended
October 3, 1997 and October 2, 1998.

12. Reinsurance:

Reinsurance contracts do not relieve United from its obligations to
policyholders. Failure of reinsurers to honor their obligations could result in
losses to United. United 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.

United limits the maximum net loss that can arise from large risks or
risks in concentrated areas of exposure by reinsuring (ceding) certain levels of
high risk with other insurers or reinsurers, either on an automatic basis under
general reinsurance contracts known as "treaties" or by negotiation on
substantial individual risks. Ceded reinsurance is treated as the risk and
liability of the assuming companies.

F-19
<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

Reinsurance amounts reflected in the financial statements as of October
3, 1997 and for the years ended September 27, 1996 and October 3, 1997 are as
follows:
<TABLE>
1996 1997
---- ----
<S> <C> <C>
For the balance sheet:
Reinsurance recoverable................................ $ 9,440,000
Prepaid reinsurance premiums........................... 3,746,000

Total.............................................. $ 13,186,000
=================
For the statement of operations:
Premiums written:
Gross.............................................. $ 28,988,000 $ 31,198,000
Assumed............................................ 567,000 742,000
Ceded.............................................. (8,185,000) (10,331,000)
----------------- -----------------
Net premiums written............................... $ 21,370,000 $ 21,609,000
================= =================
Premiums earned:
Gross.................................................. $ 26,515,000 $ 29,596,000
Assumed................................................ 598,000 682,000
Ceded.................................................. (7,403,000) (9,698,000)
----------------- -----------------
Net premiums earned.................................... $ 19,710,000 $ 20,580,000
================= =================
Expenses:
Losses and loss adjustment expenses.................... $ 18,051,000 $ 16,610,000
Reinsurance recoveries................................. (4,617,000) (3,142,000)
----------------- -----------------
Net losses and loss adjustment expenses................ $ 13,434,000 $ 13,468,000
================= =================
</TABLE>

F-20

<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

13. Segment Reporting:

A summary of information about United's operations by the distribution
and insurance segments for the years ended September 27, 1996 and October 3,
1997 is as follows:
<TABLE>

1996 1997
---- ----
<S> <C> <C>
Net sales and operations:
Distribution........................................... $ 1,280,453,000 $ 1,306,602,000
Insurance (1).......................................... 20,096,000 22,231,000
----------------- -----------------
Total.............................................. $ 1,300,549,000 $ 1,328,833,000
================= =================
Income (loss) before income taxes:
Distribution........................................... $ (8,049,000) $ (21,627,000)
Insurance (1).......................................... 2,480,000 4,167,000
----------------- -----------------
Total.............................................. $ (5,569,000) $ (17,460,000)
================= =================
Depreciation and amortization expense:
Distribution........................................... $ 8,015,000 $ 11,483,000
Insurance (1).......................................... 187,000 359,000
----------------- -----------------
Total.............................................. $ 8,202,000 $ 11,842,000
================= =================
Capital expenditures, including software:
Distribution........................................... $ 22,568,000 $ 21,974,000
Insurance.............................................. 80,000 79,000
----------------- -----------------
Total.............................................. $ 22,648,000 $ 22,053,000
================= =================

Total assets as October 3, 1997:
Distribution........................................... $ 290,516,000
Insurance.............................................. 74,911,000
-----------------
Total.............................................. $ 365,427,000
=================
- ----------
</TABLE>

(1) Reported as discontinued operations.

14. Retirement Plans:

United has a company-sponsored pension plan that covers substantially
all of its salaried employees. United has made annual contributions to the plan
equal to the amount annually accrued for pension expense. United's funding
policy is to satisfy the funding requirements of the Employees' Retirement
Income Security Act.

In determining the actuarial present value of the projected benefit
obligation, a discount rate of 8%, 7.75% and 6.75% was used for the years ended
September 27, 1996, October 3, 1997 and October 2, 1998, respectively, and a
future maximum compensation increase rate of 4%, 3.75% and 2.75% was used for
the years ended September 27, 1996, October 3, 1997 and October 2, 1998,
respectively. The expected long-term rate of return on assets was 8%.

F-21
<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

Pension costs for the plan consists of the following for the years
ended September 27, 1996, October 3, 1997 and October 2, 1998, respectively:
<TABLE>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Company-sponsored:
Service costs of benefits earned................ $ 952,000 $ 1,155,000 $ 1,184,000
Interest cost on the projected benefit obligation 1,668,000 1,788,000 1,856,000
Expected return on plan assets.................. (1,932,000) (2,197,000) (2,616,000)
Amortization of:
Unrecognized net asset...................... (168,000) (168,000) (168,000)
Unrecognized net gain....................... (38,000) (100,000) (4,962,000)
Unrecognized prior service cost............. 61,000 61,000 61,000
---------------- ----------------- -----------------
Net periodic pension cost (benefit)......... $ 543,000 $ 539,000 $ (4,645,000)
================ ================= =================
</TABLE>

Amortization of the unrecognized net gain for the year ended October 2,
1998, includes the cumulative effect of a change in accounting method (see Note
1) of $2,912,000.

The following table sets forth the plan's funded status as of the years
ended October 3, 1997 and October 2, 1998:
<TABLE>

1997 1998
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested..................................................... $ 17,200,000 $ 27,082,000
Non-vested................................................. 1,137,000 841,000
----------------- -----------------
Accumulated benefit obligation......................... 18,337,000 27,923,000
Effect of projected future compensation levels............. 5,268,000 2,125,000
----------------- -----------------
Projected benefit obligation........................... 23,605,000 30,048,000
Plan assets at fair value, primarily listed stocks, fixed income
and bond and equity funds..................................... 33,541,000 33,919,000
----------------- -----------------
Excess of plan assets over projected benefit obligation 9,936,000 3,871,000
Unrecognized net asset.......................................... (1,393,000) (1,225,000)
Unrecognized net gain........................................... (9,064,000) (976,000)
Unrecognized prior service cost................................. 594,000 271,000
----------------- -----------------
Prepaid pension cost....................................... $ 73,000 $ 1,941,000
================= =================
</TABLE>
United 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 benefits obligation, nor the net assets attributable to the
multi-employer plans in which United's union employees participate. United's
costs for these multi-employer plans for the years ended September 27, 1996,
October 3, 1997 and October 2, 1998 were $3,326,000, $3,874,000 and $3,965,000,
respectively.

In addition to providing pension benefits, United 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 United's minimum service requirements, become eligible for these
benefits. The post-retirement medical benefits available are non-contributory in
nature and it is United's practice to fund these benefits as incurred.

F-22
<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

The following table presents the status of the plan and amounts
recognized for post-retirement benefits in United's financial statements as of
and for the years ended October 3, 1997 and October 2, 1998:
<TABLE>

1997 1998
---- ----
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees................................................... $ 1,810,000 $ 2,515,000
Fully eligible active plan participants.................... 1,578,000 1,111,000
Other active plan participants............................. 927,000 370,000
----------------- -----------------
Total accumulated post-retirement benefit obligation... 4,315,000 3,996,000
Unrecognized net transition obligation.......................... (3,331,000) (3,075,000)
----------------- -----------------
Accrued post-retirement benefit obligation............. $ 984,000 $ 921,000
================= =================
</TABLE>

<TABLE>
1996 1997 1998
---- ---- ----
Net periodic post-retirement benefit cost
includes the following components for the
years ended September 27, 1996, October 3,
1997 and October 2, 1998:
<S> <C> <C> <C>
Service cost.................................. $ 52,000 $ 52,000 $ 24,000
Interest cost................................. 271,000 271,000 246,000
Amortization of transition obligation......... 169,000 169,000 178,000
----------------- ----------------- -----------------
Net periodic post-retirement benefit cost $ 492,000 $ 492,000 $ 448,000
================= ================= =================
</TABLE>

The assumed health care cost trend rate used to measure the expected
cost of benefits was 11% in year one, decreasing 1% per year to a minimum rate
of 4%. The effect of a 1% increase in the assumed health care cost trend rate on
the aggregate of the service and interest cost components of the net periodic
post-retirement benefit cost and the accumulated post-retirement benefit
obligation would be to increase these amounts by approximately $170,000,
$170,000 and $12,000 for the years ended September 27, 1996, October 3, 1997 and
October 2, 1998, respectively. The discount rate used in determining the
accumulated post-retirement benefit obligation was 7.75%, 8% and 7% as of
September 27, 1996, October 3, 1997 and October 2, 1998, respectively.

United also has two separate company-sponsored 401(k) plans. In one
plan, all salaried non-union employees are eligible to participate.
Contributions by United are at the discretion of the Board of Directors. In the
other plan, union employees are eligible to participate, but United makes no
matching contributions. For the years ended September 27, 1996, October 3, 1997
and October 2, 1998, United made matching contributions to the 401(k) plans
totaling $291,000, $305,000 and $262,000, respectively.

15. Leases:

United has various operating leases for buildings and equipment,
certain of which are subleased to affiliated companies and members. The leases
expire at various dates through 2022. Rental expense consists of the following
for the years ended September 27, 1996, October 3, 1997 and October 2, 1998:
<TABLE>

1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Minimum rentals............................... $ 19,463,000 $ 24,551,000 $ 25,768,000
Less sublease income.......................... (6,873,000) (10,506,000) (8,844,000)
------------------ ----------------- -----------------
Net rental expense....................... $ 12,590,000 $ 14,045,000 $ 16,924,000
================= ================= =================
</TABLE>

F-23
<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

The following is a schedule by years showing future minimum rentals
under operating leases that have initial or remaining non-cancelable lease terms
in excess of one year as of October 2, 1998:
<TABLE>
(a) (b)
Minimum Minimum Net
Fiscal Year Payments Receipts Minimum
----------- -------- -------- -------
<S> <C> <C> <C>
1999.......................................... $ 21,486,000 $ 8,890,000 $ 12,596,000
2000.......................................... 19,408,000 8,143,000 11,265,000
2001.......................................... 17,016,000 7,689,000 9,327,000
2002.......................................... 15,616,000 7,247,000 8,369,000
2003.......................................... 13,786,000 6,567,000 7,219,000
Thereafter.................................... 82,695,000 57,044,000 25,651,000
----------------- ----------------- -----------------
Total................................ $ 170,007,000 $ 95,580,000 $ 74,427,000
================= ================= =================

Summary:
Building leases.......................... $ 141,073,000 $ 89,266,000 $ 51,807,000
Equipment leases......................... 28,934,000 6,314,000 22,620,000
----------------- ----------------- -----------------
Total................................ $ 170,007,000 $ 95,580,000 $ 74,427,000
================= ================= =================
- ----------
</TABLE>
(a) Minimum payments are those required by the Company over the terms of
significant leases.

(b) Minimum receipts are those to be received by the Company from sublease
agreements.

United has accrued $7,310,000 and $7,751,000 as of October 3, 1997 and
October 2, 1998, respectively, for the estimated losses on subleasing
arrangements, $5,505,000 and $5,896,000, respectively, of which is included in
other liabilities and $1,805,000 and $1,855,000, respectively, of which is
included in other current liabilities in the accompanying consolidated balance
sheets.

United has entered into sale-leaseback transactions for various
supermarket properties, which resulted in deferred gains of approximately
$3,650,000 and $1,257,000 as of October 3, 1997 and October 2, 1998,
respectively. The deferred gains are being amortized over the leaseback periods
of twenty years. The total remaining lease commitments at October 2, 1998 are
approximately $7,877,000 over nineteen years with an annual rental of
approximately $336,000.

16. Supplemental Cash Flow Information:
<TABLE>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosures:
Cash paid during the years for:
Interest............................. $ 14,546,000 $ 16,342,000 $ 12,738,000
Income taxes, net of refunds of
$1,200,000 in 1998................... 279,000 151,000 4,800,000
Supplemental schedule of noncash
investing and financing activities:
Sale of insurance segment in exchange
for note receivable................ -- -- 4,000,000
Sale of Cash & Carry division and
other assets in exchange for notes
receivable......................... -- -- 18,846,346
Members' allowances paid in common
stock.............................. -- 773,000 --
Exchange of member receivable for
equity interest in affiliate....... 3,250,000 362,000 --
Exchange of investment in affiliate
for note receivable -- -- 4,550,000
</TABLE>
F-24
<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

17. Affiliated Companies:

United owns interests in affiliates, which are accounted for on the
equity method. One affiliate is a vendor that provides private label brand
merchandise. The other affiliates operate retail grocery stores and are also
members of United. A member of United's Board of Directors controls R.A.F.
Limited Liability Company.

An approximate summary of aggregate balances and transactions with
affiliates in which United had an interest as of year-end is as follows:
<TABLE>

October 3, October 2,
1997 1998
---- ----
<S> <C> <C>
Balance sheet:
Investment in affiliated companies................................. $ 6,971,000 $ 3,360,000
Accounts receivable................................................ 2,898,000 2,651,000
Notes receivable................................................... 428,000 --
Accounts payable................................................... 7,046,000 4,079,000
</TABLE>

<TABLE>
Year ended
----------
September 27, October 3, October 2,
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Statement of operations:
Sales........................................... $ 129,855,000 $ 137,029,000 $ 2,933,000
Purchases....................................... 111,348,000 118,268,000 119,495,000
Volume incentive rebate for purchases from
affiliated company............................ 2,931,000 3,909,000 4,361,000
Refunds, rebates and member allowances to
affiliated companies.......................... 2,570,000 1,985,000 34,000
Equity in earnings of affiliated companies...... 568,000 107,000 169,000

</TABLE>
These affiliates and United's net investments as of October 3, 1997 and
October 2, 1998 and percentages of ownership during the years then ended are as
follows:
<TABLE>
Net Percentage
1997 Investment Ownership
---- ---------- ---------
<S> <C> <C>
Western Family Holding Company.......................................... $ 1,974,000 22%
C & K Market, Inc. (sold July 1997)..................................... -- 22%
R.A.F. Limited Liability Company........................................ 1,081,000 94%
North State Grocery, Inc................................................ 3,623,000 26%
Other................................................................... 293,000
----------------
$ 6,971,000
1998
Western Family Holding Company.......................................... $ 2,143,000 22%
R.A.F. Limited Liability Company........................................ 1,081,000 94%
Other................................................................... 136,000
----------------
$ 3,360,000

</TABLE>

F-25

<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

Combined unaudited financial information of the affiliated entities,
including third-party interests is as follows:
<TABLE>
October 3, October 2,
1997 1998
---- ----
<S> <C> <C>
Current assets.......................................................... $ 55,359,000 $ 41,903,000
Non-current assets...................................................... 13,559,000 4,185,000
Current liabilities..................................................... 49,193,000 35,905,000
Non-current liabilities................................................. 3,872,000 --
Owners' equity.......................................................... 15,853,000 10,184,000
</TABLE>
<TABLE>

Year Ended Year Ended Year Ended
September 27, October 3, October 2,
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Revenues............................................ $ 777,379,000 $ 633,124,000 $ 525,514,000
Gross profit........................................ 98,929,000 46,506,000 19,550,000
Net income (loss)................................... 2,531,000 220,000 (77,000)
</TABLE>

All of these affiliates are privately held companies for which no ready
market values are available. In management's opinion, the equity interests as
stated are equal to or less than the fair market value of United's interests in
these affiliates.

18. Related Party Transactions:

United is owned by its primary customers, and its Board of Directors
consists entirely of members who are also customers; accordingly, the nature of
United's business involves a significant number of related party transactions.
Such transactions with members, some of whom are directors, include leasing and
sub-leasing arrangements, sale of merchandise and related extensions of trade
credit, extensions of long-term credit for members' purchases of fixed assets,
notes payable to members for capital stock and capital investment notes and
payment of purchase incentives (see members allowances in the accompanying
consolidated statements of operations) in the form of cash and shares of
United's stock.

19. Concentrations of Credit Risk:

Financial instruments that potentially subject United to significant
concentrations of credit risk consist principally of cash and cash equivalents,
investments, store financing loans and trade accounts receivable.

United 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 Federal Depositors Insurance Corporation insurance;
balances in excess of coverage are not insured.

As a cooperative, the majority of United's accounts receivable
represent sales to its members who are located throughout the Pacific Northwest
and Northern California. These accounts are not generally collateralized but
each member has stock holdings in United as well as patronage rebates, which
United could apply against account balances.

United 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 collateralized with personal
property, securities and guarantees.

F-26
<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

United performs ongoing credit evaluations of its members' financial
condition and maintains allowances for potential credit losses.

Two customers accounted for more than 10% of United's net sales for the
year ended October 2, 1998. Sales to these customers were approximately $118
million and $235 million.

20. 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 United using available market information and
appropriate valuation methodologies.

United in estimating its fair value disclosures for financial
instruments used the following methods and assumptions:

Cash and cash equivalents and long-term notes receivables--the
carrying amounts reported in the balance sheet for cash and cash
equivalents and long-term receivables approximate their fair value.

Investments restricted or maintained for insurance
reserves--see Note 4.

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 privately-held company because the
stock is not traded; thus, the investments are carried at original cost
plus equity in earnings to date in the consolidated balance sheet. Such
investments are subject to review for possible impairment.

Notes payable--the carrying amounts of 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 United'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 11% and 8% for 1997
and 1998.

The carrying amounts and approximate fair values of United's financial
instruments at the balance sheet dates are as follows:
<TABLE>
Carrying Fair
1997 Amounts Values
---- ------- ------
<S> <C> <C>
Cash and cash equivalents............................................... $ 10,223,000 $ 10,223,000
Long-term notes receivable, including the current portion, net of
allowance for doubtful notes....................................... 18,334,000 18,334,000
Investment in and accounts with affiliated companies.................... 6,971,000 6,971,000
Notes payable........................................................... 198,186,000 193,886,000

1998
----
Cash and cash equivalents............................................... $ 1,294,000 $ 1,294,000
Long-term notes receivable, including the current portion, net of
allowance for doubtful notes....................................... 37,203,000 37,203,000
Investment in and accounts with affiliated companies.................... 3,360,000 3,360,000
Notes payable........................................................... 115,593,000 112,688,000
</TABLE>

F-27
<PAGE>
United Grocers, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - (Continued)

21. Commitments and Contingencies:

United has entered into various agreements under which it sells certain
of its notes receivable from members subject to limited recourse provisions.
Personal property, securities and guarantees collateralize these notes. United
in turn receives a monthly service fee. United recognizes the net present value
of the excess of the future service fees over the estimated service cost as a
servicing asset and related gain upon the sale of a loan. The service asset is
amortized over the life of the related note agreement. In the years ended
September 27, 1996, October 3, 1997 and October 2, 1998, United sold notes
totaling approximately $10,549,000, $13,205,000 and $1,518,000, respectively,
and recognized $330,852, $1,734,000 and $20,000, respectively, of gains on the
sales. The balances of transferred notes that were outstanding and subject to
recourse provisions were approximately $39,313,000 and $24,426,000 at October 3,
1997 and October 2, 1998, respectively. The unamortized service asset as of
October 3, 1997 and October 2, 1998 was $1,969,000 and $1,281,000, respectively.
In the event United is in default of other credit agreements, the buyer of these
notes has the right to demand collection of the outstanding notes balances from
United.

United is guarantor of a covenant not to compete and loans by members
as of October 2, 1998 totaling approximately $6,740,000 with annual payments of
approximately $837,000.

United 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, United expects the outcome of these matters will not
result in a material adverse effect on United's consolidated financial position,
results of operations or cash flows.

United is guarantor of a letter of credit a customer has with a bank.
The letter of credit is $1,500,000 of which no amount has been drawn at October
2, 1998.

22. Proposed Merger (Unaudited):

In March 1999, United executed a letter of intent with respect to a
proposed merger with Certified Grocers of California, Ltd., a grocery
cooperative headquartered in Commerce, California. The consummation of the
merger is conditional upon the execution of a mutually approved definitive
merger agreement following completion of due diligence, approval of the
agreement by the shareholders of both entities, required filings with regulatory
entities, and other customary conditions.

F-28

<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

UNITED GROCERS, INC.
(Registrant)

Dated: September 16, 1999 By: /s/ T. W. Olsen
-----------------------
Terrence W. Olsen
President and C.E.O.

<PAGE>
EXHIBIT INDEX

The Exhibit Index of United's Annual Report on Form 10-K for the fiscal year
ended October 2, 1998, filed on January 20, 1999, which lists the exhibits that
are filed as part of this report is incorporated by reference, except for the
following changes:

The following additional exhibits are filed as part of this report:

Exhibit 16. Letter regarding change in certifying accountant
(incorporated by reference to Exhibit 16 to the registrant's Form 8-K
filed on June 24, 1997).

Exhibit 4.D1. Amended and Restated Loan Purchase Agreement (Existing
Program) among United Resources, Inc., the registrant and National
Consumer Cooperative Bank dated January 30, 1998.

The following exhibit (filed as part of this report) replaces Exhibit 4.D4
contained in United's Annual Report on Form 10-K for the fiscal year ended
October 2, 1998, filed on January 20, 1999:

Exhibit 4.D2. Amended and Restated Loan Purchase Agreement (Holdback
Program) among United Resources, Inc., the registrant and National
Consumer Cooperative Bank dated January 30, 1998.

Exhibit 4.D1
EXECUTION COPY

AMENDED AND RESTATED LOAN PURCHASE AGREEMENT
(Existing Program)

Dated as of

January 30, 1998

Between

UNITED RESOURCES, INC.
as Seller

UNITED GROCERS, INC.
as Guarantor

And

NATIONAL CONSUMER COOPERATIVE BANK
as Buyer

<PAGE>

TABLE OF CONTENTS
Page
----
Article I

DEFINITIONS
-----------

SECTION 1.01 Defined Terms............................................. 1
SECTION 1.02 General Principles Applicable to Definitions.............. 16
SECTION 1.03 Accounting Terms.......................................... 16

Article II

THE COMMITMENT
--------------

SECTION 2.01 Loans Sold and Purchased as of Effectiveness Date;
Agreement to Purchase and Sell Loans...................... 17
SECTION 2.01A Incremental Purchase...................................... 20
SECTION 2.02 Agreement to Accept Renewal Notes......................... 21

Article III

CLOSING PROCEDURE; CONDITIONS TO PURCHASE
-----------------------------------------

SECTION 3.01 Payment................................................... 22
SECTION 3.02 Acceptance -Renewal Loans................................. 22
SECTION 3.03 Effective Date for each Purchase.......................... 22
SECTION 3.04 Buyer's Conditions Precedent to Acceptance................ 22
SECTION 3.05 Additional Delivery Requirements for Effectiveness Date... 25
SECTION 3.06 Seller's Conditions Precedent to Sale..................... 27

ARTICLE IV

REPRESENTATIONS AND WARRANTIES
------------------------------

SECTION 4.01 Seller's corporate Representations and Warranties......... 28
SECTION 4.02 Seller's Closing Date Representations and
Warranties with respect to Loans.......................... 32
SECTION 4.03 Seller's Renewal Date Representations and Warranties...... 39
SECTION 4.04 Buyer's Representations and Warranties.................... 40
SECTION 4.05 Repurchase Upon Breach of Certain Representations and
Warranties................................................ 40

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ARTICLE V

SERVICING AND COLLECTIONS
-------------------------

SECTION 5.01 Servicing and Collections................................. 42
SECTION 5.02 Documentation and Servicing; Maintenance of System
and Lien Priority......................................... 42
SECTION 5.03 Lockboxes................................................. 43
SECTION 5.04 Payment of Guaranty Fees; Anticipated Payments and
Other Amounts............................................. 43
SECTION 5.05 Applicable Rate........................................... 43
SECTION 5.06 Computation and Payment of Guaranty Fees.................. 44
SECTION 5.07 Access to Certain Documentation and Certain Information
Regarding the Loans....................................... 45

ARTICLE VI

SELLER'S COVENANTS
------------------

SECTION 6.01 Covenants................................................. 46
SECTION 6.02 Special Covenant of Seller................................ 51

ARTICLE VIII

GUARANTOR AND GUARANTY
----------------------

SECTION 7.01 Guarantor's Guaranty and Repurchase Guaranty;
Security Interest......................................... 53
SECTION 7.02 Guarantor Representations and Warranties.................. 53
SECTION 7.03 Covenants of Guarantor.................................... 56
SECTION 7.04 Grant of Security Interest................................ 65

ARTICLE VIII

SELLER OBLIGATIONS AND REPURCHASE OPTIONS

SECTION 8.01 Purchase of Interest Rate Protection...................... 68
SECTION 8.02 Optional Repurchase of Defaulted Loans and after
Obligor Default........................................... 68
SECTION 8.03 Minimal Balances.......................................... 68
SECTION 8.04 Retransfer of Loans....................................... 69

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ARTICLE IX

TERMINATION EVENTS
------------------

SECTION 9.01 Termination Events........................................ 70
SECTION 9.02 Consequences of Termination Event......................... 72
SECTION 9.03 Remedies of a Secured Party............................... 72

ARTICLE X

MISCELLANEOUS

SECTION 10.01 Further Assurances........................................ 74
SECTION 10.02 Indemnities............................................... 74
SECTION 10.03 No Waiver: Remedies Cumulative............................ 75
SECTION 10.04 Governing Law............................................. 75
SECTION 10.05 Consent to Jurisdiction: Waiver of Immunities............. 75
SECTION 10.06 Notices................................................... 75
SECTION 10.07 Assignment................................................ 75
SECTION 10.08 Capital Markets Funding................................... 76
SECTION 10.09 Severability.............................................. 76
SECTION 10.10 Attorney's Fees........................................... 76
SECTION 10.11 Setoff.................................................... 76
SECTION 10.12 Limitation on Third Party Beneficiaries................... 76
SECTION 10.13 Entire Agreement; Amendment............................... 77
SECTION 10.14 Headings.................................................. 77
SECTION 10.15 Term of Agreement......................................... 77
SECTION 10.16 Counterparts.............................................. 77

Exhibit A - Information re: Corporate Names of Seller and
Guarantor
Exhibit B - Form of Notice of Assignment
Exhibit C - Form of Renewal Note
Exhibit D - Form of Monthly Report
Exhibit E - Credit and Collection Policies
Exhibit F - Information Regarding Litigation, etc.
Exhibit G - Form of Purchase Notice for Incremental Purchase
Exhibit H - Form of Officers' Certificate of Seller
(Incremental Purchase)
Exhibit I - Form of Officers' Certificate of Guarantor
(Incremental Purchase)
Exhibit J - Permitted Lockboxes and Lockbox Banks

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Schedule I - Loan Schedule
Schedule II - Exception Loans
Schedule III - Loans Secured by Real Property
Schedule IV - Promissory Notes and Other Obligations

<PAGE>
AMENDED AND RESTATED
--------------------
LOAN PURCHASE AGREEMENT
-----------------------
(EXISTING PROGRAM)
------------------

This AMENDED AND RESTATED LOAN PURCHASE AGREEMENT (Existing
Program) is executed as of January 30, 1998 between UNITED RESOURCES, INC., an
Oregon corporation, as seller ("United Resources" or "Seller"), UNITED GROCERS,
INC., an Oregon corporation, as guarantor ("United Grocers" or "Guarantor") and
NATIONAL CONSUMER COOPERATIVE BANK, a financial institution organized under the
laws of the United States ("Buyer").

RECITALS

WHEREAS, Seller, Guarantor and Buyer entered into a certain
Loan Purchase and Servicing Agreement dated as of May 13, 1994 and certain
amendments thereto as of July 15, 1994, September 28, 1995 and December 30, 1996
(as amended, the "Original Agreement") which provides for (i) United Resources
to sell and Buyer to purchase Loans satisfying the terms and conditions of the
Original Agreement, (ii) United Resources to service the Loans sold to Buyer and
(iii) United Grocers to provide certain guaranties with respect to such Loans;

WHEREAS, United Resources, United Grocers and Buyer desire to
make a number of significant changes to the Original Agreement;

WHEREAS, United Resources, United Grocers and Buyer have
determined to enter into this Amended and Restated Loan Purchase Agreement
(Existing Program) (this "Agreement") to reflect and govern such changed
program; and

WHEREAS, Buyer currently owns Loans purchased under the
Original Agreement and may purchase additional Loans pursuant to the terms and
conditions set forth in this Agreement.

The parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Defined Terms. The following terms, as used
herein, have the following meanings:

"Affiliate" shall mean, with respect to a Person, any other
Person (or group of related Persons) which (i) directly or indirectly controls,
is controlled by or is under common control with, such Person, or (ii) directly
or indirectly owns more than 5% of such Person's voting stock, or (iii) is a
director or officer of such Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether

<PAGE>
through the ownership of voting securities, by contract or otherwise.

"Aggregate Exposure" shall mean, for any Obligor Group, an
amount, without duplication, equal to the sum of (i) the aggregate Principal
Balance of all Loans with respect to which any member of such Obligor Group is
an Obligor or Loan Guarantor and (ii) the aggregate outstanding principal amount
of all promissory notes and evidences of indebtedness which are owed or
guaranteed by any member of the related Obligor Group to or for the benefit of
Buyer or which give the Buyer exposure to the credit of any member of the
related Obligor Group.

"Anticipated Payment" shall have the meaning given in Section
5.04.

"Applicable Rate" shall mean during each Interest Accrual
Period, a per annum rate of 150 basis points in excess of LIBOR determined on
the related LIBOR Determination Date, each calculated on the basis of actual
days elapsed and a 360-day year.

"Available Funds" shall mean Collections, Principal
Prepayments, Payaheads, Net Liquidation Proceeds, Insurance Proceeds, Guaranty
Payments and Repurchase Proceeds.

"Bank Act" shall mean the National Consumer Cooperative Bank
Act, 12 U.S.C. ss.ss. 3001-3051, and any regulations and policies adopted
thereunder.

"Business Day" shall mean any day other than Saturday, Sunday
and a day on which banks in Portland, Oregon or Washington, D.C. are authorized
to close.

"Buyer" or "NCB" shall mean National Consumer Cooperative
Bank, a financial institution organized under the laws of the United States, and
its Successors and assigns.

"Capital Leases" means all leases which shall have been, or in
accordance with U.S. GAAP, should be recorded as capital leases.

"Carry-Forward Amount" shall mean, with respect to any Payment
Date, the excess, if any, of the Anticipated Payment for the preceding Payment
Date over the amount of Available Funds actually paid to Buyer on the preceding
Payment Date, plus interest on such excess, to the extent permitted by law, at
the Applicable Rate.

"Cash Flow Ratio" shall mean, with respect to any Obligor
Group, at any date and for the period reflected in the related Obligor Group
Financial Statements, the consolidated ratio (expressed as a percentage) of (a)
EBITDA to (b) Cash Interest Expense plus CPLTD; provided that if the Obligor
Group has taken on new debt which is not reflected on the Obligor Group

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<PAGE>
Financial Statements, or if a new loan has been approved but not yet funded, the
denominator of the ratio will be adjusted to account for the CPLTD of the new
debt or loan and related interest expense.

"Cash Interest Expense" shall mean, for any period, gross
interest expense for such period determined in accordance with U.S. GAAP.

"Closing Date" shall mean the date of each Incremental
Purchase.

"Code" means the Internal Revenue Code of 1986, as amended
from time to time.

"Collateral" shall mean all or any portion of the collateral,
whether real or personal, tangible or intangible, or otherwise, pledged by any
Obligor or Loan Guarantor to secure repayment of its Loan and the related Note
(other than Seller's capital stock and patronage dividends).

"Collateral Coverage Ratio" shall mean, with respect to any
Obligor Group, as of any date, as evidenced by Obligor Group Financial
Statements, the consolidated ratio (expressed as a percentage) of (a) the value
of all Collateral, to (b) the aggregate Principal Balance of all Loans for such
Obligor Group. For purposes of determining value, furniture, fixtures and
equipment of a retail grocery store will be valued at 3.5 times the respective
store's average weekly sales net of any prior Liens, as evidenced on the related
Obligor Group Financial Statements. For purposes of determining value, inventory
located in Oregon or Washington will be net of any inventory against which there
are prior Liens and will be valued at book value as reflected on the related
Obligor Group Financial Statements or a more recent physical inventory valuation
by Seller. For purposes of determining value, inventory located in California
will be net of any inventory against which there are prior Liens and be valued
at ninety percent of book value as reflected on the related Obligor Group
Financial Statements or a more recent physical inventory valuation by Seller.
For purposes of determining value, real estate will be net of any real estate
against which there are prior Liens and will be valued at either (i) the
assessed value, as shown on the local assessor's lists, established no earlier
than 9 months before the date of the Incremental Purchase by Buyer hereunder or
(ii) the value established by an MAI appraisal dated no earlier than 9 months
before the date of the Incremental Purchase by Buyer hereunder, provided that
real estate Collateral will be valued at $0.00 if neither full Minimum
Documentation nor Standard Documentation is delivered with respect to such
Collateral for the purpose of making the representation in Section 4.02 (oo)
hereof, the calculation of Collateral Coverage Ratio shall be modified as
provided in Section 4.02 (oo).

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<PAGE>
"Collections" shall mean any and all amounts received from or
on behalf of the obligors in respect of Loans and related Notes or Related
Documents during any applicable Due Period regardless of how received and
including, without limitation, receipt of Monthly Payments and payments from
guarantors.

"Consolidated Net Worth" shall mean, with respect to any
Person, as of any date of determination, the consolidated balance sheet "net
worth" of such Person determined in accordance with U.S. GAAP.

"Consolidated Tangible Net Worth" shall have the meaning set
forth in Section 7.03 (q) hereof.

"Controlled Group" means, with respect to any Person, all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which together with such
Person are treated as a single employer under Section 414 (b) or 414 (c) of the
Code.

"CPLTD" shall mean, with respect to any Person, for any
period, that portion of such Person's long-term Debt (that is, Debt with a term
of greater than one year) which matures and is due and payable within such
period.

"Credit and Collection Policy" means, with respect to Seller,
the credit, collection, enforcement and other policies and practices of Seller,
relating to Loans, related Notes and Related Documents existing on the date
hereof and as set forth in Exhibit E hereto, as the same may be modified from
time to time with the consent of Buyer, which consent will not be unreasonably
withheld.

"Credit Agreement" shall mean the secured lending facility
dated as of September 15, 1997, by and among United Grocers, the Credit
Providers and Bank of America National Trust and Savings Association, as
Administrative Agent for the Credit Providers.

"Credit Providers" shall mean the financial institutions party
to the Credit Agreement.

"Cut-Off Date" shall mean the first (1st) day of the month in
which each Incremental Purchase occurs.

"Debt" of any Person means at any date, without duplication,
(i) all items of indebtedness or liability (except capital, surplus, deferred
credits and reserves, as such) which, in accordance with U.S. GAAP, 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, (ii)
indebtedness secured by any Lien, whether or not such indebtedness shall have
been assumed, (iii) any other indebtedness or liability for borrowed money or
for the deferred purchase price of property or services for which such person is

4
<PAGE>
directly or contingently liable as obligor, guarantor, or otherwise, or in
respect of which such Person otherwise assures a creditor against loss, and (iv)
any other obligations of such Person under Capital Leases. For all purposes of
this Agreement, the Debt of any Person shall include all recourse Debt of any
partnership or joint venture formed as a partnership where such Person is a
general partner or is otherwise liable for the Debt of such partnership or joint
venture.

"Defaulted Loan" shall mean, as of any date, a Loan with
respect to which any of the following has occurred: (a) there has occurred an
Obligor Default with respect to such Loan and such Obligor Default has been
continuing for a period of 10 days, or (b) the Obligor under such Loan has
sought protection under the United States Bankruptcy Code or is the subject of
an involuntary bankruptcy.

"Due Date" shall mean the day of the month on which the
Monthly Payment is due from the Obligor on a Loan.

"Due Period" shall mean, with respect to any Payment Date, the
calendar month preceding the month in which such Payment Date occurs.

"EBITDA" means, for any Person, for any period, the
consolidated net income (or net loss) of such Person for such period as
determined in accordance with U.S. GAAP, plus (a) the sum of (i) depreciation
expense, (ii) amortization expense, (iii) Cash Interest Expense plus the amount
of amortized debt discount deducted in determining Cash Interest Expense and
fees, (iv) total income tax expense, and (v) extraordinary or unusual losses
(and other after-tax losses on sales of assets outside of the ordinary course of
business and not otherwise included in U.S. GAAP extraordinary or unusual
losses), less (b) the sum of (i) extraordinary or unusual gains (and other after
tax gains on sales of assets outside of the ordinary course of business and not
otherwise included in U.S. GAAP extraordinary or unusual gains) of the Person
for such period and (ii) the net income (or loss) of any Person that is
accounted for by the equity method of accounting, except to the extent of the
amount of dividends or distributions paid to such Person.

"Effectiveness Date" shall mean January 30, 1998.

"Eligible Loan" shall mean a Loan as to which each applicable
representation and warranty in Section 4.2 is true and accurate on the
applicable Closing Date.

"Environmental Laws" means all federal, state and local
statutes, regulations, ordinances, and requirements, now or hereafter in effect,
pertaining to environmental protection, contamination or cleanup, including
without limitation (i) the Federal Resource Conservation and Recovery Act of
1976 (42 U.S.C. ss. 6901, et seq.), (ii) the Federal Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et

5
<PAGE>
seq.), (iii) the Federal Hazardous Materials Transportation Control Act (49
U.S.C. ss. 1801, et seq.), (iv) the Federal Clean Air Act (42 U.S.C. ss. 7401,
et seq.), (v) the Federal Water Pollution Control Act, Federal Clean Water Act
(33 U.S.C. ss. 1251 et seq.), (vi) the Federal Insecticide, Fungicide, and
Rodenticide Act, Federal Pesticide Act (7 U.S.C. ss. 136, et seq.), (vii) the
Federal Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), and (viii)
the Federal Safe Drinking Water Act (42 U.S.C. ss. 300f et seq.), all as now or
hereafter amended.

"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.

"Full Recourse Loan" shall mean any Loan that is an Eligible
Loan as to which Seller has received at least 12 Monthly Payments of principal.

"Government Approval" means an approval, permit, license,
authorization, certificate or consent of any Governmental Authority.

"Governmental Authority" means the government of the United
States or any State or any foreign country or any political subdivision of any
thereof or any branch, department, agency, instrumentality, court, tribunal or
regulatory authority which constitutes a part or exercises any sovereign power
of any of the foregoing.

"Guaranty" shall mean the first loss guaranty of Liquidation
Losses provided by Guarantor in accordance with Section 7.01(a) of this
Agreement.

"Guaranty Amount" shall mean, at any time, an amount equal to
(a) the sum of (i) twenty percent (20%) of the Principal Balance of each Loan,
minus (b) all amounts previously remitted or paid hereunder by Guarantor to
Buyer pursuant to the Guaranty, the Holdback Guaranty or the New Origination
Guaranty; provided, however, that at no time shall the Guaranty Amount be less
than the sum of the Purchase Price of the sum of the three largest Loans or the
sum of the three largest Aggregate Exposures, whichever is greater at such time.

"Guaranty Collateral" shall mean the collateral in which the
Guarantor grants a security interest in favor of the Buyer pursuant to Section
7.04(a) hereof.

"Guaranty Fee" shall have the meaning given in Section 5.06 of
this Agreement.

"Guaranty Payments" shall mean the amounts paid by Guarantor
to Buyer pursuant to the Guaranty or the Repurchase Guaranty, as applicable.

"Guarantor" shall mean United Grocers, Inc., an Oregon
corporation, and its Successors and assigns.

6
<PAGE>
"Hazardous Substances" means any substance or material defined
or designated as hazardous or toxic waste, hazardous or toxic material, a
hazardous, toxic or radioactive substance, or other similar terms, by any
federal, state or local environmental statute, regulation or ordinance presently
in effect, including but not limited to the Environmental Laws.

"Holdback Guaranty" shall mean the Guaranty provided by the
Guarantor pursuant to Section 2.1(a) of the Holdback Guaranty Agreement.

"Holdback Guaranty Agreement" shall mean the Amended and
Restated Guaranty Agreement (Holdback Program) dated as of January 30, 1998, by
and between United Grocers, as guarantor, and NCB, as the same may be further
amended or supplemented from time to time.

"Holdback Guaranty Amount" shall mean the "Guaranty Amount"
available under the Holdback Guaranty Agreement.

"Holdback Loan Purchase Agreement" shall mean the Amended and
Restated Loan Purchase Agreement (Holdback Program) dated as of January 30,
1998, by and between United Resources, as seller, and NCB, as buyer, as the same
may be further amended or supplemented from time to time.

"Incremental Purchase" shall have the meaning ascribed to such
term in Section 2.01A hereof.

"Insurance Proceeds" shall mean proceeds paid by any insurer
pursuant to any insurance policy covering a Loan or Collateral, including but
not limited to title, hazard, life, health and/or accident insurance policies.

"Interest Accrual Period" shall mean, with respect to each
Payment Date, the period commencing on the first day of the month preceding such
Payment Date and ending on the last day of the month of such Payment Date,
except that, with respect to the first Payment Date hereunder, the initial
Interest Accrual Period shall commence on the Effectiveness Date.

"LIBOR" shall mean, for any Interest Accrual Period, the
reserve-adjusted London interbank rate for one-month Euro-Dollar deposits
determined by Buyer for each Interest Accrual Period in accordance with the
provisions of Section 5.05.

"LIBOR Determination Date" shall mean the second Business Day
prior to the commencement of each Interest Accrual Period.

"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

7
<PAGE>
any real or personal property in which such Person has or hereafter acquires any
interest.

"Liquidated Loan" shall mean any Defaulted Loan as to which
NCB has determined that all amounts which it reasonably and in good faith
expects to recover have been recovered from or on account of such Loan;
provided, however, that a Defaulted Loan which has not been determined to have
become a Liquidated Loan within three months after becoming a Defaulted Loan
shall be deemed to be a Liquidated Loan on the third month anniversary date of
such Loan becoming a Defaulted Loan. A Loan deemed a Liquidated Loan shall be
due and payable on the date on which such Loan so deemed.

"Liquidation Losses" shall mean, with respect to any
Liquidated Loan, on any date of determination, the amount by which (A) the sum
of (i) the Principal Balance of such Loan, (ii) accrued and unpaid interest
thereon at the Applicable Rates and (iii) unreimbursed reasonable fees and
expenses incurred by NCB in servicing the liquidation of such Defaulted Loan,
exceeds (B) the Net Liquidation Proceeds and Insurance Proceeds thereon, if any.

"Liquidation Proceeds" shall mean, cash, other than Insurance
Proceeds, and any other amounts received in connection with the liquidation of
Defaulted Loans and related Collateral, whether through trustee's sale,
foreclosure sale or otherwise.

"Loan" shall mean each loan originated by Seller in the
ordinary course of its business and transferred (in its entirety or through a
participation interest therein) to Buyer pursuant to this Agreement, together
with the rights and obligations of a holder thereof, payments thereon and
proceeds therefrom, the Loans originally subject to this Agreement being
identified on the Loan Schedule. "Loan" shall include any Renewal Loan or Rays'
Loan accepted by Buyer under this Agreement. "Loan" shall also include a Loan
sold and transferred by Seller under the Original Agreement and owned by Buyer
on the Effectiveness Date.

"Loan File" means the documents pertaining to a Loan,
including the related Note and Related Documents delivered to Buyer or its agent
in accordance with Section 2.01 of this Agreement in connection with the sale of
the Loan by Seller and the Renewal Note and Related Documents delivered to Buyer
pursuant to Section 2.02 of this Agreement.

"Loan Guarantor" shall mean any Person who (i) guarantees an
Obligor's payment and/or other obligations under any Loan, (ii) co-signs, or is
a co-maker on, the related Note, or (iii) otherwise supports, either in a
primary or secondary position, an Obligor's obligations with respect to a Loan,
the related Note or other Related Documents.

"Loan Interest Rate" shall mean, with respect to any date of
determination, the then applicable annual rate of

8
<PAGE>
interest borne by a Loan, pursuant to its terms, which, as of the applicable
Closing Date, is shown on the Loan Schedule.

"Loan Schedule" shall mean, the schedule of Loans, delivered
by Seller to Buyer at the time of each Incremental Purchase, such schedule
identifying each Loan to be purchased in such Incremental Purchase by the name
and address of the Obligor (and, if different from such address, the location of
the grocery store to which such Loan relates) and setting forth as to each Loan
the following information: (i) the Principal Balance as of the close of business
on the applicable Closing Date, (ii) if a participation interest in such Loan is
being purchased hereunder, the percentage participation interest being
purchased, (iii) the account number on Seller's records, (iv) the original
principal amount of the Loan, (v) the date the Loan was made and original number
of months to maturity and original amortization period, in months, (vi) the Loan
Interest Rate as of the applicable Cut-Off Date and whether fixed or variable,
(vii) when the first Monthly Payment was due, (viii) the Monthly Payment as of
the applicable Cut-Off Date, (ix) the remaining number of months in the
amortization period as of the applicable Cut-Off Date, (x) amortization method
and period, (xi) if the Loan has a variable Loan Interest Rate, the margin which
is added to the Prime Rate to determine the Loan Interest Rate, and the maximum
and minimum Loan Interest Rates, if applicable, (xii) whether such Loan is a
Preferred Loan, Standard Loan or Full Recourse Loan, (xiii) the Aggregate
Exposure which relates to such Loan, (xiv) with respect to the related Obligor
Group, the Cash Flow Ratio and the Collateral Coverage Ratio as of the
applicable Cut-Off Date, (xv) whether such Loan has Renewal Loan provisions, and
(xvi) whether such Loan is secured by real estate Collateral. The Loan Schedule
shall be supplemented on the date of each Incremental Purchase to include the
Loans purchased on such date and shall be amended to reflect in the pool of
Loans sold hereunder including Renewal Loans and Purchased Loans.

"MAI" shall mean Member of the American Institute of Real
Estate Appraisers.

"Minimum Documentation" means, with respect to a Loan secured
by real estate Collateral, (i) a certification of Seller as to the assessed
value of the related mortgaged property (which certification shall be based on a
tax assessment dated no later than 9 months before the Closing Date on which
such Loan first purchased by Buyer), (ii) a completed environmental
questionnaire in the form prescribed by Seller and acceptable to Buyer, and
(iii) copies of any title search or report prepared by an attorney or title
company relating to the mortgaged property.

"Maximum Purchase Amount" shall mean $28,750,000, unless
otherwise increased or reduced by the parties hereto.

"Monthly Interest Amount" shall have the meaning given in
Section 5.05.

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<PAGE>
"Monthly Payment" shall mean the monthly payment of principal
and/or interest required to be made by an Obligor on the related Loan pursuant
to the terms of the related Note.

"Multiemployer Plan" shall mean, for any Person, a
"multiemployer plan" as defined in Section 4001(a) (3) of ERISA which is or was
at any time during the current year or the immediately preceding five years
contributed to by such Person or any member of a Controlled Group on behalf of
its employees and which is covered by Title V of ERISA.

"Net Liquidation Proceeds" shall mean Liquidation Proceeds net
of (i) any reimbursements to Buyer made therefrom for any expenses incurred in
liquidating Loans and (ii) amounts required to be released to the related
Obligor pursuant to applicable law.

"New Origination Guaranty" shall mean the "Guaranty" provided
by Guarantor in accordance with the New Origination Guaranty Agreement.

"New Origination Guaranty Agreement" shall mean the Guaranty
Agreement (New Origination Program) dated as of January 30, 1998, by and between
Guarantor and NCB, as the same may be amended from time to time.

"New Origination Guaranty Amount" shall mean the "Guaranty
Amount" available under the New Origination Guaranty Agreement.

"New Origination Loan Agreement" shall mean the Loan
Origination and Purchase Agreement dated as of January 30, 1998, by and between
United Resources, as Seller, and NCB, as buyer, as the same may be amended and
supplemented from time to time.

"Note" shall mean any promissory note evidencing the
indebtedness of an Obligor under a Loan, and shall include a Renewal Note
accepted by Buyer under this Agreement.

"Notice of Assignment" shall mean a Notice of Assignment
executed by Seller in substantially the form of the annexed Exhibit B.

"Obligor" shall mean the Person or Persons primarily obligated
to repay the Loan and the indebtedness evidenced by the related Note including,
without limitation, all Persons executing such Note (regardless of whether they
have also executed all subsequent extension agreements relating to such Note).

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<PAGE>
failure continues after the applicable grace period, if any, specified in such
Note or Related Document relating to such Loan; or (b) the failure by an Obligor
to perform any term or covenant on its part to be performed under any Loan,
related Note or Related Document which failure continues after the applicable
grace period, if any, specified in the Note or Related Document, if the effect
of such failure to perform is to accelerate or to permit the acceleration of the
maturity of the indebtedness evidenced by such Note or Related Document; or (c)
the occurrence of an event or condition whereby the indebtedness related to the
Loan of any Obligor shall be declared to be due and payable or required to be
prepaid (other than by regularly scheduled required prepayment) prior to the
stated maturity thereof.

"Obligor Group" shall include an Obligor and any of its
Affiliates and Subsidiaries.

"Obligor Group Financial Statements" shall mean the balance
sheets and related statements of income and retained earnings prepared in
accordance with U.S. GAAP which shall be prepared by an accounting service and
signed by appropriate officers of the Obligor Group. For purposes of ratio
determination, the financial statements reflecting the most recent fiscal year's
results will be used, provided that if such financial statements reflect a
period ended more than nine months earlier, an interim statement covering at
least two quarters' results shall be used.

"Original Agreement" shall have the meaning given in the
Recitals hereto.

"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.

"Payaheads" shall mean, with respect to a Due Period, any
amounts received on a Loan in excess of the Monthly Payment due on the Due Date
relating to such Due Period which does not constitute either a Principal
Prepayment or payment with respect to an overdue amount. Payaheads are payments
of principal for purposes of this Agreement.

"Payment Date" shall mean the twenty second (22nd) day of each
calendar month unless such day is not a Business Day, in which event, "Payment
Date" shall mean the next succeeding Business Day.

"Pension Plan" means, for any Person, an "employee pension
benefit plan" (as such term is defined in ERISA) from time to time maintained by
such Person, any Subsidiary of such Person, or a member of the Controlled Group
of such Person.

"Permitted Lockbox" shall mean a post office box or other
mailing location identified on Exhibit J to this Agreement maintained by a
Permitted Lockbox Bank for the purpose of

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<PAGE>
receiving payments made by the Obligors or such other post office box or mailing
location as Buyer may designate from time to time.

"Permitted Lockbox Bank" shall mean a bank identified on
Exhibit J to this Agreement or such other bank as Buyer may designate from time
to time.

"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or any agency or instrumentality thereof.

"Plan" shall mean, for any Person, at any time, an employee
pension benefit plan, other than a Multiemployer Plan, which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code and is either (i) maintained by such Person, any Subsidiary of such Person,
or any member of a Controlled Group for employees of such Person or any member
of such Controlled Group or (ii) maintained pursuant to collective bargaining
agreement or other arrangement under which more than one employer makes
contributions and to which such Person or any member of a Controlled Group is
then making or accruing an obligation to make contributions or has within the
preceding five (5) plan years made contributions.

"Preferred Loan" shall mean any Loan which is an Eligible Loan
and which falls into either of the following categories: (i) the Obligor Group
related thereto has a Collateral Coverage Ratio of at least 110% and a Cash Flow
Ratio of at least 100%; or (ii) (a) the Obligor Group related thereto has a
Collateral Coverage Ratio and Cash Flow Ratio of at least 85% each and a
combined Collateral Coverage Ratio and Cash Flow Ratio of at least 240%, and (b)
the Obligor Group related thereto has a Consolidated Tangible Net Worth greater
than $0.00.

"Primary Collateral" shall mean that portion of the Collateral
in which Seller had, prior to the sale and assignment hereunder, first priority
perfected security interests.

"Prime Rate" shall mean the "Prime Rate" from time to time
published in the "Money Rates" section of the Wall Street Journal; provided,
however, that if such rate is not published in the Wall Street Journal, the
Prime Rate shall be a substantially comparable index selected by Seller and
approved by Buyer.

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<PAGE>
Payment Date, which were distributed pursuant to Section 5.04 on any previous
Payment Date, and (b) all Principal Prepayments, Payaheads, Insurance Proceeds,
Net Liquidation Proceeds, Guaranty Payments, payments under the Holdback
Guaranty, the New Origination Guaranty and Repurchase Proceeds to the extent
applied by the Servicer as recoveries of principal in accordance with the
provisions hereof, which were distributed pursuant to Section 5.04 on any
previous Payment Date.

"Principal Prepayment" shall mean any payment or other
recovery of principal on a Loan equal to the Principal Balance thereof, received
in advance of the final scheduled Due Date which is intended to satisfy a Loan
in full. Principal Prepayment shall also include, with respect to a Loan that
has provisions for renewal, all or any portion of the Principal Balance of the
related Note that is greater than the Renewal Balance, if any.

"Private Placement Agreement" means any agreement currently
existing or hereafter entered into by Guarantor for the private placement of
debt securities issued by Guarantor.

"Prior Note" shall have the meaning given in the definition of
"Renewal Note".

"Property" shall mean the Loans, the related Notes, Related
Documents, Collateral pledged to secure the Loans, and other rights, title and
interest of Seller conveyed and sold pursuant to Section 2.01(a) or conveyed and
accepted by Buyer pursuant to Section 3.02 hereof.

"Purchase Price" shall have the meaning given in Section 3.01.

"Rating Agency" shall mean Standard & Poor's Corporation,
Moody's Investors Service, Inc., or any Successor of either, or any other
nationally-recognized rating agency.

"Rays' Loan" shall mean certain loans relating to the
Rays'/C&K Market sold by United Resources to NCB pursuant to the Holdback Loan
Purchase Agreement and repurchased by United Resources pursuant to Section 7.04
of the Holdback Loan Purchase Agreement after any such Rays' Loan satisfies the
Loan eligibility requirements set forth in Section 4.02 of this Agreement.

"Related Documents" shall mean with respect to each Loan and
related Note, a loan agreement, a security agreement, a mortgage, an assignment
of lease and all other documents, instruments or assignments (including
amendments or modifications thereof) executed by the Obligor or other Person on
Obligor's behalf in respect of such Loan and related Note, including, without
limitation, general or limited guaranties.

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<PAGE>
"Renewal Balance" shall mean for each Renewal Note, the
Principal Balance evidenced thereby on its Renewal Date.

"Renewal Date" shall have the meaning given in the definition
of "Renewal Note."

"Renewal Loan" shall mean a loan evidenced by a Renewal Note.

"Renewal Note" shall mean a Note accepted by Buyer (i) which
is substantially in the form of the annexed Exhibit C (ii) which is executed by
all of the Obligors and Loan Guarantors of a note related to a Loan previously
sold to Buyer ("Prior Note") which Prior Note was to be paid in full on the date
the Renewal Note first becomes effective ("Renewal Date"); (iii) which evidences
an obligation to repay a principal amount equal to or less than the principal
amount required to be paid by the Obligor under the Prior Note on the Renewal
Date; (iv) which provides for monthly principal payments in amounts not less
than the monthly principal payments required pursuant to the terms of the Prior
Note; (v) which provides that on and after the first Renewal Date after the
purchase by Buyer hereunder, the related Loan will fully amortize over the
remaining term to maturity; and (vi) which remains subject to and secured by all
of the Related Documents applicable to the Prior Note (as the same may be
amended and restated by the terms of the Renewal Note).

"Repurchase Amount" shall mean the amount set forth as such in
Section 2.01(e).

"Repurchase Guaranty" shall mean the guaranty of Seller's
repurchase obligation provided by the Guarantor pursuant to Section 7.01(b)
hereof.

"Repurchased Loans" shall mean all Loans repurchased by or on
behalf of Seller, whether through a payment of Repurchase Proceeds by Seller
pursuant to Sections 2.01(e), 2.02(c), 3.02, 4.05, 8.02, 8.03 and 9.02, or
through a payment by the Guarantor on its Repurchase Guaranty pursuant to
Section 7.01(b).

"Repurchase Proceeds" shall mean the amounts received from
Seller with respect to a Repurchased Loan.

"Responsible Officer" shall mean when used with respect to
Buyer, Guarantor or Seller, the chairman of the Board of Directors, any vice
chairman of the Board of Directors, the chairman of the executive committee, any
vice chairman of the executive committee, the president, any vice president
(whether or not designated by numbers or words added before or after the title
"vice president"), the secretary, the treasurer, any assistant treasurer, or any
other officer or assistant officer of Buyer, Guarantor or Seller customarily
performing functions similar to those performed by the Persons who at the time
shall be such officers, respectively.

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<PAGE>
"Security Documents" shall have the meaning given in the
Credit Agreement.

"Seller" shall mean United Resources, Inc., an Oregon
corporation, and its Successors and assigns.

"Senior Funded Debt" has the meaning given in Section 7.03(k)
hereof.

"Standard Loan" shall mean any Loan (i) that is an Eligible
Loan and (ii) with respect to which the product of the related Obligor Group's
Cash Flow Ratio and Collateral Coverage Ratio is at least equal to 100%.

"Standard Documentation" means, with respect to a Loan secured
by real estate Collateral, (i) an MAI appraisal dated no later than 9 months
before the Closing Date on which such Loan first purchased by Buyer, (ii) a
Phase I environmental survey (except that for real estate Collateral which is
residential property, an environmental questionnaire in the form prescribed by
Seller acceptable to Buyer is acceptable) and (iii) originals of all title
insurance policies relating to the mortgaged property.

"Subordinated Debt" means, with respect to any Person, as of
any date of determination, Total Funded Debt which by its terms provides that no
payments or distributions may be made thereon or in respect thereto at any time
when a Termination Event or default has occurred and is continuing hereunder or
under any other agreement, document or instrument providing for repayment of any
Total Funded Debt (other than such Subordinated Debt) or for the payment by such
Person of the purchase price of tangible property.

"Subsidiary" means with respect to any Person, any
corporation, limited liability company or partnership directly or indirectly
controlled by such Person. For the purposes of this definition, "controlled by"
shall mean the possession, directly or indirectly of the power to direct or
cause the direction of the management and policies of such Subsidiary, whether
through the ownership of voting securities, by contract or otherwise.

"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.

"Termination Date" shall mean the first date on which (i) all
Loans shall have been paid in full or, (ii) all Loans shall have been
repurchased by or on behalf of Seller pursuant to Section 2.01(e), 2.02(c),
3.02, 4.05, 7.01(b), 8.02, 8.03 or 9.02.

"Termination Event" shall have the meaning given in Section
9.01.

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<PAGE>
"Total Capitalization" means, for any Person, as of any date
of determination, the sum of (i) the consolidated balance sheet "members equity"
of such Person determined in accordance with U.S. GAAP and (ii) Total Funded
Debt.

"Total Funded Debt" means for any Person (i) all indebtedness
or liability of such person, without duplication, for borrowed money and all
indebtedness or liability for borrowed money secured by a Lien on the assets of
such Person, whether or not such indebtedness or liability has been assumed by
such Person, (ii) all indebtedness and liability of such Person for Capital
Leases and (iii) all indebtedness or liability for borrowed money or for Capital
Leases 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.

"Total Funded Debt Ratio" means, for any Person, at any time,
the ratio of such Person's Total Funded Debt to Total Capitalization.

"Unfunded Vested Liability" shall mean, with respect to any
Person and any Plan, at any time, the amount (if any) by which (a) the present
value of all vested nonforfeitable benefits under such Plan exceeds (b) the fair
market value of all Plan assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plan, but only to the extent that
such excess represents a potential liability of such Person, any Subsidiary or
any member of the Controlled Group to the PBGC of the Plan under Title IV of
ERISA.

"U.S. GAAP" has the meaning specified in Section 1.03.

SECTION 1.02 General Principles Applicable to Definitions.
Definitions given in Section 1.01 shall be equally applicable to both singular
and plural forms of the terms therein defined and references herein to "he" or
"it" shall be applicable to Persons whether masculine, feminine or neuter.
References herein to any document including, without limitation, this Agreement,
a Loan, a Note, an Assignment and a Related Document shall be deemed a reference
to such document as it now exists, and as, from time to time hereafter, the same
may be amended.

SECTION 1.03 Accounting Terms. Except as otherwise provided
herein, accounting terms not specifically defined shall be construed, and all
accounting procedures shall be performed, in accordance with generally accepted
United States accounting principles ("U.S. GAAP") consistently applied.

[End of Article I]

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<PAGE>
ARTICLE II

THE COMMITMENT
--------------

SECTION 2.01 Loans Sold and Purchased as of Effectiveness
Date; Agreement to Purchase and Sell Loans. (a) Seller and buyer acknowledge
that prior to the Effectiveness Date, under the terms of the Original Agreement,
Seller did assign, sell, set-over, transfer and otherwise convey, and Buyer did
purchase Loans and that such Loans and related property identified on the Loan
Schedule are owned by Buyer as of the Effectiveness Date. At the time of each
Incremental Purchase pursuant to Section 2.01A hereof, Seller does hereby
assign, sell, set-over, transfer and otherwise convey to Buyer, without recourse
(but subject to Seller's covenants, representations, warranties and indemnities
specifically provided herein), all of Seller's right, title and interest in, to
and under (i) each Loan purchased on the date of such Incremental Purchase and
any and all monies of whatsoever nature (payable upon the occurrence of any
event) payable pursuant to each such Loan after the applicable Cut-Off Date,
including payments on the related Note, all Insurance Proceeds, any Net
Liquidation Proceeds, other Collections, and any other amounts payable in
connection with the termination of such Loan, (ii) all rights, powers, and
remedies of Seller under or in connection with each such Loan, whether arising
under the terms of such Loan, by statute, at law or in equity, or otherwise
arising out of any default by the Obligor under such Loan, including all rights
to exercise any election or option or to make any decision or determination or
to give or receive any notice, consent, approval or waiver thereunder, (iii) all
security interests and lien rights of Seller in each item of Collateral pledged
to secure any such Loan, all additions, alterations, accessions or modifications
thereto or replacement of any part thereof, and all intangibles and other rights
associated with the Collateral, (iv) all rights of Seller under each Related
Document, in each case as the same may be modified, amended, supplemented or
restated from time to time, (v) all documents of title, books and records
concerning the foregoing property (including all computer programs, tapes, disks
and related items containing any such information), and (vi) all proceeds,
products, rents or profits of the foregoing of any nature whatsoever, including
all Insurance Proceeds and Net Liquidation Proceeds (with each Renewal Loan,
related Renewal Note and Related Documents conveyed by Seller and accepted by
Buyer pursuant to Section 3.02 hereof, collectively, the "Property"). The
foregoing transfer, sale, assignment and conveyance does not constitute and is
not intended to result in the creation, or an assumption by Buyer, of any
obligation of Seller or any other Person in connection with any Loan, the
related Note, Related Documents or Collateral or under any agreement or
instrument relating thereto, including any obligation to any Obligor.

(b) In connection with each transfer, sale and assignment of
Loans, Buyer hereby directs Seller to deliver to

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<PAGE>
the Buyer as of the date of each Incremental Purchase the Loan Files with
respect to the Loans transferred and sold on the date of each such Incremental
Purchase, which shall include, but not be limited to, the following:

(i) the original Notes, endorsed by Seller as
follows: "Pay to the order of National Consumer Cooperative Bank,
without recourse" and signed by a Responsible Officer of Seller, with
all prior and intervening endorsements showing a complete chain of
endorsement from the originator to Seller, if Seller was not the
originator, together with all originals or copies of Renewal Notes in
Seller's possession;

(ii) executed original counterparts of the Related
Documents, together with executed originals of all modifications or
amendments thereof;

(iii) irrevocable power of attorney of Seller to
Buyer to execute, deliver, file, record or otherwise deal with the
Collateral for the Loans in accordance with this Agreement;

(iv) documents evidencing or related to any
insurance policies; and

(v) with respect to Loans secured by mortgages on
real property, Buyer shall have received (A) either: (i) the original
mortgage, with evidence of recording thereon, (ii) a copy of the
mortgage certified as a true copy by a Responsible Officer of Seller
where the original has been transmitted for recording until such time
as the original is returned by the public recording officer or duly
licensed title or escrow officer or (iii) a copy of the mortgage
certified by the public recording office in those instances where the
original recorded mortgage has been lost; (B) either: (i) the original
assignment of mortgage from Seller endorsed as follows: "National
Consumer Cooperative Bank," with evidence of recording thereon
(provided, however, that where permitted under the laws of the
jurisdiction wherein the mortgaged property is located, the assignment
of mortgage may be effected by one or more blanket assignments for
Loans secured by mortgaged properties located in the same county), or
(ii) a copy of such assignment of mortgage certified as a true copy by
a Responsible Officer of Seller where the original has been transmitted
for recording (provided, however, that where the original assignment or
mortgage is not being delivered to Buyer, each such Responsible Officer
may complete one or more blanket certificates attaching copies of one
or more assignments of mortgage relating to the mortgages originated by
Seller); and (C) either: (i) originals of all intervening assignments,
if any, showing a complete chain of title from the originator to
Seller, including warehousing assignments, with evidence of recording
thereon if such assignments were

18
<PAGE>
recorded, (ii) copies of any assignments certified as true copies by a
Responsible Officer of Seller where the originals have been submitted
for recording until such time as the originals are returned by the
public recording officer, or (iii) copies of any assignments certified
by the public recording office in any instances where the original
recorded assignments have been lost; and (D) either: (i) with respect
to all Loans which are secured by real estate Collateral, available
Minimum Documentation or Standard Documentation.

(c) In addition, concurrently with or prior to each
Incremental Purchase, Seller agrees to cause any UCC-1 financing statements,
UCC-3 assignments or other instruments necessary to perfect the ownership or
security interests granted and assigned by Seller to Buyer in the Loans and
other Property transferred and sold on the date of each such Incremental
Purchase (other than UCC-1 financing statements naming the Obligors under the
Loans as debtors) to be filed or recorded in all such appropriate places as are
required to protect Buyer's interest in such Loans and such other Property, and
to deliver a file-stamped copy of such financing statements or other evidence of
such filings to Buyer. Seller and Buyer agree that with respect to each Loan,
Related Document and item of Primary Collateral, Seller will make all filings
and take all such other actions necessary to perfect Buyer's first priority
security interest therein, and, with respect to each item of Collateral which is
not Primary Collateral, Seller will make all filings and take all such other
actions necessary to perfect Buyer's security interest therein to the same level
of priority enjoyed by Seller at the time of the Incremental Purchase of the
related Loan.

(d) It is the intention of the parties to this Agreement that
each conveyance of Seller's right, title and interest in and to the Property
pursuant to this Agreement shall constitute a purchase and sale and not a loan.
If, notwithstanding the foregoing, the conveyance of the Property to Buyer
hereunder is characterized by any third party as a pledge, the parties intend
that Seller shall be deemed hereunder to have granted to Buyer a first priority
perfected security interest in all of Seller's right, title and interest in, to
and under the Loans, the Notes, the related Collateral and Related Documents,
and all monies due or to become due with respect thereto after the applicable
Cut-Off Date, and that this Agreement shall constitute a security agreement
under applicable law.

(e) If Buyer determines that any document or documents
constituting a part of a Loan File are missing or defective (that is, mutilated,
damaged, defaced, incomplete, improperly dated, clearly forged or otherwise
physically altered) with respect to any Loan in any respect which materially and
adversely affects the interests of Buyer, then Buyer shall promptly notify
Seller, whereupon Seller shall have a period of 30 days, within which to correct
or cure any such defect. If any such material defect has not been corrected or
cured in all material respects as described

19
<PAGE>
below, notwithstanding any other provision of this Agreement, Seller will
repurchase the related Loan from Buyer at a price equal to the sum (without
duplication) of (i) the difference between (A) the Principal Balance of such
Loan and (B) the aggregate of the principal portion of the Monthly Payments then
received and retained by Buyer (after taking into account any payment of
principal made by the related Obligor on such day), plus (ii) an amount equal to
the interest accrued at the applicable Loan Interest Rate on such Repurchased
Loan through the last day of the Due Period during which such repurchase occurs,
to the extent such amount was not previously received during such Due Period
from the Obligor as a Monthly Payment (the "Repurchase Amount"). The Repurchase
Amount shall be paid by Seller to Buyer in immediately available funds by the
last day of the Due Period during which such repurchase obligation arises and,
upon receipt by Buyer of such deposit, Buyer shall release or cause to be
released to Seller the related Loan Files and shall execute and deliver or cause
to be executed and delivered such instruments of transfer or assignment of such
Loan, the security interest in the related Property, in each case without
recourse, representation or warranty, as Seller shall reasonably request (as
shall be prepared by and at the expense of Seller).

SECTION 2.01A Incremental Purchase. (a)Prior to the
Effectiveness Date, in accordance with the provisions of the Original Agreement,
Seller sold and Buyer purchased Loans and Property related thereto. Subject to
the terms and conditions hereof, Seller may at any time on and after the
Effectiveness Date and prior to February 28, 1998 (or such later date as is
approved by Buyer) sell to Buyer and Buyer shall purchase from Seller certain
identified Loans and Property related thereto. Each sale and purchase of Loans
under the Original Agreement and hereunder is referred to as an "Incremental
Purchase"; no Incremental Purchase shall be for a principal amount of less than
$1,000,000 (or such lesser amount as is approved by Buyer) (other than the final
Incremental Purchase which may be in such lesser amount as agreed to by Buyer)
and that Buyer shall not be obligated to make an Incremental Purchase (or any
portion thereof) to the extent such Purchase (or any portion thereof), together
with the aggregate Principal Balance of all Loans purchased in previous
Incremental Purchases, would exceed the Maximum Purchase Amount.

(b) Subject to the terms and conditions hereof (other than the
payment of any fees and expenses relating to such Incremental Purchase), Buyer
hereby agrees to make one or more Incremental Purchases of Rays' Loans having an
aggregate Principal Balance of not more than $2,000,000.

(c) Seller shall provide Buyer with written notice of its
intention to request an Incremental Purchase in the form of Exhibit G hereto no
later than ten (10) Business Days before each Incremental Purchase and shall
provide Buyer with at least five (5) Business Days to review the Loan Files
relating to each Incremental Purchase. Upon satisfaction of all terms and

20
<PAGE>
conditions contained herein, Buyer shall pay to Seller the Purchase Price of
each Incremental Purchase on the applicable Closing Date.

SECTION 2.02 Agreement to Accept Renewal Notes. (a) Subject to
the terms and conditions of this Agreement, including delivery of the Renewal
Notes and satisfaction of the other delivery and filing requirements set forth
in Section 2.01 hereof no later than five (5) Business Days before the
applicable Renewal Date, and upon at least 30 days' written notice from Seller,
Buyer agrees to accept on any Renewal Date such Renewal Loans as Seller shall
have caused Obligors of the related Prior Notes to execute and deliver.

(b) The parties to this Agreement intend that the conveyance
of each Renewal Loan and related Property by Seller and acceptance thereof by
Buyer shall constitute a purchase and sale and not a loan.

(c) If any document or documents constituting part of a Loan
File relating to a Renewal Loan are missing or defective as described in Section
2.01(e) hereof, Buyer shall have the same rights against Seller as provided in
such Section 2.01(e).

[End of Article II]

21
<PAGE>
ARTICLE III

CLOSING PROCEDURE; CONDITIONS TO PURCHASE
-----------------------------------------

SECTION 3.01 Payment. Buyer shall pay in immediately available
funds to Seller, on or before 12:00 noon Washington, D.C. time, on each Closing
Date, the sum of 100% of the Principal Balance of each Loan sold by Seller to
Buyer on such Closing Date (each such sum, collectively, the "Purchase Price").

SECTION 3.02 Acceptance - Renewal Loans. For each Loan with
provisions for renewal on a Renewal Date, no later than thirty (30) days before
the Renewal Date for such Loan, Seller shall provide Buyer with a notice that
(i) identifies the Loan and related Note by original dated date, face amount,
Loan Interest Rate, and name of Obligor, (ii) identifies the Renewal Date of
such Loan, and (iii) states whether all or any part of the Principal Balance of
such Loan will be renewed on the Renewal Date, and if the Loan is to be renewed,
the anticipated Renewal Balance. No later than five (5) Business Days before the
Renewal Date for any Loan to be renewed, Seller shall deliver to Buyer the
Renewal Note and other documents required by Section 2.01 hereof. On the
applicable Renewal Date for any Loan which is to be renewed, Buyer shall,
subject to satisfaction of the delivery requirements of Section 2.02 and the
conditions set out in Section 3.04, accept a Renewal Note from Seller (in lieu
of receiving the Renewal Balance) as payment in full of a portion of the
Outstanding Balance of the Prior Note equal to the Renewal Balance. In the event
that Seller has caused a Renewal Note to be executed but the conditions
precedent to acceptance thereof set out in Section 3.04 have not been satisfied
or waived by the Renewal Date, Seller shall on such Renewal Date repurchase such
Renewal Loan on the same terms as stated in Section 2.01(e).

SECTION 3.03 Effective Date for each Purchase. Each sale made
pursuant to Sections 2.01 and 2.01A of the Original Agreement was effective, and
each sale made pursuant to Sections 2.01 and 2.01A of this Agreement shall be
effective, and all right, title and interest in the Loans and the related
Property so sold passed or shall pass, as applicable, to Buyer at such time as
Buyer shall pay the Purchase Price in respect thereof due on the applicable
Closing Date.

SECTION 3.04 Buyer's Conditions Precedent to Acceptance. The
obligation of Buyer to pay the Purchase Price on each Closing Date and to accept
the Renewal Loans and Notes on any applicable Renewal Date is subject to the
fulfillment on such Closing Date or Renewal Date, as the case may be, of each of
the following conditions (relating only to the Loans purchased or renewed on
each such Date):

(a) Buyer shall have received the original Notes or Renewal
Notes, as the case may be, and such Notes shall have been

22
<PAGE>
duly endorsed by Seller without recourse or warranty except as provided herein,
and of the Related Documents;

(b) Buyer shall have received the original executed
counterpart of the loan agreement, security agreement and other Related
Documents with respect to each Loan (or, to the extent more than one original
counterpart exists, all original executed counterparts of such agreements and
Related Documents that are in the possession of Seller or any of its
Affiliates), and each such Document shall be in a form reasonably satisfactory
to Buyer;

(c) Buyer shall have received a duly executed Notice of
Assignment in the form annexed hereto as Exhibit B addressed to each Obligor of
a Note related to a Loan;

(d) With respect to Loans secured by mortgages on real
property, Buyer shall have received (A) either: (i) the original mortgage, with
evidence of recording thereon, (ii) a copy of the mortgage certified as a true
copy by a Responsible Officer of Seller where the original has been transmitted
for recording until such time as the original is returned by the public
recording officer or duly licensed title or escrow officer or (iii) a copy of
the mortgage certified by the public recording office in those instances where
the original recorded mortgage has been lost; (B) either: (i) the original
assignment of mortgage from Seller endorsed as follows: "National Consumer
Cooperative Bank," with evidence of recording thereon (provided, however, that
where permitted under the laws of the jurisdiction wherein the mortgaged
property is located, the assignment of mortgage may be effected by one or more
blanket assignments for Loans secured by mortgaged properties located in the
same county), or (ii) a copy of such assignment of mortgage certified as a true
copy by a Responsible Officer of Seller where the original has been transmitted
for recording (provided, however, that where the original assignment of mortgage
is not being delivered to Buyer, each such Responsible Officer may complete one
or more blanket certificates attaching copies of one or more assignments of
mortgage relating to the mortgages originated by Seller); and (C) either: (i)
originals of all intervening assignments, if any, showing a complete chain of
title from the originator to Seller, including warehousing assignments, with
evidence of recording thereon if such assignments were recorded, (ii) copies of
any assignments certified as true copies by a Responsible Officer of Seller
where the originals have been submitted for recording until such time as the
originals are returned by the public recording officer, or (iii) copies of any
assignments certified by the public recording office in any instances where the
original recorded assignments have been lost; and (D) with respect to all Loans
which are secured by real estate Collateral, all available Standard
Documentation or Minimum Documentation;

(e) Seller has, or on the applicable Closing Date will have,
(1) a first priority perfected security interest in each item of Primary
Collateral, free from any Lien, security

23
<PAGE>
interest, encumbrance or other right, title or interest of any Person, and (2) a
perfected security interest in each other item of Collateral, subject to the
prior Liens existing on, and identified to and approved by Buyer on the
applicable Closing Date. Seller shall, on the applicable Closing Date, transfer
its security interest in the Collateral subject to the rights of the holder of
title in and to the Collateral and of the Obligors in the Collateral under the
Loans, related Notes and Related Documents (and in the case of Collateral which
is not Primary Collateral, holders of prior Liens), and Seller, as agent for
Buyer, shall defend Buyer's security interest in and to the Collateral related
to any Loan against all claims and demands of all Persons at any time claiming
the same or any interest therein adverse to that of obligors or Buyer;

(f) On each applicable Closing Date, at least 90% the
Collateral securing each Loan must consist of Primary Collateral;

(g) Buyer shall have received Uniform Commercial Code
financing statements on Form UCC-3 executed by Seller as "Assignor" evidencing
the assignment to Buyer by Seller of all security interests in personal
property, arising in favor of Seller under the Related Documents, on the
Collateral relating to the Loans (other than security interests in Seller's
capital stock and patronage dividends) in form and content sufficient for filing
with the applicable location for central filing in the state where the related
form UCC-1 is filed;

(h) Buyer shall have received Assignments of Deeds of Trust
executed by Seller as "Assignor" evidencing the assignment to Buyer by Seller of
all security interests in real property arising in favor of Seller under the
Related Documents in form and content sufficient for filing in the real property
recording districts in which such real property is located;

(i) Buyer shall have received evidence reasonably satisfactory
to Buyer that the security interests arising in favor of Seller under the
Related Documents and the Collateral therein described (other than Seller's
capital stock and patronage dividends) have been duly perfected by the filing of
all such Uniform Commercial Code financing statements and the taking of all such
other or additional acts as may be necessary to create a valid and perfected
Lien enforceable against all third parties in all jurisdictions to secure each
Obligor's respective obligations to Seller under the Loans, related Notes and
Related Documents and evidence reasonably satisfactory to Buyer;

(j) Buyer shall have received evidence reasonably satisfactory
to Buyer that the security interests arising in its favor under this Agreement
in the Loans, related Notes, related Collateral, the Related Documents and the
proceeds thereof has been duly perfected by the filing of all such Uniform
Commercial Code financing statements and the taking of all such other or

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<PAGE>
additional acts as may be necessary to create a valid and perfected lien of
first priority enforceable against all third parties (other than prior lien
holders in the case of Collateral which is not Primary Collateral) in all
jurisdictions to secure all of Seller's obligations to Buyer;

(k) No Termination Event, and no event which with the giving
of notice or passage of time or both would constitute a Termination Event shall
have occurred and be continuing, and a Responsible Officer of Seller shall have
so certified to Buyer in writing;

(l) Each representation and warranty of Seller set forth in
Section 4.01, 4.02 or 4.03 shall be true and correct in all material respects,
and a duly Responsible Officer of Seller shall have so certified to Buyer in
writing in substantially the form of Exhibit H hereto;

(m) Each representation and warranty of Guarantor set forth in
Section 7.02 hereof shall be true and correct in all material respects, and a
duly Responsible Officer of Guarantor shall have so certified to Buyer in
writing in substantially the form of Exhibit I hereto;

(n) Buyer shall have received the revised or supplemented Loan
Schedule and other Schedules required by this Agreement and they shall be in a
form reasonably acceptable to Buyer;

(o) Buyer shall have received from Seller financial and other
documentation supporting Seller's calculation of Cash Flow Ratio and Collateral
Coverage Ratio with respect to each Obligor Group having an Aggregate Exposure
as of such Closing Date of $250,000 and greater;

(p) Seller shall have paid or provided for the payment of all
fees and expenses, including Buyer's out-of-pocket expenses and the fees of
Buyer's counsel, incurred in selling the Loans pursuant to this Agreement; and

(q) The Guaranty Amount shall not have been reduced to zero.

SECTION 3.05 Additional Delivery Requirements for
Effectiveness Date. The obligation of Buyer to perform any of its obligations
under this Agreement shall be further subject to satisfaction of each of the
following delivery requirements on the Effectiveness Date (or on the date
specified below) to the reasonable satisfaction of Buyer:

(a) Buyer shall have received amendments to the Uniform
Commercial Code financing statements filed in connection with the Original
Agreement on Form UCC-3 naming Buyer as "Secured Party" and executed by Seller
as "Debtor" covering the Loans and Related Property sold and to be sold under
this

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<PAGE>
Agreement (by reference to the Loan Schedules attached to this Agreement),
in form and content sufficient for filing in the appropriate offices in the
States of Oregon, Washington and California;

(b) Buyer shall have received an opinion of counsel for Seller
dated such date and in a form reasonably acceptable to Buyer;

(c) Buyer shall have received an opinion of Counsel for
Guarantor dated such date and in a form reasonably acceptable to Buyer;

(d) Buyer shall have received in form and substance reasonably
satisfactory to it a certified copy of a resolution adopted by the Board of
Directors of Seller, authorizing the execution, delivery and performance of this
Agreement, together with evidence of the authority and specimen signatures of
the persons who have signed this Agreement and such other evidence of corporate
authority as Buyer may reasonably require;

(e) Buyer shall have received in form and substance reasonably
satisfactory to it, a certified copy of a resolution adopted by the Board of
Directors of Guarantor, authorizing the execution, delivery and performance of
this Agreement;

(f) Buyer shall have received officers' certificates from
Seller and Guarantor in forms reasonably acceptable to Buyer;

(g) Buyer shall have received an executed counterpart of a
certain amended and restated Subordination Agreement in which United Grocers,
Inc. agrees to subordinate its interest in the Collateral (other than patronage
and stock) securing the Loans to the interest of Seller therein;

(h) Buyer shall have received Exhibit A containing information
relating to the corporate and "doing business" names of Seller and Guarantor in
the States of Oregon, Washington and California;

(i) Buyer shall have received duly executed counterparts of
the Holdback Loan Purchase Agreement and the Holdback Guaranty Agreement, each
dated as of the date hereof, together with opinions of counsel to United
Resources and United Grocers to the effect that such Agreements are the legal,
valid and binding obligations of United Resources and United Grocers, as
applicable enforceable against both such parties in accordance with their
respective terms;

(j) Buyer shall have received duly executed counterparts of
the New Origination Loan Agreement and the New Origination Guaranty Agreement,
each dated the date hereof, together with an opinion of counsel to United
Grocers to the effect that such Agreements are the legal, valid and binding

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<PAGE>
obligations of United Grocers, enforceable against United Grocers in accordance
with their respective terms;

(k) Buyer shall have received a Loan Schedule listing all of
the Loans sold by Seller and purchased by Buyer under the Original Agreement and
owned by Buyer as of the Effectiveness Date;

(l) Buyer shall have received certified copies of requests for
information or copies (Form UCC-11) (or a similar search report certified by
parties acceptable to Buyer) dated a date reasonably near the Effectiveness Date
listing all effective financing statements which name Seller or Guarantor as
debtor and which are filed in jurisdictions in which the filings were made
pursuant to item (a) above, together with copies of such financing statements
(none of which shall cover any Loans and Related Property);

(m) Buyer shall have received executed copies of the Credit
Agreement and Security Documents; and

(n) Buyer shall have received a receipt-stamped
acknowledgement copy of a Uniform Commercial Code financing statements on Form
UCC-1 naming Buyer as "Secured Party" (subordinate to Credit Providers) and
executed by Guarantor as "Debtor" covering the Guaranty Collateral, from the
appropriate offices in the State of Oregon.

SECTION 3.06. Seller's Conditions Precedent to Sale. The
obligation of Seller to sell Loans on each Closing Date shall be subject to the
fulfillment of each of the following conditions on such Closing Date to the
reasonable satisfaction of Seller:

(a) Seller shall have received the Purchase Price as provided
in Section 3.01; and

(b) Each representation and warranty of Buyer set forth in
Section 4.04 shall be true and correct in all material respects, and a duly
authorized officer of Buyer shall have so certified to Seller in writing.

[End of Article III]

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<PAGE>
ARTICLE IV

REPRESENTATIONS AND WARRANTIES
------------------------------

SECTION 4.01 Seller's corporate Representations and
Warranties. Seller represents and warrants to Buyer as of the Effectiveness
Date, as of each Closing Date and as of any Renewal Date as follows:

(a) Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Oregon, is doing
business only under the corporate and "doing business as" names listed in
Exhibit A hereto, and is qualified to do business in each other jurisdiction
where the conduct of its business or the ownership of its properties requires
such qualification, and has full corporate power, authority and legal right to
carry on its business as presently conducted, to own and operate its properties
and assets, to execute, deliver and perform this Agreement and to sell the Loans
and related Property.

(b) The execution, delivery and performance by Seller of this
Agreement and any assignment, the endorsement the Notes and the sale of any
Loans, related Notes and Related Documents and the security interest in the
related Collateral hereunder have been duly authorized by all necessary
corporate action of Seller, do not require any shareholder approval or the
approval or consent of any trustee or the holders of any Debt of Seller, except
such as have been obtained (certified copies thereof having been delivered to
Buyer), do not contravene any law, regulation, rule or order binding on it or
its Articles of Incorporation or Bylaws and do not contravene the provisions of
or constitute a default under any indenture, mortgage, contract or other
agreement or instrument to which Seller is a party or by which Seller or any of
the Loans, related Notes or Related Documents may be bound or affected.

(c) No Government Approval or filing or registration with any
Governmental Authority is required for the making and performance by Seller of
this Agreement or any assignment or the endorsement of the Notes or in
connection with the sale of the Loans and related Property contemplated hereby,
except such as have been heretofore obtained and are in full force and effect
(certified copies thereof having been delivered to Buyer).

(d) This Agreement has been duly executed and delivered by
Seller and constitutes, and any assignment and any endorsement of a Note when
duly executed and delivered will constitute, the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its terms.

(e) Except as described in Exhibit F hereto, there are no
actions, proceedings, investigations, or claims against or affecting Seller now
pending before any court, arbitrator or

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<PAGE>
other Governmental Authority (nor to the knowledge of Seller has any thereof
been threatened nor does any basis exist therefor) which if determined adversely
to Seller would be likely to (i) have a material adverse effect on the financial
condition or operations of Seller, (ii) have a material adverse effect on
Seller's ability to perform its obligations under this Agreement, or (iii)
impair or defeat the Buyer's security interest in any of the Property conveyed
pursuant to this Agreement. With respect to the litigation described in Exhibit
F hereto, a determination in such litigation that is materially adverse to
Seller or Guarantor would not have a material adverse effect on the financial
condition or operations of Seller or on Seller's ability to perform its
obligations under this Agreement, and would not impair the Buyer's security
interest in the Property.

(f) The consolidated balance sheet of Seller and its
Affiliates and Subsidiaries as at September 27, 1996, and the related statements
of income and retained earnings of Seller and its Affiliates and Subsidiaries
for the fiscal year then ended, copies of which have been furnished to Buyer,
fairly present the financial condition of Seller and its Affiliates and
Subsidiaries as at such date and the results of operations of Seller and its
Affiliates and Subsidiaries for the period then ended, all in accordance with
U.S. GAAP consistently applied. Since that date, there has been no material
adverse change in the financial condition or operations of Seller or any of its
Subsidiaries or Affiliates.

(g) Seller has good and marketable title to each of the
properties and assets reflected in its balance sheet referred to in Section
4.01(f) except such as have been since sold or otherwise disposed of in the
ordinary course of business or in accordance with Section 6.01(i) hereof.

(h) Neither Seller nor any of its Subsidiaries or Affiliates
is in material breach of or default under any agreement or agreements to which
it is a party or which are binding on it or any of its assets and which provide
for the payment of monies, the delivery of goods or the provision of services in
amounts or with values in the aggregate in excess of One Million Dollars
($1,000,000).

(i) The present value of all benefits vested under all Pension
Plans did not, as of the most recent valuation date of such Pension Plans,
exceed the value of the assets of the Pension Plans allocable to such vested
benefits by an amount which would represent a potential material liability of
Seller and its consolidated subsidiaries or affect materially the ability of
Seller to perform this Agreement; no Plan or trust created thereunder, or any
trustee or administrator thereof, has engaged in a "prohibited transaction" (as
such term is defined in Section 406 or Section 2003(a) of ERISA) which could
subject such Plan or any other Plan, any trust created thereunder, or any
trustee or administrator thereof, or any party dealing with any Plan or any such
trust to the tax or penalty on prohibited transactions

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<PAGE>
imposed by Section 502 or Section 2003(a) of ERISA; no Pension Plan or trust
created thereunder has been terminated, and there have been no "reportable
events" (as that term is defined in Section 4043 of ERISA) since the effective
date of ERISA; no Pension Plan or trust created thereunder has incurred any
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA) whether or not waived, since the effective date of ERISA; the required
allocations and contributions to Pension Plans will not violate Section 415 of
the Code; and Seller has no withdrawal liability to any trust created pursuant
to a multi-employer pension or benefit plan and would not be subject to any
withdrawal liability in excess of One Million Dollars ($1,000,000) if it
withdrew from any such plan or if its participation therein were otherwise
terminated.

(j) Uniform Commercial Code financing statements have been
duly filed in all places where filing is necessary and all other or additional
acts have been taken as are necessary to perfect Buyer's interests arising
hereunder and under the assignments in and to the Loans and related Property and
the lien created hereby constitutes a valid and perfected lien of first priority
in and to all of the Loans and related Property (other than in Collateral which
is not Primary Collateral, in which case Buyer has only such interest as Seller
had and disclosed to Buyer on the applicable Closing Date and other than
Seller's security interest in its capital stock and patronage dividends) and is
enforceable against all third parties (other than third parties whose interests
in Collateral which is not Primary Collateral are prior to Seller's interests
therein on the applicable Closing Date) in all jurisdictions as security for all
obligations of Seller to Buyer under this Agreement.

(k) Seller has good and marketable title to the Loans and
related Notes designated for sale to Buyer hereunder, the Related Documents and
the proceeds thereof, free and clear of all liens and encumbrances and Seller
has not transferred in any manner whatever to any Person (other than Buyer) and
has not created or permitted any lien, pledge, charge, security interest,
ownership interest, participation interest or any other interest of any nature
whatever (other than in favor of Buyer) in respect of the Loans, the related
Notes, the Related Documents or the proceeds thereof.

(l) Seller's chief executive offices and the offices where
such Seller keeps records concerning the Loans and related Property are located
at 6433 S.E. Lake Road, Portland, Oregon or such other location to which such
offices are moved pursuant to Section 6.01(m) hereof.

(m) This Agreement, the financial statements referred to in
Section 4.01(f) and all other instruments, documents, certificates and
statements furnished to Buyer by Seller, taken as a whole, do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements contained herein or therein not misleading.

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<PAGE>
(n) To the best of Seller's knowledge, all properties of
Seller and each Subsidiary of Seller and Seller's and such Subsidiary's use
thereof comply in all material respects with zoning and use restrictions and
with applicable laws and regulations relating to the environment including,
without limitation, the Environmental Laws. Without limiting the foregoing to
the best of Seller's knowledge, no Hazardous Substances have been generated,
manufactured, refined, transferred, stored, treated, transported, handled,
managed, discharged or disposed of, whether by Seller or, by any other Person
onto, upon, over, beneath or from any real property owned by Seller or other
premises owned, leased, operated, used or held at any time by Seller
(collectively, the "Premises") or any of the ground water beneath the Premises
which in any fashion might result in the Buyer incurring or suffering at any
time any loss, liability, damages, or obligations including liability for
cleanup and recovery costs and expenses. To the best of Seller's knowledge,
there are no past or present events, conditions, circumstances, activities,
practices, incidents or actions at or in connection with the Premises or any of
the ground water beneath the Premises which could reasonably be expected to
interfere with or prevent continued compliance with any laws or regulations
pertaining to underground storage tanks or any other Environmental Laws or give
rise to any legal liability or otherwise from the basis of any claim, action,
suit, proceedings, hearing or investigation against or affecting Seller under
the Environmental Laws. To the best of Seller's knowledge, there has been no
disposal from the Premises by Seller or any other Person directly or indirectly
of any Hazardous Substances to, on or in any site currently listed or formally
proposed to be listed on the National Priorities List under Superfund or any
site listed on any priority cleanup list compiled by any Governmental Authority.
Seller will not be (and to the best of Seller's knowledge, has not been)
involved in any operations at or near the Premises which operations when
conducted in accordance with applicable law could lead to: (a) the imposition of
liability under Environmental Laws on borrower or any subsequent owner of the
Premises or (b) the creation of a Lien on the Premises under Environmental Laws
or under any similar laws or regulations.

(o) Seller has filed all tax returns and reports required of
it, has paid all taxes which are due and payable, and has provided adequate
reserves for payment of any tax the payment of which is being contested. The
charges, accruals and reserves on the books of Seller and each Subsidiary of
Seller in respect of taxes for all fiscal periods to date are accurate. There
are no questions or disputes between Seller or any of its Subsidiaries and any
Governmental Authority with respect to any taxes except as disclosed in the
balance sheet referred to in Section 4.01(f) hereof or otherwise disclosed to
the Buyer in writing prior to the date of this Agreement.

(p) Neither Seller nor any Subsidiary of Seller is in
violation of or subject to any contingent liability on account of

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<PAGE>
any laws, statutes, rules, regulations and orders of any Governmental Authority.
Neither Seller nor any Subsidiary of Seller is in material breach of or default
under any agreement of which it is a party or which is binding on it or any of
its assets.

(q) Neither Seller nor any Subsidiary of Seller is 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
Purchase Price 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
an Federal Reserve Regulation. Seller will furnish to Buyer on request a
statement conforming with the requirements of Regulation U.

(r) Seller and each of its Subsidiaries owns or possesses all
the patents, mask works, trade secrets, 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 Buyer prior
to the date of this Agreement.

(s) Seller is "eligible" to borrow from NCB under the
provisions of the Bank Act.

SECTION 4.02 Seller's Closing Date Representations and
Warranties with respect to Loans. Seller represents and warrants to Buyer as of
each Closing Date with respect to Loans transferred and sold on such Closing
Date as follows:

(a) The information with respect to each Loan set forth in the
Loan Schedule, together with any documentation supporting such information, is
true and correct;

(b) With respect to each Loan, there exists only one original
Note. Such original Note and all of the other original or certified
documentation set forth in Sections 2.01 and 3.03 (including all material
documents related thereto) have been or will be delivered to Buyer on the
applicable Closing Date;

(c) Each Loan was originated in the United States and Monthly
Payments on such Loan are payable in U.S. Dollars by an Obligor domiciled in the
United States;

(d) Each Note will have a Loan Interest Rate that is either
(i) a fixed rate of at least 7.5% per annum (except for those Loans listed on
Schedule II hereto (as the same may be supplemented upon subsequent Incremental
Purchases) which shall have fixed Loan Interest Rates of at least 5.99% or (ii)
a

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<PAGE>
variable rate based on the Prime Rate, adjusted either monthly or semi-annually,
plus at least 100 basis points;

(e) Immediately prior to the transfer and assignment herein
contemplated, Seller held good and indefeasible title to, and was the sole owner
of, each Loan conveyed by Seller, subject to no liens, charges, mortgages,
encumbrances or rights of others or other liens which will be released
simultaneously with such transfer and assignment; and immediately upon the
transfer and assignment herein contemplated, Buyer will hold good and
indefeasible title, to, and be the sole owner of, each Loan subject to no liens,
charges, mortgages, encumbrances or rights of others;

(f) Seller shall have received at least three (3) (or in the
case of a Full Recourse Loan, twelve (12)) scheduled principal payments before
the applicable Cut-Off Date;

(g) As of the applicable Cut-Off Date, no Loan is delinquent
(after giving effect to any applicable grace period) in payment and, as of the
applicable Closing Date, no Loan shall have had an individual payment delinquent
(after giving effect to any applicable grace period) for periods in excess of 31
days on 2 or more separate occasions;

(h) The Loan is not subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of the related Note, Related Document or any
related Collateral, or the exercise of any right thereunder, render either the
related Note, Related Document or any related Collateral unenforceable in whole
or in part, or subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury, and so such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;

(i) Each Loan at the time it was made complied and, as of the
applicable Closing Date, complied in all material respects with applicable state
and federal laws and regulations, including, without limitation, usury, equal
credit opportunity, disclosure and recording laws;

(j) The Loans were originated by Seller in accordance with the
underwriting criteria set forth in the Credit and Collection Policy;

(k) Except as noted on Schedule II, the Notes executed by any
one Obligor (or other Person directly or indirectly controlling, controlled by
or under common control with, such Obligor), together with any other promissory
notes or evidences of indebtedness executed by such Obligors for the benefit of
Seller, shall have an aggregate outstanding balance of less than $2,000,000;

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<PAGE>
(l) At least one of the Obligors with respect to each Loan (i)
is a member in good standing of United Grocers and (ii) to the best of Seller's
knowledge, shall have provided to Seller complete and accurate information
relating to Obligor's financial condition and shall have suffered no material
adverse changes in its financial condition or otherwise since the date the Loan
was originated;

(m) Except for any Loan identified on Schedule II (as the same
may be supplemented upon subsequent Incremental Purchases) hereof, each Loan has
a remaining amortization period of no less than 12 months and no greater than
117 months;

(n) The Note related to each Loan provides that the principal
be amortized monthly over the term of such Note, with either (i) level monthly
payments of principal or (ii) level monthly payments of principal and interest,
provided that, in the case of a Loan with renewal provisions, a balloon payment
on such Renewal Date is permissible;

(o) Each Loan, related Note, related Collateral and Related
Documents pursuant to which Collateral is pledged to Seller is the legal, valid
and binding obligation of the Obligor thereof and is enforceable in accordance
with its terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law), none of
which will prevent the ultimate realization of the security provided by the
Collateral or Related Document, and all parties to each Loan had full legal
capacity to execute all Related Documents and convey the property therein
purported to be conveyed;

(p) The terms of the Loan, related Note and each Related
Document pursuant to which Collateral was pledged have not been impaired,
altered or modified in any respect, except by written instrument which has been
recorded, if necessary, to protect the interest of Buyer and which has been
delivered to Buyer;

(q) The proceeds of the Loan have been fully disbursed, and
there is no obligation on the part of Seller to make future advances thereunder.
Any and all requirements as to disbursements of any escrow funds therefor have
been complied with. All costs, fees and expenses incurred in making or closing
or recording the Loans were paid;

(r) Except for any Obligor identified on Schedule II (as the
same may be supplemented upon subsequent Incremental Purchases), the Obligor
with respect to each Loan and each other member of its Obligor Group has a
positive net worth as accounted for under U.S. GAAP, consistently applied, and
has no present intention to seek relief under the federal bankruptcy laws;

34
<PAGE>
(s) There is no default, breach, violation or event of
acceleration existing under the Loan, related Note or Related Document and no
event which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or event of
acceleration, and Seller has not waived any such default, breach, violation or
event of acceleration;

(t) The Loan was not selected for inclusion under this
Agreement from Seller's portfolio of comparable loans on any basis which would
have a material adverse effect on Buyer;

(u) The Obligor and/or the Loan Guarantor with respect to each
Loan and related Property is personally liable for the payment and performance
of its obligations under such Loan. Pursuant to the terms of each Loan, each of
the Obligor and the Loan Guarantor thereunder is absolutely required to make all
payments and perform all obligations due pursuant to such Loan without
abatement, deferment or defense of any kind or for any reason (except as the
same may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws of general application relating to or affecting creditors rights
and by general principles of equity);

(v) As of the applicable Closing Date, insofar as facts are
within Seller's actual knowledge, the Collateral covered by or securing the
obligations under each Loan is insured against loss by fire and such other
hazards as are customary for personal property of the same or similar type, such
insurance being in an amount not less than the full replacement value of such
personal property subject to customary deductibles and Buyer is designated as
loss payee under such policies;

(w) Each Loan requires each of the Obligor and Loan Guarantor
thereunder at its own costs and expense to maintain the Collateral pledged to
secure the related Loan in good repair, condition and working order, and to the
best knowledge of Seller, each Obligor and Loan Guarantor under a Loan is
currently in compliance with this requirement;

(x) As of the applicable Closing Date, at least 90% of the
value of the Collateral securing each Loan consists of Primary Collateral, and
at least a portion of the Primary Collateral consists of the inventory,
furniture, fixtures and equipment in the stores owned or leased by the related
Obligor. All Collateral securing any Loan is located in the United States;

(y) Seller has, or on the applicable Closing Date will have,
(1) a first priority perfected security interest in each item of Primary
Collateral, free from any lien, security interest, encumbrance or other right,
title or interest of any Person, and (2) a perfected security interest in each
other item of Collateral, subject to the prior liens, security interests and
encumbrances existing on, and identified to and approved by Buyer on the
applicable Closing Date. Seller shall, on the applicable

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<PAGE>
Closing Date, transfer its security interest in the Collateral subject however
to the rights of the holder of title in and to the Collateral and of the
Obligors in the Collateral pledged under the Related Documents (and, in the case
of Collateral which is not Primary Collateral, holders of prior liens), and
Seller, as agent for Buyer, shall defend the Buyer's security interest in and to
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest therein adverse to that of the Obligors or Buyer.

(z) Either (i) the Obligor and Loan Guarantor has, under the
terms of each Loan, consented to a sale and assignment of the Loan, the related
Note and Related Documents and the sale or grant of a security interest in and
to the Loan and the Collateral relating thereto, or (ii) none of the Loan, the
related Note or any Related Documents requires the consent of approval of notice
to the Obligor or Loan Guarantor with respect to the assignment and transfer by
Seller of Seller's right, title and interest in and to the Loan, the related
Note, any Related Document and Collateral;

(aa) The Notes and Related Documents delivered to Buyer on the
applicable Closing Date are true, correct, and complete original counterparts of
all instruments and documents evidencing or in any way relating to the Loan and
related indebtedness referred to therein; except as approved by Buyer, such
Notes and Related Documents are in substantially the form of the documents
previously delivered to Buyer in connection with the execution of the Original
Agreement; except as included with the instruments and documents so delivered,
such Notes and such Related Documents have not been amended; and each such Note
and Related Document to which Obligor or Loan Guarantor is a party bears the
original signature of such Obligor and Loan Guarantor;

(bb) Uniform Commercial Code financing statements have been
duly filed in all places where filing is necessary, and all other or additional
acts have been taken as are necessary to perfect Seller's security interests
arising pursuant to the Related Documents in the Collateral and such security
interests constitute a valid and perfected lien in and to all of the Collateral
of first priority (subject to no prior or equal liens or interests) in the case
of all Primary Collateral and of the same level of priority as that enjoyed by
Seller on the applicable Closing Date in the case of all other Collateral, and
will be enforceable against all third parties in all jurisdictions as security
for the respective obligations of Obligors to Seller under their respective
Notes and Related Documents;

(cc) Seller has heretofore caused all copies of the Loans,
related Notes and Related Documents in its possession to be separately
identified and distinguished from Seller's other loans, and on the applicable
Closing Date, Seller will cause each copy of each Note, related Collateral and
Related Document in its possession to be identified with an appropriate legend
clearly

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disclosing the fact that such Loan, the related Notes, Related Documents and
Seller's security interest in the related Collateral have been sold and assigned
to Buyer and Buyer is the owner thereof, and any original copies of any Note,
related Collateral or Related Document coming into the possession of Seller will
be delivered to Buyer;

(dd) All Loans specified on Schedule III (as the same may be
supplemented upon subsequent Incremental Purchases) are secured by mortgages on
each property;

(ee) With respect to any Loan secured by a mortgage on real
property, each mortgage is a valid and subsisting lien of record on the
mortgaged property subject only to a first mortgage lien on such mortgaged
property previously disclosed to Buyer and subject in all cases to such
exceptions that are generally acceptable to prudent and experienced lenders in
connection with their regular commercial lending activities, and such other
exceptions to which similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect the benefits
of the security intended to be provided by such mortgage;

(ff) With respect to each Loan secured by a mortgage on real
property, each original mortgage was recorded, and all subsequent assignments of
the original mortgage have been recorded in the appropriate jurisdictions
wherein such recordation is necessary to perfect the lien thereof as against
creditors of Seller;

(gg) With respect to each Loan secured by a mortgage on real
property, any related mortgage contains customary and enforceable provisions
which render the rights and remedies of the holder thereof adequate for the
realization against the mortgaged property of the benefits of the security,
including (i) in the case of a mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial foreclosure;

(hh) With respect to each Loan secured by a mortgage on real
property, (i) there are no material defaults in complying with the terms of any
applicable mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable; (ii)
there is no proceeding pending or threatened for the total or partial
condemnation of any related mortgaged property, nor is such a proceeding
currently occurring, and such property is undamaged by waste, fire, earthquake
or earth movement, windstorm, flood, tornado or other casualty, so as to affect
adversely the value of such mortgaged property as security for the Loan or the
use for which the premises were intended; and (iii) at the time of origination
of Loan, and to the best of Seller's knowledge, and based

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primarily on the related Phase I environmental survey or environmental
questionnaire, as the case may be, is, as of the applicable Cut-Off Date, free
of contamination from toxic substances or hazardous wastes;

(ii) Except for any Loan identified on Schedule II (as the
same may be supplemented upon subsequent Incremental Purchases) hereof, (i)
neither the Obligor nor any member of its Obligor Group shall have defaulted on
any obligation (including an open account) to Seller or any Affiliate or
Subsidiary of Seller and (ii) the place of business of Obligor or any member of
its Obligor Group cannot have been the location of a failed grocery store
(whether or not owned or managed by Obligor or any member of its Obligor Group);

(jj) The classification of Loans as either Preferred Loans or
Standard Loans or Full Recourse Loans (as specified in the Loan Schedule) is
true and correct and complies with the criteria stated in the definitions of
such terms herein;

(kk) As of the applicable Closing Date, the aggregate
Principal Balance of all Loans (including Loans purchased on previous Closing
Dates, if any) classified as Preferred Loans is at least equal to 51% of the
Principal Balance of all Loans as of the related Closing Date and the aggregate
Principal Balance of all Loans classified as Full Recourse Loans is less than or
equal to 25% of the Principal Balance of all Loans as of the related Closing
Date.

(ll) The Aggregate Exposure listed with respect to each Loan
in the Loan Schedule is true and correct;

(mm) Except for those Loans specified on Schedule II (as the
same may be supplemented upon subsequent Incremental Purchases) hereto, the
purpose for which the Loans were made was not to provide term financing for open
account balances that were (or would otherwise have been) delinquent, and no
Obligor or other member of its Obligor Group has ever been provided term
financing for open account balances that were (or would otherwise have been)
delinquent;

(nn) Except for those Loans specified on Schedule II (as the
same may be supplemented upon subsequent Incremental Purchases) hereto, the
Loans are cross-collateralized with other Loans and Collateral made, pledged or
guaranteed by any member of the related Obligor Group; and

(oo) With respect to each Loan secured by real estate
Collateral having a value of 100%, or more than 10%, of the Principal Balance of
such Loan on the applicable Closing Date, either (1) the Collateral Coverage
Ratio for the related Obligor Group, calculated for the purpose of making the
representation in this Section 4.02(oo) by excluding the value of the real
estate Collateral having Minimum Documentation, is at least equal to 100% or (2)
the Loan remains classified as a Preferred Loan even

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if the Collateral Coverage Ratio for the related Obligor Group is calculated by
excluding the value of real estate Collateral having Minimum Documentation.

SECTION 4.03 Seller's Renewal Date Representations and
Warranties. Seller represents and warrants to Buyer as of each Renewal Date on
which Seller has designated any Renewal Note for acceptance as follows:

(a) As of the applicable Renewal Date, all applicable
representations and warranties in Section 4.02 hereof are confirmed as to such
Renewal Loan.

(b) As of the applicable Renewal Date, each Obligor of the
applicable Renewal Loan is not in default of its payment obligations under the
Prior Note or under the Related Documents, and is not in default of its
nonmonetary obligations under such Note or Related Documents.

(c) As of the applicable Renewal Date, no event has occurred
and is continuing which would permit Seller to accelerate the maturity of any
Obligor's obligations under the applicable Renewal Loan or under the Prior Note
or the Related Documents.

(d) The Notes and Related Documents delivered to Buyer on or
prior to the applicable Renewal Date are true, correct, and complete original
counterparts of all instruments and documents evidencing or in any way relating
to the Loan and the related Indebtedness referred to therein; except as included
with the instruments and documents so delivered, such Notes and Related
Documents have not been amended; and each such Note and each such Related
Document to which an Obligor or Loan Guarantor is a party bears the original
signature of the Obligor or Loan Guarantor.

(e) The Loans and Notes designated by Seller as Renewal Loans
and Notes together with the Related Documents to which Obligors or Loan
Guarantors are parties have been duly executed by their respective Obligors or
Loan Guarantors and constitute the legal, valid and binding obligations of their
respective Obligors and Loan Guarantors enforceable against such Obligors and
Loan Guarantors in accordance with their respective terms.

(f) Each amount identified in a notice provided pursuant to
the terms of Section 3.02 as the "anticipated Renewal Balance" correctly
identifies the amount of the outstanding Principal Balance evidenced by the Note
to be accepted as of such Renewal Date and there are no offsets or defenses to
the payment of such amount that may be asserted against Seller either by way of
defense or counterclaim.

(g) Uniform Commercial Code financing statements have been
duly filed in all places where filing is necessary, and all other or additional
acts have been taken as are necessary to

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<PAGE>
perfect Seller's security interests arising pursuant to the Related Documents in
the Collateral and such security interests constitute a valid and perfected lien
in and to all of the Collateral of first priority (subject to no prior or equal
liens or interests) in the case of all Primary Collateral and of the same level
of priority as that enjoyed by Seller on the Closing Date on which the Loan was
first sold and assigned hereunder in the case of all other Collateral, and will
be enforceable against all third parties in all jurisdictions as security for
the respective obligations of Obligors to Seller under their respective Notes
and Related Documents.

(h) No Renewal Loan, related Renewal Note or any Related
Document, alone or in connection with Seller's prior course of conduct,
expressly or impliedly requires Seller or any other Person to make additional
advances thereunder.

(i) The Note related to the Renewal Note provides for full
amortization over its remaining term to maturity.

SECTION 4.04 Buyer's Representations and Warranties. Buyer
represents and warrants to Seller as follows:

(a) Buyer is a financial institution duly organized, validly
existing and in good standing under the laws of the United States of America,
and has full corporate power, authority and legal right to execute, deliver and
perform this Agreement and to purchase the Loans and related Property.

(b) Execution, delivery and performance by Buyer of this
Agreement and the purchase of the Loans and related Property hereunder have been
duly authorized by all necessary corporate action of Buyer, do not require any
shareholder approval or the approval or consent of any trustee or the holders of
any Indebtedness of Buyer, do not contravene any law, regulation, rule or order
binding on it or its Articles of Association or Bylaws and do not contravene the
provisions of or constitute a default under any indenture, mortgage, contract or
other agreement or instrument to which Buyer is a party or by which Buyer or any
of its properties may be bound or affected.

(c) No Government Approval or filing or registration with any
Governmental Authority is required for the making and performance by Buyer of
this Agreement or in connection with any of the transactions contemplated
hereby.

(d) This Agreement has been duly executed and delivered by
Buyer and constitutes the legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms.

SECTION 4.05 Repurchase Upon Breach of Certain Representations
and Warranties. (a) The representations and warranties and agreements of Seller
set forth in Sections 4.01, 4.02 and 4.03 with respect to Seller and each Loan
and related

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<PAGE>
Property shall continue so long as such Loan remains outstanding. Upon discovery
by either Seller or Buyer that any of such representations or warranties was
incorrect as of the time made, the party making such discovery shall give prompt
notice to the other party. In the event any defect, misrepresentation or
omission materially and adversely affects the interest of Buyer, Seller shall
eliminate or cure the circumstance or condition causing the defect within 10
days of the discovery thereof or, repurchase such Loan and the related Property.

(b) Any such repurchase of a Loan and the related Property by
Seller shall be accomplished in the manner set forth in Section 2.01(e) and at a
price equal to the Repurchase Amount.

[End of Article IV]

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ARTICLE V

SERVICING AND COLLECTIONS
-------------------------

SECTION 5.01 Servicing and Collections. Buyer will perform all
servicing functions with respect to the Loans purchased prior to the
Effectiveness Date from the Effectiveness Date and with respect to the Loans
purchased on and after the Effectiveness Date from their respective Closing
Dates hereunder, all in compliance with all applicable laws. Each of United
Resources and United Grocers agrees that if Buyer so requests, it will cooperate
with Buyer in communicating with Obligors and assisting Buyer in collecting on
delinquent and Defaulted Loans.

SECTION 5.02 Documentation and Servicing; Maintenance of
System and Lien Priority.

(a) Buyer shall use the same diligence and practices in
documenting, servicing and collecting the Loans, the related Collateral and the
Related Documents as it uses in documenting, servicing and collecting all other
indebtedness evidenced by notes and related documents held for its own account
and, in any event, shall endeavor to collect or cause to be collected from each
Obligor the amounts as and when due and owing under such Obligor's Note and
Related Documents. In performing its duties hereunder, Buyer shall take such
actions with respect to the Loans, Notes and Related Documents as, in its
reasonable business judgment, it may deem advisable to maintain or enhance
receipt of timely Collections thereunder. In addition, Buyer shall use its best
efforts to collect on any Defaulted Loan so as to maximize Liquidation Proceeds
and notwithstanding that a Guaranty Payment may have been received with respect
to a Defaulted Loan, shall diligently pursue all efforts to collect on such
Loan, including by liquidating Collateral and by seeking to collect any
deficiency against the related Obligor.

(b) Buyer shall arrange and maintain with respect to the
Loans, related Notes and Related Documents, data processing, accounting and
related services adequate for the effective and timely performance of its
servicing obligations hereunder in accordance with good business practices and
in compliance with all applicable federal, state and local laws and regulations.

(c) Buyer agrees to take all actions, including lien searches
and continuation statement filings, necessary or desirable to ensure that the
liens arising pursuant to the Related Documents and securing repayment of any
Obligor's indebtedness evidenced by a related Note will be maintained as
continuously perfected first priority (except in the case of Collateral which is
not Primary Collateral, in which event Buyer shall take all actions to maintain
the priority sold and assigned hereunder) security interests (except as
otherwise approved by Buyer) in all applicable jurisdictions.

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<PAGE>
SECTION 5.03 Lockboxes. Seller hereby agrees (i) to instruct
all Obligors to cause all Monthly Payments, Payaheads and Principal Prepayments
on account of Loans to be mailed directly to a Permitted Lockbox; and (ii) to
use its best effort not to suffer or permit any funds other than such Monthly
Payments, Payaheads and Principal Prepayments to be mailed to Permitted
Lockboxes.

SECTION 5.04 Payment of Guaranty Fees; Anticipated Payments
and Other Amounts. (a) On each Payment Date, Buyer shall remit to Guarantor the
Guaranty Fee; provided, however, that if there shall have occurred and be
continuing a Termination Event (other than a Termination Event solely under
Section 9.01(a)), Buyer shall not be required to remit the Guaranty Fee to the
Guarantor.

(b) Buyer shall be entitled to retain on each Payment Date
from amounts received as (i) Collections and other Available Funds (other than
Guaranty Payments) during the related Due Period and (ii) Guaranty Payments on
or before such Payment Date, the Anticipated Payment; provided, however, that
upon the occurrence and continuation of a Termination Event (other than a
Termination Event solely under Section 9.01(a)), Buyer shall be entitled to
retain all Collections and other Available Funds. In addition, Buyer shall at
all times be entitled to retain late fees and penalties received with respect to
Loans.

(1) As used herein "Anticipated Payment" means for
any Payment Date the sum of, for each Loan, (a) the principal portion
of the Monthly Payment actually received during the related Due Period,
other than the portion of the Principal Balance of a Prior Note which,
at the time it became due, constituted the Renewal Balance under a
Renewal Note; (b) any Principal Prepayment, Payahead, Insurance
Proceeds and Net Liquidation Proceeds actually received during the
related Due Period; (c) the principal portion of any Guaranty Payment
or Repurchase Proceeds with respect to the related Due Period; and (d)
the Monthly Interest Amount for the related Interest Accrual Period.

(2) As used herein, "Monthly Interest Amount" on any
Payment Date shall mean an amount equal to the sum of, for each Loan
the product of (i) the Principal Balance of such Loan during the
related Due Period, times (ii) the Applicable Rate times (iii) a
fraction, the denominator of which is three hundred sixty (360), and
the numerator of which is the actual number of days in the related
Interest Accrual Period.

SECTION 5.05 Applicable Rate. As used in this Agreement,
"Applicable Rate" shall be determined as follows. The Applicable Rate shall be
established as of each LIBOR

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<PAGE>
Determination Date and shall be applicable for the next succeeding Interest
Accrual Period without regard to changes thereafter occurring during such
Interest Accrual Period in the principal amounts outstanding under the Notes, in
the Principal Balance of Loans purchased, or in LIBOR. Buyer shall, after the
determination of the Applicable Rate on each LIBOR Determination Date, notify
Seller and Guarantor of such Applicable Rate; provided, however, that any
failure of Buyer to give such notice shall not affect Seller's or Guarantor's
obligations hereunder.

The Applicable Rate for each Loan shall be computed and
applied on the basis of a year of three hundred sixty (360) days for the actual
number of days occurring in the applicable Interest Accrual Period. For each
Interest Accrual Period, the Applicable Rate shall mean an interest rate per
annum equal to the sum of (a) 150 basis points and (b) LIBOR in effect on the
applicable LIBOR Determination Date. For purposes hereof, Buyer will determine
LIBOR by 12:00 noon, Eastern Standard Time, on each LIBOR Determination Date on
the basis of quotations provided by four Reference Banks as of 11:00 A.M.
(London time) on such LIBOR Determination Date as such quotations appear on the
display designated as page "LIBO" on the appropriate display on the Bloomberg
Financial Markets System (or such other page as may replace the LIBO page on
that service for the purpose of displaying London interbank offered rates of
major banks). LIBOR as determined by Buyer is the arithmetic mean of such
quotations (rounded, if necessary, to the nearest whole multiple of 0.0625% per
annum). If on any LIBOR Determination Date at least two but fewer than all of
the Reference Banks provide quotations, LIBOR will be determined in accordance
with the provisions set forth above on the basis of the offered quotations of
those Reference Banks providing such quotations. If on the LIBOR Determination
Date only one or none of the Reference Banks provides such offered quotations,
LIBOR will be: (i) the rate per annum (rounded, as aforesaid) that Buyer
determines to be either (x) the arithmetic mean of the offered quotations that
leading banks in the City of New York selected by Buyer are quoting at or about
11:00 A.M. London time on the relevant LIBOR Determination Date for one month
Dollar deposits to the principal London office of each of the Reference Banks or
those of them (being at least two in number) to which such offered quotations
are, in the opinion of Buyer, being so quoted or (y) in the event that Buyer can
determine no such arithmetic mean, the arithmetic mean of the offered quotations
that leading banks in the City of New York selected by Buyer are quoting at or
about 11:00 A.M. London time on such LIBOR Determination Date to leading
European banks for one month Dollar deposits; or (ii) if the banks selected as
aforesaid by Buyer are not quoting as described in clause (i) above, LIBOR for
such Interest Accrual Period will be LIBOR as determined on the previous LIBOR
Determination Date. "Reference Banks" shall mean four major banks in the London
interbank market selected by Buyer.

SECTION 5.06 Computation and Payment of Guaranty Fees. On each
Payment Date, Buyer shall remit to the Guarantor

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<PAGE>
as a guaranty fee (the "Guaranty Fee"), the amount, if any, by which (a) the
amount equal to the sum of total Collections and other Available Funds received
during, or attributable to, the related Due Period exceeds (b) the sum of the
Anticipated Payment. Upon the occurrence and continuation of a Termination Event
(other than a Termination Event solely under Section 9.01(a)), the Guarantor
shall no longer be entitled to receive the Guaranty Fee.

SECTION 5.07 Access to Certain Documentation and Certain
Information Regarding the Loans. Seller will provide to Buyer access to the
documentation in its possession regarding the Loans, such access being afforded
without charge but only during normal business hours at the offices of Seller or
its designee or agent, as designated by Seller.

[End of Article V]

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<PAGE>
ARTICLE VI

SELLER'S COVENANTS
------------------

SECTION 6.01 Covenants. At all times prior to the later of (i)
the Termination Date or (ii) the date on which all obligations of Seller and
Guarantor under this Agreement have been performed in full, Seller agrees to do
all of the following unless Buyer shall otherwise consent in writing.

(a) Preservation of Corporate Existence, Etc. To preserve and
maintain its corporate existence, rights, and privileges in the jurisdiction of
its incorporation and to qualify and remain qualified as a foreign corporation
in each jurisdiction where such qualification is necessary or advisable in view
of the business and operations of Seller or the ownership of its properties.

(b) Compliance with Laws. To comply in all material respects
with all laws, regulations, rules and orders of Governmental Authorities
applicable to Seller or 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 Buyer for the payment thereof in the event the contest is
determined adversely to the Seller.

(c) Other Obligations. To pay and discharge before the same
shall become delinquent (after giving effect to all applicable grace periods)
all Debt, taxes and other obligations for which Seller is liable or to which its
income or property is subject and all claims for labor and materials or supplies
which, if unpaid, might become by law a Lien upon the assets of Seller except
any thereof whose validity or amount is being contested in good faith by Seller
in appropriate proceedings upon stay of execution of the enforcement thereof,
with provision having been made to the satisfaction of Buyer for the payment
thereof in the event the contest is determined adversely to the Seller, and
except other Debt, taxes and other obligations which, in the aggregate do not
exceed One Million Dollars ($1,000,000); provided, however, the covenant
included in this Section 6.01(c) shall not extend to any obligation of Seller
identified in Section 6.01(k) or 9.01(f).

(d) Visitation; Records. At any reasonable time and from time
to time, to permit Buyer to examine and make copies of and abstracts from
Seller's records and books of accounts relating to the Loans, the related Notes
and Related Documents and to visit the properties of Seller and to discuss the
affairs, finances and accounts of Seller as they relate to the transactions
contemplated by this Agreement with any of its officers. Seller will keep
adequate records and books of accounts in which complete entries will be made,
in accordance

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<PAGE>
with U.S. GAAP, reflecting all financial transactions of Seller as they relate
to the transactions contemplated by this Agreement. Seller's records relating to
Loans will be clearly marked with a legend to the effect that such records
pertain to Loans sold to Buyer.

(e) Financial Information. To deliver to Buyer (i) as soon as
available and in any event within one hundred (100) days after the end of each
fiscal year of Seller the balance sheet of Seller as of the end of such fiscal
year (which may be on a consolidating basis with the financial statements of
United Grocers) and the related statements of income and retained earnings and
statement of changes in the financial position of Seller for such year,
accompanied by the audit report thereon by independent certified public
accountants (which report shall be prepared in accordance with U.S. GAAP and
shall not be qualified by reason of restricted or limited examination of any
material portion of Seller's records and shall contain no disclaimer of opinion
or adverse opinion); (ii) as soon as available and in any event within fifty
(50) days after the end of each fiscal quarter of Seller the unaudited balance
sheet and statement of income and retained earnings of Seller as of the end of
such fiscal quarter (including the fiscal year to the end of such fiscal
quarter), accompanied by a certificate of the chief financial officer of Seller
that such unaudited balance sheet and statement of income and retained earnings
have been prepared in accordance with U.S. GAAP and present fairly the financial
position and the results of operations of Seller as of the end of and for such
fiscal quarter and that since the fiscal year-end report referred to in clause
(i) above there has been no material adverse change in the financial condition
or operations of Seller as shown on the balance sheet as of said date; (iii) as
soon as available and in any event within three (3) days after the end of each
calendar month (other than a month that is the last month of a calendar quarter)
and within fifty (50) days after the end of each calendar quarter, the unaudited
balance sheet and statement of income and retained earnings of Seller as of the
end of such month (including the fiscal year to the end of such month)
accompanied by certificate of the chief financial officer of Seller stating that
such unaudited consolidating balance sheet and statement of income and retained
earnings have been prepared in accordance with U.S. GAAP and present fairly the
financial position and the results of operations of Seller as of the end of and
for the fiscal year to the end of such month and that since the fiscal year-end
report referred to in clause (i) above there has been no material adverse change
in the financial condition or operations of Seller as shown on the balance sheet
as of said date; (iv) within fifty (50) days after the end of each calendar
quarter, a certificate signed by the chief financial officer of Seller stating
that as of the close of such fiscal year no Termination Event or other event
which, with notice or lapse of time or both would have become a Termination
Event had occurred and was continuing; (v) within one hundred twenty (120) days
after the end of each fiscal year of Seller, a report setting forth information
relating to Seller's portfolio of loans

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<PAGE>
originated or acquired in the ordinary course of its business and owned by
Seller during the related fiscal year, including loan balances by types of
loans, numbers of loans by types of loans, interest rates of loans by type and
loss and delinquency experience; and (vi) such other statements, reports and
other information as Buyer may reasonably request concerning the financial
condition and the servicing and collection operations of Seller.

(f) Notification. Promptly after learning thereof, to notify
Buyer of (i) the details of any action, proceeding, investigation or claim
against or affecting Seller instituted before any court, arbitrator or
Governmental Authority or, to Seller's knowledge, threatened to be instituted,
which if determined adversely to Seller would be likely to have a material
adverse effect on the business, operations or financial condition of Borrower,
or to result in a judgment or order against Seller (in excess of insurance
coverage and when combined with all other pending or threatened claims), of more
than One Million Dollars ($1,000,000) or to impair or defeat the security
interest of the Buyer in any of the Property or the Guaranty Collateral any
rights of Seller in the Property; (ii) any substantial dispute between Seller or
any of its Subsidiaries and any Governmental Authority; (iii) any labor
controversy which has resulted in or, to Seller's knowledge, threatens to result
in a strike which would materially affect the business operations of Seller or
any of its Subsidiaries; (iv) if Seller 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 403 of ERISA) with
respect to any Plan (or the Internal Revenue Service gives notice to the PBGC of
any "Reportable Event" as defined in subsection (c) (2) of Section 4043 of ERISA
and Seller attains knowledge thereof) which might constitute grounds for
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (v) any representation or warranty set forth
in Section 4.02 or 4.03 which proves to have been incorrect in any material
respect when made; (vi) Seller's material breach of its obligations under this
Agreement; (vii) any Obligor Default; (viii) any Loan that has become a
Defaulted Loan; (ix) any circumstance or event of which Seller has actual
knowledge which materially impairs or might reasonably be expected to impair an
Obligor's ability to repay or perform its obligations under, the related Loan;
or (x) the occurrence of any Termination Event or other event which, with notice
or lapse of time or both, would constitute a Termination Event.

(g) Additional Payments; Additional Acts. From time to time,
to (i) pay or reimburse Buyer on request for all taxes imposed on this Agreement
or the sale of any Loans hereunder (other than taxes based on Buyer's net
income, items of tax preference, or gross receipts) and for all expenses,
including reasonable legal fees, actually incurred by Buyer in connection

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<PAGE>
with the preparation or modification of this Agreement, or the sale of any
Loans, related Notes and Related Documents or the security interest in the
related Collateral hereunder or the enforcement by judicial proceedings or
otherwise of any rights of Buyer hereunder; (ii) obtain and promptly furnish to
Buyer evidence of all such Government Approvals as may be required to enable
Seller to comply with its obligations under this Agreement; and (iii) execute
and deliver all such other instruments and perform all such other acts as Buyer
may reasonably request to carry out the transactions contemplated by this
Agreement.

(h) Liens. Not to create, assume or suffer to exist any lien,
security interest or other encumbrance except (i) Liens granted pursuant to, or
permitted under, the Credit Agreement or the Security Documents related thereto;
(ii) Liens on Seller's properties securing mortgage indebtedness relating to
such properties, and any extensions, refinancing or renewals thereof in an
amount not exceeding the amount of such indebtedness prior to such extension,
refinancing or renewal; (iii) capital lease obligations; (iv) Liens to secure
indebtedness for the deferred price of property acquired after the date hereof,
but only if such Liens are limited to such property and its proceeds; (v) Liens
imposed by law (such as mechanic's liens) incurred in good faith in the ordinary
course of business which are not delinquent or which remain payable without
penalty or the validity or amount of which are being contested in good faith by
appropriate proceeding upon stay of execution of the enforcement thereof; or
(vi) deposits or pledges under workmen's compensation, unemployment insurance,
social security or similar laws or made to secure the performance of bids,
tenders, contracts (except for the repayment of borrowed money) or leases, or to
secure statutory obligations or surety or appeal bonds or to secure indemnity,
performance or other similar bonds given in the ordinary course of business.

(j) Liquidation, Merger, Sale of Assets, Etc. To not
liquidate, dissolve or enter into any merger, consolidation, joint venture,
partnership or other combination nor sell, lease, dispose of such portion of its
business or assets (excepting sales of goods in the ordinary course of business
and excepting sales of the Loans to Buyer) as constitutes a substantial portion
thereof; provided, however, so long as no Termination Event or event which with
the passage of time or the giving of notice or both would constitute a
Termination Event shall have occurred and be continuing or will occur as a
result of such merger or consolidation, Seller may merge or consolidate with any
Person or sell all or substantially all of its business or assets to any other
Person so long as (A) (i) Seller or United Grocers shall be the surviving or
continuing corporation or (ii) if Seller shall not be the surviving or
continuing corporation or shall sell all or substantially all of its assets to a
Person such surviving, continuing or purchasing Person shall be incorporated
under the laws of the United States or any jurisdiction thereof, shall assume in
writing all obligations of Seller under this Agreement,

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<PAGE>
shall be eligible to borrow from NCB pursuant to the provisions of the Bank Act,
and (B) at the time of such consolidation, merger or sale and after giving
effect thereto no Termination Event shall have occurred and be continuing.

(j) Transactions with Affiliates. To not directly or
indirectly enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property) with any of
Seller's Affiliates on terms that are less favorable to Seller than those which
might be obtained at the time from Persons who are not Affiliates.

(k) ERISA Compliance. To not and not allow any member of its
Controlled Groups or any Plan of any of them to: (i) engage in any "prohibited
transaction" as such term is defined in Section 4.06 or Section 2003(a) of
ERISA; (ii) incur any "accumulated funding deficiencies" (as such term is
defined in Section 3.02 of ERISA) whether or not waived; (iii) terminate any
Pension Plan in a manner which could result in the imposition of a Lien on any
property of Seller or any member of its respective Controlled Groups pursuant to
Section 4068 of ERISA; or (iv) violate state or federal securities laws
applicable to any Plan.

(l) No Name Change, Etc. To not change its name, identity or
corporate structure in any manner which could make any financing or continuation
statement filed hereunder seriously misleading within the meaning of Section
9-402(7) of any applicable enactment of the Uniform Commercial Code without
giving Buyer at least sixty (60) days prior written notice thereof.

(m) Relocation of Offices. To give Buyer at least sixty (60)
days prior written notice of any relocation of its chief executive offices or
the offices where records concerning the Loans and related Property are kept.

(n) Limitation on Transfers, Etc. To not transfer or attempt
to transfer in any manner whatsoever to any Person other than Buyer pursuant to
the terms of this Agreement, and except in favor of Buyer hereunder shall not
create, cause to be created or permit any lien, pledge, charge, security
interest, ownership interest, participation interest or any other interest of
any nature whatever in respect of the Loans and related Property.

(o) Bank Act Eligibility. To remain "eligible" to borrow from
NCB pursuant to the provisions of the Bank Act.

(p) No Changes. To make no change in the Credit and Collection
Policy, which change would impair the collectibility of any material amount of
the Loans; make no material change in the Credit and Collection Policy without
prior written consent of Buyer, or change its name, identity or corporate
structure in any manner which would make any financing statement or continuation
statement filed in connection with this Agreement or the transactions
contemplated hereby seriously misleading within the

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<PAGE>
meaning of Section 9-402(7) of the UCC of any applicable jurisdiction or other
applicable laws unless it shall have given Buyer at least 45 days' prior written
notice thereof and unless prior thereto it shall have caused such financing
statement or continuation statement to be amended or a new financing statement
to be filed such that such financing statement or continuation statement would
not be seriously misleading; to make no material change in the terms of the
Notes and Related Documents relating to the Loans without the prior written
notice to and consent of Buyer.

(q) Security Interest. To transfer to Buyer, at Buyer's
request, a security interest in all or any specified portion of that Collateral
securing any Loan which was not transferred to Buyer on the applicable Closing
Date (transferring to Buyer the same interest as Seller had and disclosed to
Buyer on the applicable Closing Date) and to provide evidence reasonably
satisfactory to Buyer that all actions as are necessary or appropriate to
perfect Buyer's security interest in such Collateral have been taken.

(r) Maintenance of Property, Etc. To maintain and preserve all
of its properties in good working order and condition, ordinary wear and tear
excepted, and from time to time to make all needed repairs, renewals or
replacements so that the efficiency of such properties shall be fully maintained
and preserved.

(s) Insurance. To 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 and to
furnish, on request, to Buyer certificates of insurance or duplicate policies
evidencing such coverage.

(t) Investments. To not make any loan or advance to any person
or purchase or otherwise acquire the capital stock, assets or obligations of, or
any interest in, any person, or contribute any assets to any person except (i)
commercial bank time deposits maturing within one year, (ii) marketable general
obligations of the United States or a State or marketable obligations fully
guaranteed by the United States, and (iii) short-term commercial paper with the
highest rating of a generally recognized rating service.

(u) Accounting Change. To maintain a fiscal year ending on the
Friday closest to the last day in September and to not make any significant
change in accounting policies or reporting practices other than changes required
by U.S. GAAP or otherwise required by law.

SECTION 6.02 Special Covenant of Seller. At all times prior to
the later of (i) the Termination Date or (ii) the date on which all obligations
of Seller and Guarantor under this Agreement have been performed in full, Seller
agrees not to

51
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(a) make or own (including a participation in) any loan to any Obligor or member
of its Obligor Group unless such Obligor's or member's obligation, as the case
may be, to repay such loan is subordinate to such Obligor's or member's
obligation, as the case may be, to repay the Loan or Loans made to such Obligor
and sold to Buyer under this Agreement and (b) own a corporation or other
business entity that makes loans to an Obligor or member of its Obligor Group if
such Obligor's or member's repayment obligation on such loan is senior to its
obligation to repay the Loan or Loans made to Obligor or its member and sold to
Buyer hereunder.

[End of Article VI]

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<PAGE>
ARTICLE VII

GUARANTOR AND GUARANTY
----------------------

SECTION 7.01 Guarantor's Guaranty and Repurchase Guaranty;
Security Interest. (a) Guarantor hereby agrees to provide to Buyer a Guaranty of
Liquidation Losses, equal at any time to the then current Guaranty Amount. After
a Loan has become a Liquidated Loan and the amount Liquidation Loss thereon has
been determined, Buyer shall notify Guarantor of the amount of Liquidation Loss
and, within five (5) Business Days of receipt of such notice, Guarantor shall
make a Guaranty Payment to Buyer in the amount of such Liquidation Loss;
provided, however, that Guarantor's obligation to make a Guaranty Payment shall
be limited to first, the then available Guaranty Amount, and, if the Guaranty
Amount is exhausted, the then available Holdback Guaranty Amount and/or the then
available New Origination Guaranty Amount (allocated between the Holdback
Guaranty Amount and the New Origination Guaranty Amount as Buyer determines).

(b) Guarantor hereby agrees to provide to Buyer a Repurchase
Guaranty of Seller's repurchase obligation pursuant to Section 2.01 (e), 2.02
(c), 3.02, 4.05 and 9.02. If Buyer shall not have received the Repurchase Amount
on the day on which due, Buyer shall promptly so notify Guarantor and Seller and
within two Business Days of receipt of such notice, Guarantor shall make a
Guaranty Payment to Buyer in the amount of such Repurchase Amount.

(c) The parties to this Agreement hereby expressly acknowledge
that the Guaranty Amount will be available to support the Holdback Guaranty and
the New Origination Guaranty to the extent the Holdback Guaranty Amount and/or
the New Origination Guaranty Amount have been exhausted and conversely, that the
Holdback Guaranty Amount and the New Origination Guaranty Amount will be
available to support Guarantor's Guaranty hereunder to the extent the Guaranty
Amount is exhausted.

SECTION 7.02 Guarantor Representations and Warranties.
Guarantor hereby represents and warrants to, and agrees as follows as of the
Effectiveness Date and as of each Closing Date:

(a) Guarantor is duly organized and is validly existing and in
good standing as an Oregon corporation, with corporate power and authority to
own its properties and to transact the business in which it is now engaged; the
Guarantor is duly qualified to do business and is in good standing in each State
of the United States where the nature of its business requires it to be so
qualified; and Guarantor is doing business only under the corporate and "doing
business as" names listed on Exhibit A hereto. Guarantor has full corporate
power, authority and legal right to carry on its business as presently
conducted, to own and operate its business as presently conducted, to own

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<PAGE>
and operate its properties and assets, and to execute, deliver and perform this
Agreement.

(b) The performance of Guarantor's obligations under this
Agreement, and the consummation of the transactions herein contemplated will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any of the property or assets of Guarantor or any of
its Subsidiaries pursuant to the terms of, any indenture, mortgage, deed of
trust, loan agreement or other agreement (other than this Agreement) or
instrument to which it or any of its Subsidiaries is a party or by which it or
any of its subsidiaries is bound or to which any of its property or assets is
subject, nor will such action result in any violation of the provisions of its
Certificate of Incorporation or By-Laws or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
it or any of its properties; and no consent, approval, authorization, order,
registration or qualification of or with any court or any such regulatory
authority or other governmental agency or body is required for the consummation
of the other transactions contemplated by this Agreement.

(c) No Government Approval or filing or registration with any
Governmental Authority is required for the making and performance by Guarantor
of this Agreement, except such as have been heretofore obtained and are in full
force and effect (certified copies thereof having been delivered to Buyer).

(d) This Agreement has been duly authorized, executed and
delivered by Guarantor and this Agreement is the valid and legally binding
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization and
other similar laws of general applicability relating to or affecting creditors'
rights and to general principles of equity.

(e) Guarantor is "eligible" in Section 3015 to borrow from
NCB pursuant to the provisions of the Bank Act.

(f) Except as described in Exhibit F hereto, there are no
actions, proceedings, investigations, or claims against or affecting Guarantor
or any of its Subsidiaries now pending before any court, arbitrator or other
Governmental Authority (nor to the knowledge of Guarantor has any thereof been
threatened nor does any basis exist therefor) which if determined adversely to
the Guarantor or any such Subsidiary would be likely to have a material adverse
effect on the financial condition or operations of Guarantor or on Guarantor's
ability to perform its obligations under this Agreement or under an endorsement
of any Note. With respect to the litigation described in Exhibit F hereto, a
determination in such litigation that is materially adverse to Seller or
Guarantor would not have a material adverse effect on the financial condition or
operations of Guarantor or on

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<PAGE>
Guarantor's ability to perform its obligations under this Agreement.

(g) The consolidated balance sheet of Guarantor and its
Subsidiaries as at September 27, 1996, and the related statements of income and
retained earnings of Guarantor and its Subsidiaries for the fiscal year then
ended, and the consolidated and consolidating balance sheet of Guarantor and its
Subsidiaries as at June 27, 1997, and the related statements of income and
retained earnings of Guarantor and its Subsidiaries for the fiscal quarter then
ended, copies of which have been furnished to Buyer, fairly present the
financial condition of Guarantor and its Subsidiaries as at such date and the
results of operations of Guarantor and its Subsidiaries for the period then
ended, all in accordance with U.S. GAAP consistently applied. Since that date,
there has been no material adverse change in the financial condition or
operations of Guarantor or any of its Subsidiaries.

(h) Guarantor has good and marketable title to each of the
properties and assets reflected in its balance sheet referred to in Section 7.02
(g) except such as have been since sold or otherwise disposed of in the ordinary
course of business or in accordance with Section 7.03 (r) hereof.

(i) Neither Guarantor nor any of its Subsidiaries or
Affiliates is in material breach of or default under any agreement or agreements
to which it is a party or which are binding on it or any of its assets and which
provide for the payment of monies, the delivery of goods or the provision of
services in amounts or with values in the aggregate in excess of One Million
Dollars ($1,000,000).

(j) 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
Guarantor and its consolidated subsidiaries or affect materially the ability of
Guarantor to perform this Agreement; no Plan or trust created thereunder, or any
trustee or administrator thereof, has engaged in a "prohibited transaction" (as
such term is defined in Section 406 or Section 2003(a) of ERISA) which could
subject such Plan or any other Plan, any trust created thereunder, or any
trustee or administrator thereof, or any party dealing with any Plan or any such
trust to the tax or penalty on prohibited transactions imposed by Section 502 or
Section 2003(a) of ERISA; no Pension Plan or trust created thereunder has been
terminated, and there have been no "reportable events" (as that term is defined
in Section 4043 of ERISA) since the effective date of ERISA; no Pension Plan or
trust created thereunder has incurred any "accumulated funding deficiency" (as
such term is defined in Section 302 of ERISA) whether or not waived, since the
effective date of ERISA; and the required allocations and contributions to
Pension Plans will not violate Section 415 of the Code; and neither Guarantor
nor any of its Subsidiaries has any withdrawal

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<PAGE>
liability to any trust created pursuant to a multi-employer pension or benefit
plan and neither would be subject to any withdrawal liability in excess of One
Million Dollars ($1,000,000) if it withdrew from any such plan or if its
participation therein were otherwise terminated.

(k) This Agreement, the financial statements referred to in
Section 7.02 (g) and all other instruments, documents, certificates and
statements furnished to Buyer by Guarantor, 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.

SECTION 7.03 Covenants of Guarantor. At all times prior to the
later of (i) the Termination Date or (ii) the date on which all obligations of
Seller and Guarantor under this Agreement, the Holdback Loan Purchase Agreement,
the Holdback Guaranty Agreement, the New Origination Loan Agreement and the New
Origination Guaranty Agreement have been performed in full, Guarantor agrees to
do all of the following unless Buyer shall otherwise consent in writing.

(a) Preservation of Corporate Existence, Etc. To preserve and
maintain its corporate existence, rights, and privileges in the jurisdiction of
its incorporation and will qualify and remain qualified as a foreign corporation
in each jurisdiction where such qualification is necessary or advisable in view
of the business and operations of Guarantor or the ownership of its properties.

(b) Compliance with Laws. To comply and to cause each of its
Subsidiaries to comply in all material respects with all laws, regulations,
rules and orders of Governmental Authorities applicable to Guarantor or any
Subsidiary or to their respective 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 Buyer for the payment thereof in the event the contest is
determined adversely to Guarantor or such Subsidiary.

(c) Other Obligations. To pay and discharge and to cause each
of its subsidiaries to pay and discharge before the same shall become delinquent
(after giving effect to all applicable grace periods) all Debt, taxes and other
obligations for which Guarantor or such Subsidiary is liable or to which its
income or property is subject and all claims for labor and materials or supplies
which, if unpaid, might become by law a Lien upon the assets of Guarantor or any
Subsidiary, except any thereof whose validity or amount is being contested in
good faith by Guarantor in appropriate proceedings, upon stay of execution of
enforcement thereof, with provision have been made to the satisfaction of Buyer
for the payment thereof in the event the contest is determined adversely to
Guarantor or such Subsidiary

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<PAGE>
and except other Debt, taxes and other obligations which, in the aggregate do
not exceed One Million Dollars ($1,000,000); provided, however, that this
covenant shall not extend to any obligation of Guarantor identified in Section
7.03 (x) or 9.01 (f).

(d) Financial Information. To deliver to Buyer (i) as soon as
available and in any event within one hundred (100) days after the end of each
fiscal year of Guarantor, the consolidated balance sheet of Guarantor as of the
end of such fiscal year and the related statements of income and retained
earnings and statement of changes in the financial position of Guarantor for
such year, accompanied by the audit report thereon by independent, certified
public accountants (which report shall be prepared in accordance with U.S. GAAP
and shall not be qualified by reason of restricted or limited examination of any
material portion of Guarantor's records and shall contain no disclaimer of
opinion or adverse opinion) and an Annual Report on Form 10-K for such year
filed by the Guarantor with the Securities and Exchange Commission; (ii) as soon
as available and in any event within fifty (50) days after the end of each
fiscal quarter of Guarantor, the unaudited balance sheet and statement of income
and retained earnings of Guarantor as of the end of such fiscal quarter
(including the fiscal year to the end of such fiscal quarter), accompanied by a
certificate of the chief financial officer of Guarantor, that such unaudited
balance sheet and statement of income and retained earnings have been prepared
in accordance with U.S. GAAP and present fairly the financial position and the
results of operations of Guarantor, as of the end of and for such fiscal quarter
and setting forth calculations demonstrating that at the end of such quarter the
Guarantor was in compliance with Sections 7.03 (g) through 7.03 (i), 7.03 (k)
and 7.03 (n), inclusive and that since the fiscal year-end report referred to in
clause (i) above there has been no material adverse change in the financial
condition or operations of Guarantor as shown on the balance sheet as of said
date; (iii) as soon as available and in any event within three (3) days after
the end of each calendar month (other than a month that is the last month of a
calendar quarter) and within fifty (50) days after the end of each calendar
quarter, the unaudited balance sheet and statement of income and retained
earnings of Guarantor as of the end of such month (including the fiscal year to
the end of such month) accompanied by certificate of the chief financial officer
of Guarantor stating that such unaudited consolidated and consolidating balance
sheet and statement of income and retained earnings have been prepared in
accordance with U.S. GAAP and present fairly the financial position and the
results of operations of Guarantor as of the end of and for the fiscal year to
the end of such month and that since the fiscal year-end report referred to in
clause (i) above there has been no material adverse change in the financial
condition or operations of Guarantor as shown on the balance sheet as of said
date; (iv) within one hundred twenty (120) days after the close of each fiscal
year of Guarantor, a certificate signed by the chief financial officer of
Guarantor stating that as of the close of such fiscal year no Termination Event
or other event which, with

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<PAGE>
notice or lapse of time or both would have become a Termination Event had
occurred and was continuing; (v) within one hundred twenty (120) days after the
end of each fiscal year of Guarantor, a report setting forth information
relating to the portfolio of loans originated or acquired by Guarantor and each
of its Subsidiaries and Affiliates (other than United Resources) in the ordinary
course of their respective businesses and owned by Guarantor and each of its
Subsidiaries and Affiliates (other than United Resources) during the related
fiscal year, including loan balances by types of loans, numbers of loans by
types of loans, interest rates of loans by type and loss and delinquency
experience; and (vi) such other statements, reports and other information as
Buyer may reasonably request concerning the financial condition and the
servicing and collection operations of Guarantor; provided, however, that if
either Guarantor or any of its Subsidiaries or Affiliates (as specified) does
not originate and/or service loans of the kind sold and assigned by Seller
pursuant to this Agreement, the covenants in subsections (v) and (vi) of this
subsection (d) shall be satisfied by a certification of a Responsible Officer to
the effect that during the preceding fiscal year, Guarantor or the specified
Subsidiary or Affiliate did not originate or service loans.

(e) Notification. Promptly after learning thereof, to notify
Buyer of (i) the details of any action, proceeding, investigation or claim
against or affecting Guarantor or any of its Subsidiaries instituted before any
court, arbitrator or Governmental Authority or, to Guarantor's knowledge
threatened to be instituted, which, if determined adversely to Guarantor would
be likely to have a material adverse effect on the business, operations or
financial condition of the Guarantor, or to result in a judgment or order
against Guarantor (in excess of insurance coverage and when combined with all
other pending or threatened claims) of more than One Million Dollars
($1,000,000) or to impair or defeat the security interest of the Buyer in any
Property or the Guaranty Collateral; (ii) any substantial dispute between
Guarantor or any of its Subsidiaries; (iii) any substantial dispute between
Guarantor or any of its Subsidiaries and any Governmental Authority; (iv) any
labor controversy which has resulted in or, to Guarantor's knowledge, threatens
to result in a strike which would materially affect the business operations of
Guarantor or such Subsidiary; (v) if Guarantor or any member of the Controlled
Group gives or is required to give notice to the PBGC of any "reportable event"
(as defined in subsections (b) (1), (2), (5) or (6) of Section 403 of ERISA)
with respect to any Plan (or the Internal Revenue Service gives notice to the
PBGC of any "Reportable Event" as defined in subsection (c) (2) of Section 4043
of ERISA and Guarantor attains knowledge thereof) which might constitute grounds
for termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (vi) any representation or warranty set forth
in Section 7.02 which proves to have been incorrect in any material respect when
made; (vii)

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<PAGE>
Seller's, or Guarantor's material breach of its obligations under this
Agreement; or (viii) the occurrence of any Termination Event or other event
which, with notice or lapse of time or both, would constitute a Termination
Event.

(f) Keeping of Books and Records; Visitation Rights. To keep
and to cause each of its Subsidiaries to keep adequate records and books of
account in which complete entries will be made, in a manner which will permit
the preparation of consolidated and consolidating financial statements in
accordance with U.S. GAAP. At any reasonable time and from time to time
Guarantor shall and shall cause each of its Subsidiaries to permit Buyer to
examine and make copies of and abstracts from Guarantor's records and books, to
visit its properties and to discuss the affairs, finances and accounts of
Guarantor and any Subsidiary with any of its officers, directors or employees.

(g) Maintenance of Property, Etc. To maintain and preserve and
to cause each of its Subsidiaries to maintain and preserve all of their
respective properties in good working order and condition, ordinary wear and
tear excepted, and from time to time to make all needed repairs, renewals or
replacements so that the efficiency of such properties shall be fully maintained
and preserved.

(h) Insurance. To shall keep in force and to cause each of its
Subsidiaries to keep in force upon all of Guarantor's or such Subsidiary's
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 and to furnish on request to Buyer certificates of insurance or
duplicate policies evidencing such coverage.

(i) Additional Acts. From time to time, to obtain and promptly
furnish to Buyer evidence of all such Government Approvals as may be required to
enable Guarantor to comply with its obligations under this Agreement and to
execute and deliver all such other instruments and perform all such other acts
as Buyer may reasonably request to carry out the transactions contemplated by
this Agreement.

(j) Funded Debt to Capitalization. To maintain as of the end
of each fiscal quarter on a consolidated basis a ratio of Total Funded Debt to
Total Capitalization of not more than the ratio set forth below:

For Fiscal
Quarters Ending Maximum Ratio
--------------- -------------

On or after
June 30, 1997
and before
April 3, 1998 0.8500 to 1

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<PAGE>
On or after
April 3, 1998
and before
October 2, 1998 0.8375 to 1

On or after
October 2, 1998
and before
April 2, 1999 0.8250 to 1

On or after
April 2, 1999 0.8125 to 1

(k) Senior Debt to Capitalization. To maintain as of the end
of each fiscal quarter on a consolidated basis a ratio of Senior Funded Debt to
Total Capitalization of not more than the ratio set forth below:

For Fiscal
Quarters Ending Maximum Ratio
--------------- -------------

On or after
June 30, 1997
and before
April 3, 1998 0.6750 to 1

On or after
April 3, 1998
and before
October 2, 1998 0.6625 to 1

On or after
October 2, 1998
and before
April 2, 1999 0.6500 to 1

On or after
April 2, 1999 0.6375 to 1

As used herein, "Senior Funded Debt" shall mean, as of any date of
determination, Total Funded Debt less Subordinated Debt.

(l) Fixed Charge Coverage. To maintain as of the end of each
fiscal quarter on a consolidated basis for each period of four consecutive
fiscal quarters a Fixed Charge Coverage Ratio of not less than the ratio set
forth below:

For Fiscal
Quarters Ending Maximum Ratio
--------------- -------------

On or after
June 30, 1997
and before
October 3, 1997 1.45 to 1

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<PAGE>
On or after
October 3, 1997
and before
April 3, 1998 1.70 to 1

On or after
April 3, 1998
and before
October 2, 1998 1.80 to 1

On or after
October 2, 1998
and before
April 2, 1999 1.90 to 1

On or after
April 2, 1999 1.95 to 1

As used herein, "Fixed Charge Coverage Ratio" shall mean, for any period, the
ratio of (a) the sum of (i) net income (or net loss), excluding (A) gains and
losses, if any, from the sale of assets and (B) for the fiscal quarter ended
June 27, 1997, extraordinary charges not to exceed Five Million One Hundred
Thousand Dollars ($5,100,000) in the aggregate, (ii) interest expense, (iii)
income taxes aid, (iv) depreciation expense, (v) amortization expense and (vi)
patronage dividends to (b) the sum of (i) interest expense and (ii) amortization
of any discount applied in advancing any Total Funded Debt to Guarantor.

(m) Adjusted Charge Coverage. To maintain as of the end of
each fiscal quarter on a consolidated basis for each period of four consecutive
fiscal quarters an Adjusted Fixed Charge Coverage Ratio of not less than the
ratio set forth below:

For Fiscal
Quarters Ending Maximum Ratio
--------------- -------------

On or after
June 30, 1997
and before
October 3, 1997 1.20 to 1

On or after
October 3, 1997
and before
April 3, 1998 1.40 to 1

On or after
April 3, 1998
and before
October 2, 1998 1.55 to 1

On or after
October 2, 1998
and before
April 2, 1999 1.75 to 1

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<PAGE>
On or after
April 2, 1999 1.90 to 1

As used herein, "Adjusted Fixed Charge Coverage Ratio" shall mean, for any
period, the ratio of (a) the sum of (i) net income (or net loss), excluding any
(A) gains and losses, if any, from the sale of assets and (B) for the fiscal
quarter ended June 27, 1997, extraordinary charges not to exceed Five Million
One Hundred Thousand Dollars ($5,100,000) in the aggregate, (ii) interest
expense, (iii) income taxes paid, (iv) depreciation expense and (v) amortization
expense to (b) the sum of (i) interest expense and (ii) amortization of any
discount applied in advancing any Total Funded Debt to Guarantor.

(n) Working Capital. To maintain, on a consolidated basis
(exclusive of the Guarantor's insurance subsidiaries), a ratio of current assets
to current liabilities, each determined in accordance with U.S. GAAP, of at
least 1.05 to 1.

(o) Minimum Net Worth. To maintain on a consolidated basis as
the end of the fiscal quarter a Consolidated Net Worth equal to or greater than
the sum of (a) Thirty Seven Million Dollars ($37,000,000) plus (b) sixty percent
(60%) of the sum of (i) Guarantor's net income for each fiscal quarter after the
fiscal quarter ended June 27, 1997 in which Guarantor has a positive net income,
plus (ii) income taxes and (iii) patronage dividends income for each fiscal
quarter after the fiscal quarter ended June 27, 1997, less (c) income taxes.

(p) Minimum Net Worth and Subordinated Debt. To maintain, on a
consolidated basis, the sum of Subordinated Debt plus Members' Equity in an
amount equal to or greater than the sum of (a) Eighty Million Dollars
($80,000,000) plus (b) sixty percent (60%) of the sum of (i) Guarantor net
income for each fiscal quarter after the fiscal quarter ended June 27, 1997 in
which Guarantor has a positive net income, plus (ii) income taxes and (iii)
patronage dividends income for each fiscal quarter after the fiscal quarter
ended June 27, 1997, minus (c) Two Million Five Hundred Thousand Dollars
($2,500,000) in the event Guarantor repays to the Credit Providers in the
aggregate, the principal sum of at least Five Million Dollars ($5,000,000) of
the term loans under the Credit Agreement, less (d) income taxes.

(q) Member Notes Receivable Ratio. To maintain, on a
consolidated basis, a Member Portfolio of not more than one hundred fifty
percent (150%) of Consolidated Tangible Net Worth. As used herein, "Member
Portfolio" shall mean the sum of (i) all Debt of members owning to Guarantor or
any of its Subsidiaries which have not been sold; plus (ii) all investments by
Guarantor or any of its Subsidiaries in Guarantor's members; plus (iii) Debt of
members of Guarantor or any of its Subsidiaries which have been sold with
recourse to Guarantor or any of its Subsidiaries. As used herein, "Consolidated
Tangible Net Worth" shall mean, with respect to any Person, Consolidated Net
Worth of

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such Person less (i) all assets which should be classified as intangible assets
(such as good will, patents, trademarks, copyrights, franchises and covenants
not to compete) and (ii) to the extent not already deducted from total assets,
all reserves including those for deferred income taxes, depreciation,
obsolescence or amortization of properties and (iii) all capital stock or other
investments in any direct or indirect subsidiary other than in (x) any offshore
investment subsidiary, or (y) a subsidiary having all or substantially all of
its operations in the United States.

(r) Amendments to Private Placement; Prepayments of Private
Placement. To promptly provide to Buyer a copy of each Private Placement
Agreement now or hereafter executed by Guarantor and, as to any Private
Placement Agreement not executed as of the date hereof, shall notify Buyer at
least five (5) days in advance of the execution thereof. Guarantor will not
agree to or permit to be made any amendment to nor request any waivers of the
terms of any Private Placement Agreement if such an amendment or waiver to the
terms of repayment thereof or to the terms of any promissory notes issued
thereunder. Guarantor shall deliver to Buyer, 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 Buyer a substantially contemporaneous confirming
notice and a copy of any amendment or waiver actually made or granted. Guarantor
shall not make any prepayments in respect of any Private Placement Agreement or
any of the promissory notes issued pursuant thereto.

(s) Investments. To not and to cause each of its Subsidiaries
(other than Grocers Insurance Company) to not make any loan or advance to any
Person or purchase or otherwise acquire the capital stock, assets or obligations
of, or any interest in, any Person, or contribute any assets to any Person
except (a) commercial bank time deposits maturing within one year, (b)
marketable general obligations of the United States or a State or marketable
obligations fully guaranteed by the United States, and (c) short-term commercial
paper with the highest rating of a generally recognized rating service.

(t) Accounting Change. To maintain a fiscal year ending on the
Friday closest to the last day in September and shall not make any significant
change in accounting policies or reporting practices other than changes required
by U.S. GAAP or otherwise required by law.

(u) Liens and Sales. Not to and to cause each of its
Subsidiaries not to create, assume or suffer to exist any Lien, security
interest or other encumbrance except as granted in or permitted under the Credit
Agreement (or Security Documents related thereto).

(v) Liquidation, Merger, Sale of Assets, Etc. To not
liquidate, dissolve or enter into any merger, consolidation,

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joint venture, partnership or other combination nor sell, lease, dispose of such
portion of its business or assets (excepting sales of goods in the ordinary
course of business and sales of Loans under this Agreement) as constitutes a
substantial portion thereof; provided, however, so long as no Termination Event
or event which with the passage of time or the giving of notice or both would
constitute a Termination Event shall have occurred and be continuing or will
occur as a result of such merger or consolidation, Guarantor may merge or
consolidate with any Person or sell all or substantially all of its business or
assets to any other Person so long as (A) (1) Guarantor shall be the surviving
or continuing corporation, or (2) if Guarantor shall not be the surviving or
continuing corporation or shall sell substantially all of its assets to a
Person, such surviving, continuing or purchasing Person shall be incorporated
under the laws of the United States or any jurisdiction thereof and shall assume
in writing all obligations of Guarantor under this Agreement, shall be eligible
to borrow form NCB under the provisions of the Bank Act and shall satisfy the
financial covenants set forth in Sections 7.03 (j) through (q) hereof, and (B)
at the time of such consolidation, merger or sale and after giving effect
thereto, no Termination Event shall have occurred and be continuing. Without
limitation on the foregoing, the Guarantor, and its consolidated subsidiaries,
will not during in any fiscal year consecutive calendar quarters sell in excess
of 10% of their Consolidated Tangible Net Worth unless the proceeds of such sale
or sales are reinvested within 12 months in assets to be owned and utilized by
the Guarantor in the ordinary course of its business; provided, however, in
determining compliance with the foregoing requirement, sales of the following
assets will be disregarded: (i) individual assets having a book value of less
than $250,000, not to exceed in the aggregate One Million Five Hundred Thousand
Dollars ($1,500,000) in any fiscal year, (ii) promissory notes of Guarantor's
members payable to Seller or Guarantor evidencing Debt incurred in connection
with equipment, store or inventory financing provided by Seller or Guarantor to
such members, where Guarantor or Seller, as applicable, receives from such sale
an amount equal to the then existing outstanding principal balance of and
accrued interest on such notes, and (iii) Excess Assets (as defined in the
Credit Agreement), where the proceeds of such sale are applied to repay the term
loans made pursuant to the Credit Agreement.

(w) Transactions with Affiliates. To not directly or
indirectly enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property) with any of
Guarantor's Affiliates, on terms that are less favorable to Guarantor than those
which might be obtained at the time from Persons who are not Affiliates.

(x) ERISA Compliance. To not and not allow any member of its
Controlled Groups or any Plan of any of them to: (i) engage in any "prohibited
transaction" as such term is defined in Section 4.06 or Section 2003 (a) of
ERISA; (ii) incur any "accumulated funding deficiencies" (as such term is
defined in

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Section 3.02 of ERISA) whether or not waived; (iii) terminate any Pension Plan
in a manner which could result in the imposition of a lien on any property of
the Guarantor, or any member of its Controlled Group pursuant to Section 4068 of
ERISA; or (iv) violate state or federal securities laws applicable to any Plan.

(y) Security Interest. To take all actions necessary or
desirable, including filings of financing statements or continuation thereof, to
perfect and maintain the perfection of Buyer's security interest in the Guaranty
Collateral.

(z) Subordinate Position. To (i) make or own (including a
participation) no loan to any Obligor or member of its Obligor Group unless such
Obligor's or member's obligations, as the case may be, to repay such loan is
subordinate to such Obligor's or member's obligation, as the case may be, to
repay the Loan or Loans made to such Obligor and sold by Seller to Buyer under
this Agreement and (ii) own no corporation or other business entity that makes
loans to any Obligor or member of its Obligor Group if such Obligor's or members
repayment obligation on such loan is senior to its payment obligation to the
Loan or Loans made to Obligor or its member and sold to Buyer hereunder.

(aa) NCB Borrower Eligibility. To maintain its status as
an "eligible" borrower under the provisions of the Bank Act.

The parties hereto acknowledge that the financial covenants
set forth in Section 7.03 (j) - (q) and (u) above are intended to be
substantially the same as those contained in the Credit Agreement. In the event
that any of the related covenants in the Credit Agreement is amended, then any
such amendment shall be deemed to be made and effective in this Agreement as of
the date made and effective in the Credit Agreement. If at any time the Credit
Agreement is terminated, the Buyer reserves the right to reassess and request an
amendment to any of the above-referenced financial covenants herein (as the same
may have been amended or deemed amended) that, in the Buyer's reasonable
judgment, are necessary to protect the Buyer's interests in the Loans and under
this Agreement.

SECTION 7.04 Grant of Security Interest.

(a) In order to secure Guarantor's obligations under the
Guaranty, Guarantor hereby grants to Buyer a perfected security interest,
subordinate to the security interests of the Credit Providers granted
pursuant to and in accordance with the Credit Agreement and the Security
Documents executed by Guarantor and certain of its Subsidiaries in
connection therewith, in all of Guarantor's now owned or hereafter acquired
goods and other personal property, including all tangible and intangible
items and including without limitation the following (collectively, the
"Guaranty Collateral"):

(i) Accounts, Contract Rights, Etc. All of Guarantor's
right title and interest in (A) all accounts, (B) all

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contract rights, (C) all chattel paper, (D) all documents, documents of
title, drafts, checks, acceptances, bonds, letters of credit, notes,
instruments or other negotiable and non-negotiable instruments, bills
of exchange, deposits, certificates of deposit, insurance policies and
any other writings evidencing a monetary obligation or security
interest in or a lease of personal property, (E) all licenses, leases,
contracts or agreements, (F) all judgments, choses in action and
general intangibles which represent the right to receive the payment of
money or other considerations; and (G) all guarantees and other
personal property securing the payment or performance of any of the
foregoing;

(ii) Inventory, Etc. All of Guarantor's right, title and
interest in inventory and stock in trade of Guarantor including
without limitation raw materials, work in progress, materials used
or consumed in Guarantor's business, finished goods, returned
goods and goods traded in;

(iii) Promissory Notes. Those certain promissory notes
and obligations to pay identified on Schedule IV hereto, together
with all other obligations, now or hereafter arising, of members
of Guarantor for the repayment of loans or advances made by
Guarantor to such members, together with all rights of Guarantor,
now or hereafter existing, in and to all security agreements,
mortgages, deeds of trust, pledge agreements and other contracts
securing or otherwise supporting the repayment of such member's
promissory notes and obligations;

(iv) Equipment, Etc. All of Guarantor's right, title and
interest in equipment, supplies, fittings, furnishings, and other
items of any kind ordered, obtained, or possessed by Guarantor or
for its account whether held by Guarantor, by sellers under any
contracts for the purchase of equipment or by others, whether
completed or under construction, together with any product into
which such equipment may be processed, manufactured or assembled
and together with all additions and substitutions for such
equipment and all parts, instruments, accessories, alterations,
modifications, replacements, additions, fitting and accessions to
said equipment, including all supplies, operating manuals, plans,
specifications, improvements and tools therefor or thereto;

(v) Fixtures. All of Guarantor's right, title and
interest in and to all fixtures affixed to or to become affixed to
any real property owned, leased or operated by Guarantor or
otherwise used in connection with the business or operations of;

(vi) General Intangibles. All of Guarantor's general
intangibles now or hereafter acquired of whatever nature and
however evidenced, including without limitation all

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judgments, choses in action, patents, trademarks, trade names, service
marks, licenses, copyrights and other intellectual property whether
registered or not, and whether or not used or to be used by Guarantor,
including, with respect to all of said property, without limitation,
all rights corresponding thereunder throughout the world, all renewals
thereof, all license royalties with respect thereto, all claims for
damages, profits and proceeds by reason of past, present and future
infringements, and all rights to sue therefor;

(vii) Insurance. All insurances, including without
limitation: (A) all insurances now or hereafter in effect with
respect to the equipment specified in subsection (iv) above, the
fixtures specified in subsection (v) above, the inventory
specified in subsection (ii) above, proceeds of such inventory, or
any other real or personal property, (B) all claims and all
returns of premiums, dues, calls, and assessments that are not
immediately applied to premiums, dues, calls and assessments that
accrue from time to time, and all other sums or claims for sums
due or to become due under the foregoing insurances and (C) all
right, title, and interest in, to, or under the foregoing;

(viii) Documents and Deposits. All of Guarantor's right,
title, and interest in and to books, correspondence, credit files,
records, invoices, and other documents including without
limitation all tapes, disks, cards, computer runs and other papers
or documents in the possession or control of Guarantor; and all
balances, credits, deposits, accounts or monies of or in the name
of Guarantor in the possession or control of, or in transit to,
the Buyer;

(ix) Investment Property. All of Guarantor's right, title
and interest in investment property, including without limitation,
all stocks, bonds, debentures, notes, bills, certificates,
options, rights, shares or other securities now or hereafter owned
or acquired, all dividends or distributions in respect thereof and
all brokerage or commodities accounts; and

(x) Proceeds and Products. All proceeds of any and all of
the foregoing Guaranty Collateral and, to the extent not otherwise
included, all rents, royalties and payments under insurance,
indemnity, warranty or guaranty, payable by reason of loss,
damage, or otherwise, with respect to any of the foregoing
Guaranty Collateral.

(b) The parties to this Agreement intend that this Agreement
shall constitute a security agreement under applicable law with respect to the
Guarantor's grant of a security interest in the Guaranty Collateral.

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(c) The parties hereto further acknowledge that the security
interest granted by Guarantor pursuant to subsection (c) of this Section 7.04
will also secure Guarantor's obligations under the Holdback Guaranty and the New
Origination Guaranty.

[End of ARTICLE VII]

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ARTICLE VIII

SELLER OBLIGATIONS AND REPURCHASE OPTIONS
-----------------------------------------

SECTION 8.01 Purchase of Interest Rate Protection. Seller
hereby agrees to provide interest rate protection for Buyer, in the form of a
swap agreement, hedge, cap, guaranteed rate contract or other similar device or
agreement (each, an "Interest Rate Agreement"), or any combination of the
foregoing, or any other plan acceptable to Buyer (an "Interest Rate Protection
Plan"), if, for any three (3) consecutive months during the term of this
Agreement, the Prime Rate in effect on the LIBOR Determination Date for each
such month is equal to or less than the sum of the LIBOR on such Date and 200
basis points. An Interest Rate Agreement, if any, must satisfy the following
requirements: (i) have a term of 36 months (or such fewer number of months as
remain in the term of this Agreement); (ii) be provided by a party or parties
who is or are either rated "A" or higher by a Rating Agency or acceptable to
Buyer; (iii) be accompanied by an opinion of counsel to provider to the effect
that the Interest Rate Agreement is a legal, valid and binding Agreement of
provider, enforceable in accordance with its terms; (iv) provide for an interest
payment during each Interest Accrual Period at least equal to the related LIBOR
plus 200 basis points; and (v) be delivered by the Payment Date in the month
immediately following the month in which the requirement of this Section 8.01
takes effect. An Interest Rate Protection Plan must be coterminous with this
Agreement.

SECTION 8.02 Optional Repurchase of Defaulted Loans and after
Obligor Default. In addition to the other repurchase obligations contained
herein, Seller will have the option to repurchase any Loan sold by Seller to
Buyer if (i) such Loan is a Defaulted Loan or (ii) an Obligor Default has
occurred and has then been continuing for at least thirty (30) days or (iii)
Buyer has received notice of any adverse event as described in Section 6.01 (f)
hereof. Such Loan shall be repurchased by Seller from Buyer by the last day of
the Due Period during which Seller receives notice of any such Defaulted Loan or
the occurrence and continuation of an Obligor Default or notice of adverse
event, as the case may be. Such repurchase shall be accomplished on the same
terms as set forth in Section 2.01 (e) and at the Repurchase Amount.

SECTION 8.03 Minimal Balances. On any Payment Date, Seller may
elect to repurchase all Loans for their aggregate Principal Balance, if as of
such Payment Date, the aggregate Principal Balance is less than five percent
(5%) of the Maximum Purchase Amount. If Seller elects to repurchase the Loans
pursuant to this Section 8.03, Seller shall provide Buyer with thirty (30) days
prior written notice. The Repurchase Amount shall be paid by Seller to Buyer in
immediately available funds prior to 12:00 noon, Washington, D.C. time. Any
resale of a Loan and related Property pursuant to this Section 8.03 shall be

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without recourse or warranty of any kind except that Buyer shall be deemed to
have warranted that such Loans and related Property are free and clear of all
liens or claims resulting from or arising out of its acts or omissions (other
than acts of Buyer resulting from Seller's failure to perform as required by
this Agreement) or claims of Buyer's creditors.

SECTION 8.04 Retransfer of Loans. Immediately upon the payment
of the required Repurchase Amount, all right, title and interest in the Loans
being repurchased shall pass to Seller and such Loans shall cease to be "Loans"
for all purposes of this Agreement. Any resale of a Loan and related Property
pursuant to the terms of this Article VIII shall constitute the simultaneous
resale by Buyer and repurchase by Seller of all Loans and related Property.

[End of Article VIII]

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ARTICLE IX

TERMINATION EVENTS
------------------

SECTION 9.01 Termination Events. The occurrence of any of
the following events shall constitute a "Termination Event" hereunder.

(a) Breach of Covenant. Seller shall fail to perform or
observe any covenant, obligation or term of Articles VI or X or of Section 2.01
(e), 2.02, 3.02, 4.05 or 8.01 of this Agreement and, except in the case of a
breach of Section 6.01 (c) or Section 6.01 (f) (iii), (iv) or (v), such failure
shall remain unremedied for thirty (30) days after written notice thereof shall
have been given to Seller by Buyer; or

(b) Guarantor Defaults. Guarantor shall fail (i) to make any
payments due under the Guaranty, Repurchase Guaranty, Holdback Guaranty or New
Origination Guaranty and such failure shall continue unremedied for five (5)
Business Days after written notice thereof shall have been given to Guarantor by
Buyer and (ii) to perform or observe any other obligation, covenant or term of
Article VII of this Agreement and such failure shall remain unremedied for
thirty (30) days after written notice thereof shall have been given to Guarantor
by Buyer; or

(c) Voluntary Bankruptcy, Etc. Either Seller, Guarantor or any
Subsidiary or Affiliate of Seller or Guarantor shall: (1) file a petition
seeking relief for itself under Title 11 of the United States Code, as now
constituted or hereafter amended, or file an answer consenting to, admitting the
material allegations of or otherwise not controverting, or fail timely to
controvert a petition filed against it seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended; or (2) file such
petition or answer with respect to relief under the provisions of any other now
existing or future applicable bankruptcy, insolvency, or other similar law of
the United States of America or any State thereof or of any other country or
jurisdiction providing for the reorganization, winding-up or liquidation of
corporations or an arrangement, composition, extension or adjustment with
creditors; or

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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 Seller, Guarantor or any Affiliate or Subsidiary of Seller or
Guarantor, or of any substantial part of the property of Seller, Guarantor, or
any Affiliate or Subsidiary, as the case may be, or ordering the reorganization,
winding-up or liquidation of its affairs, or upon the expiration of one hundred
twenty (120) days after the filing of any involuntary petition against it
seeking any of the relief specified in Section 9.01 (c) or this Section 9.01 (d)
without the petition being dismissed prior to that time; or

(e) Insolvency, Etc. Either Seller, Guarantor or any Affiliate
or Subsidiary of Seller or Guarantor shall (i) make a general assignment for the
benefit of its creditors or (ii) consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, or custodian of all or
a substantial part of the property of Seller, Guarantor, or any Affiliate or
Subsidiary, as the case may be, or (iii) admit its insolvency or liability to
pay its debts generally as they become due, or (iv) fail generally to pay its
debts as they become due, or (v) take any action (or suffer any action to be
taken by its directors or shareholders) looking to the dissolution or
liquidation of Seller, Guarantor, or any Affiliate or Subsidiary, as the case
may be; or

(f) ERISA. Seller, Guarantor, any Subsidiary of Guarantor, or
any member of the Controlled Group shall fail to pay when due an amount
aggregating in excess of One Million Dollars ($1,000,000) which it shall have
become liable to pay to the PBGC or to a Plan under Section 515 of ERISA or
Title IV of ERISA; or notice of intent to terminate a Plan or Plans (other than
a multi-employer plan, as defined in Section 4001(3) or ERISA), having aggregate
Unfunded Vested Liabilities in excess of One Million Dollars ($1,000,000) shall
be filed under Title IV of ERISA by Seller, Guarantor or any Subsidiary of
Guarantor, as the case may be, any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate any such Plan or Plans; or

(g) Cross-default. Seller, Guarantor or any Subsidiary of
Seller or Guarantor shall fail (i) to pay when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) any Debt in
excess of One Million Dollars ($1,000,000) 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 Debt, or (ii) to
perform any term or covenant on its part to be performed under any agreement or
instrument relating to any such Debt and required to be performed and such
failure shall continue after the applicable grace period, if any, specified in

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such agreement or instrument, if the effect of such failure to perform is to
accelerate or to legally and in accordance with the applicable documents permit
the acceleration of the maturity of such Debt; or

(h) Material Adverse Changes; Extraordinary Situation. An
event shall occur which results in a material adverse change in Seller's or
Guarantor's financial condition or operations or an extraordinary situation
shall occur which gives the Buyer reasonable grounds to believe that Seller or
Guarantor may not, or will be unable to, perform or observe in the normal course
its obligations under this Agreement; or

(i) Judgment. A final judgment or order for the payment of
money in excess of One Million Dollars ($1,000,000) or its equivalent in another
currency shall be rendered against Seller or Guarantor or any Subsidiary of
Seller or Guarantor and such judgment or order shall continue unsatisfied and in
effect for a period of thirty (30) consecutive days; or

(j) Change in Control. Except as permitted under Section 6.01
(i) or 7.03 (v) hereof, 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 Seller or Guarantor.

SECTION 9.02 Consequences of Termination Event. If any
Termination Event shall occur and be continuing, then in any such case and at
any time thereafter so long as any such Termination Event shall be continuing,
Buyer may, at its option, immediately terminate Buyer's commitment to make
Incremental Purchases or to accept Renewal Notes hereunder.

In addition, upon the occurrence of any Termination Event
specified in (c), (d) or (e) of Section 9.01, subject to the provisions of
Section 10.15, this Agreement shall automatically and immediately terminate.

Thereafter, and before exercising any other remedies provided
herein or by applicable law, Buyer may, at its option, require that Seller
repurchase all Loans and related Property Notes for the Repurchase Amount within
two (2) Business Days of receipt of notice from Buyer of its election to cause
the repurchase of all Loans. In addition, Buyer may pursue all other rights and
remedies available herein and by applicable law including, without limitation,
its rights to pursue collection from Seller in an amount equal to the Repurchase
Amount.

SECTION 9.03 Remedies of a Secured Party. Following the
occurrence of a Termination Event, Buyer shall have all remedies provided by law
and without limiting the generality of the foregoing shall have the following
remedies: (a) the remedies of a secured party under the Uniform Commercial Code;
(b) the right to make notification and pursue collection or, at Buyer's option,
to sell all or any part of the Loans and related

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Property; (c) the right to exercise all of owner's or secured party's rights
under the Loans and related Property; and (d) to the extent that notice shall be
required by law to be given, Seller agrees that a period of twenty (20) days
from the time the notice is sent shall be a reasonable period of notification of
a sale or other, disposition of the Loans and related Property.

[End of Article IX]

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ARTICLE X

MISCELLANEOUS
-------------

SECTION 10.01 Further Assurances. Each party hereto agrees to
execute and deliver to the other party and to perform all such other acts as the
other party may reasonably request to carry out the transactions contemplated by
this Agreement without limiting the foregoing, Buyer agrees to endorse without
recourse the Note related to any Loan being resold to Seller pursuant to
Articles II, IV or VIII, and to execute assignments and related Uniform
Commercial Code financing statements to evidence the assignment of the Related
Documents to Seller.

SECTION 10.02 Indemnities. (a) Seller and Guarantor will
defend and hereby indemnify Buyer and its successors, assigns, servants and
agents (hereinafter "Indemnities") against and agree to protect, save and keep
harmless and make whole each thereof, from any and all liabilities, obligations,
losses, damages, penalties, claims, actions, suits, costs (including any net
increase in the tax liability of an Indemnitee resulting from its receipt of
indemnity payments made under this Section 10.02), expenses and disbursements,
including reasonable attorneys' fees, of whatsoever kind and nature imposed on,
incurred by or asserted against any Indemnitee in any way relating to or arising
out of (i) this Agreement or any of the documents entered into in connection
herewith; (ii) Buyer's interest in the Loans or related Property purchased or
accepted hereunder or the enforcement of any claims thereunder; (iii) any claim
made by any Obligor, or any other party, related to the Loans or related
Property purchased or accepted hereunder, or the administration of the
transactions evidenced by such Loans and related Property or related to any
other transactions between the Obligors or their affiliates and Seller or its
affiliates; or (iv) any environmental claim or liability relating to any real
property securing any Loans.

(b) The foregoing indemnities with regard to any particular
Indemnitee shall not extend to any liability, obligation, loss, damage, penalty,
claim, action, suit, cost, expense or disbursement (i) that results from the
willful misconduct or gross negligence of such Indemnitee or from any breach of
any representation or warranty made by such Indemnitee herein; (ii) that
constitutes any tax based on any Indemnitee's net income, items of tax
preference or gross receipts (except with respect to indemnity payments
hereunder); or (iii) that consists of the failure of any Obligor to pay its
obligations under the Notes as they become due unless such failure results from
a claim of such Obligor against Seller, Guarantor, or any Subsidiary or
Affiliate of any of them, or Buyer otherwise indemnified against hereunder. Any
indemnity payments required under this Section 10.02 shall be paid within thirty
(30) days following notice thereof from the Indemnitee to Seller or Guarantor,
as applicable, (which notice shall describe in

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reasonable detail the matter with respect to which indemnification is required
and shall set forth the computation used in determining the amount of the
indemnity payment). All of the rights and privileges of each Indemnitee under
this Section 10.02, and the rights, privileges and obligations of Seller or
Guarantor, as applicable hereunder, shall survive the expiration or other
termination of this Agreement.

SECTION 10.03 No Waiver: Remedies Cumulative. No failure by
Seller, Guarantor or Buyer to exercise, and no delay in exercising, any right,
power or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, power, or remedy. The rights and remedies provided herein are
cumulative and not exclusive of any right or remedy provided by law.

SECTION 10.04 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.

SECTION 10.05 Consent to Jurisdiction: Waiver of Immunities.
Buyer, Guarantor and Seller hereby irrevocably submit to the jurisdiction of any
state or federal court sitting in the District of Columbia or the State of
Oregon in any action or proceeding brought to enforce or otherwise arising out
of or relating to this Agreement or any Assignment and irrevocably waive to the
fullest extent permitted by law any objection which they may now or hereafter
have to the laying of venue in any such action or proceeding in any such forum,
and hereby further irrevocably waive any claim that any such forum is an
inconvenient forum. The parties agree that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in any other jurisdiction
by suit on the judgment or in any other manner provided by law.

SECTION 10.06 Notices. All notices and other communications
provided for in this Agreement shall be in writing or (unless otherwise
specified) by telex, telegram or cable and shall be sent for next Business Day
delivery to each party at the address set forth under its name on the signature
page hereof, or at such other address as shall be designated by such party in a
written notice to each other party. Except as otherwise specified, all such
notices and communications if duly given or made shall be effective upon
receipt.

SECTION 10.07 Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective Successors and
assigns. Notwithstanding the foregoing, neither Seller nor Guarantor may assign
or otherwise transfer all or any part of its rights or obligations hereunder
without the prior written consent of the other parties, and any such assignment
or transfer purported to be made without such consent shall be ineffective.
Buyer may not at any time sell,

76
<PAGE>
assign or transfer its rights hereunder or the participations therein without
the consent of Seller, except that by executing this Agreement, Seller and
Guarantor shall be deemed to have consented to the sale and assignment of the
Loans and Related Property to NCB Retail Finance Corporation or other special
purpose vehicle established by Buyer.

SECTION 10.08 Capital Markets Funding. Seller and Guarantor
hereby agree to cooperate with Buyer in making such modifications to this
Agreement and the Related Documents, in executing such other documents and
certificates, in causing to be prepared and delivered such opinions,
certificates, financial reports and letters, and in taking such other actions,
including changing accounting firms, as are reasonably necessary to achieve
capital markets funding of the Loans and Related Property or to improve the
execution of such funding.

SECTION 10.09 Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall as to such
jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties waive any
provision of law which renders any provision hereof prohibited or unenforceable
in any respect.

SECTION 10.10 Attorney's Fees. In the event it is necessary
for any party hereto or its Successors or assigns to institute suit in
connection with this Agreement or the breach thereof, the prevailing party in
such suit shall be entitled to reimbursement for its reasonable costs, expenses
and attorney's fees incurred including fees incurred on any appeal.

SECTION 10.11 Setoff. In addition to any rights now or
hereafter granted under applicable law, upon the occurrence of any Termination
Event, Buyer is hereby authorized by Seller and Guarantor at any time, without
notice to Seller and Guarantor, as the case may be, to set off and to
appropriate and to apply to the amounts then owed by Seller or Guarantor, as the
case may be, hereunder to Buyer any and all deposits (general or special,
including, but not limited to, Indebtedness evidenced by certificates of
deposit, whether matured or unmatured, but not including trust accounts) and any
other Indebtedness at any time held or owing by Buyer to Seller or Guarantor, as
the case may be.

SECTION 10.12 Limitation on Third Party Beneficiaries. No
provision, warranty, representation, or agreement herein, whether express or
implied, is intended to or shall be construed as conferring upon any Person not
a party hereto (including, without limitation, any Obligor) any rights or
remedies whatsoever; provided, however, that in the event of a sale of Loans by
Buyer pursuant to Section 10.07 or a securitization pursuant to Section 10.08,
the purchaser or purchasers of the

77
<PAGE>
Loans (or beneficial interests therein) are acknowledged by Seller and Guarantor
to be third party beneficiaries of this Agreement.

SECTION 10.13 Entire Agreement; Amendment. This Agreement
comprises the entire agreement of the parties and may not be amended or modified
except by written agreement of Buyer, Guarantor and Seller. No provision of this
Agreement may be waived except in writing and then only in the specific instance
and for the specific purpose for which given.

SECTION 10.14 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 10.15 Term of Agreement. This Agreement shall
terminate upon the earlier to occur of (i) the reduction of the aggregate
Principal Balance of the Loans (including Liquidated Loans as to which there
remain unpaid Liquidation Losses) to zero or (ii) the date on which this
Agreement is automatically terminated following the occurrence of any of the
specified Termination Events pursuant to Section 9.02; provided, however, that
(a) the rights accrued to Buyer prior to such termination, (b) the obligations
of the Guarantor under this Agreement, and (c) the indemnification provisions
set forth in Section 10.02 shall be continuing and shall survive any termination
of this Agreement.

SECTION 10.16 Counterparts. This Agreement may be executed in
any number of identical counterparts, any set of which signed by all parties
hereto shall be deemed to constitute a complete, executed original for all
purposes.

[End of Article X]

78
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Loan Purchase Agreement (Existing Program) to be executed by their
respective officers or agents thereunto duly authorized as of the date first
above written.

UNITED RESOURCES, INC., as Seller

By:/s/George p. Fleming
----------------------------
Its President

By:/s/Mark Tweedie
----------------------------
Its Asst Secretary

Notice Address:
6433 S.E. Lake Road
Portland, Oregon 97222
Attention: President

UNITED GROCERS, INC., as Guarantor

By:/s/Charles E. Carlbom
----------------------------
Its President & CEO

By:/s/Mark Tweedie
----------------------------
Its Vice President

Notice Address:
6433 S.E. Lake Road
Portland, Oregon 97222
Attention: President

79
<PAGE>

NATIONAL CONSUMER COOPERATIVE BANK, as Buyer

By:/s/Tom Sewell
----------------------------
Its V.P.

By:
----------------------------
Its

Notice Address:
1401 Eye Street, N.W.
Suite 700
Washington, D.C. 20005

80
<PAGE>

LOAN ORIGINATION AND PURCHASE AGREEMENT
DATED AS OF JANUARY 30,1998
EXHIBIT ( )
SELLER AND GUARANTOR CORPORATE NAMES

GUARANTOR
UNITED GROCERS, INC.

SELLER
UNITED RESOURCES, INC.
dba in Washington: UNITED RESOURCES OREGON, INC.
Dba in California OREGON UNITED RESOURCES, INC.

Exhibit 4.D2
EXECUTION COPY

AMENDED AND RESTATED
LOAN PURCHASE AGREEMENT
(Holdback Program)

dated as of

January 30, 1998

between

UNITED RESOURCES, INC.
as Seller

and

NATIONAL CONSUMER COOPERATIVE BANK
as Buyer

<PAGE>
TABLE OF CONTENTS
Page
----

ARTICLE I

DEFINITIONS
-----------

SECTION 1.01 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 General Principles Applicable to
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 1.03 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . 14

ARTICLE II

THE COMMITMENT
--------------
SECTION 2.01 Loans Sold and Purchased as of
Effectiveness Date; Agreement to
Purchase and Sell Loans . . . . . . . . . . . . . . . . . . 15
SECTION 2.01A Incremental Purchase . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.02 Agreement to Accept Renewal Notes. . . . . . . . . . . . . . 19

ARTICLE III

CLOSING PROCEDURE; CONDITIONS TO PURCHASE
-----------------------------------------

SECTION 3.01 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.02 Acceptance - Renewal Loans . . . . . . . . . . . . . . . . . 20
SECTION 3.03 Effective Date for each Purchase . . . . . . . . . . . . . . 21
SECTION 3.04 Buyer's Conditions Precedent to
Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.05 Additional Delivery Requirements
for Effectiveness Date . . . . . . . . . . . . . . . . . . . 24
SECTION 3.06 Seller's Conditions Precedent to
Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

ARTICLE IV

REPRESENTATIONS AND WARRANTIES
------------------------------

SECTION 4.01 Seller's Corporate Representations
and Warranties . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.02 Seller's Closing Date
Representations and Warranties with
respect to Loans . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.03 Seller's Renewal Date
Representations and Warranties . . . . . . . . . . . . . . 34
SECTION 4.04 Buyer's Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 35

i
<PAGE>
Page
----

SECTION 4.05 Repurchase Upon Breach of Certain
Representations and Warranties . . . . . . . . . . . . . . . 36

ARTICLE V

SERVICING AND COLLECTION
------------------------

SECTION 5.01 Servicing and Collections . . . . . . . . . . . . . . . . . 37
SECTION 5.02 Documentation and Servicing;
Maintenance of System and Lien
Priority . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.03 Lock Boxes . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.04 Payment of Guaranty Fees; Periodic
Payments and Other Amounts . . . . . . . . . . . . . . . . . 38
SECTION 5.05 Applicable Rate. . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.06 Access to Certain Documentation and
Certain Information Regarding the
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

ARTICLE VI

SELLER'S COVENANTS
------------------

SECTION 6.01 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.02 Special Covenant of Seller . . . . . . . . . . . . . . . . . 45

ARTICLE VII

SELLER OBLIGATIONS AND REPURCHASE OPTIONS
-----------------------------------------

SECTION 7.01 Purchase of Interest Rate
Protection . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.02 Optional Repurchase of Defaulted
Loans and after Obligor Default . . . . . . . . . . . . . . 47
SECTION 7.03 Minimal Balances . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.04 Optional Repurchase of Special
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.05 Transfer of Interests . . . . . . . . . . . . . . . . . . . 48

ARTICLE VIII

TERMINATION EVENTS
------------------

SECTION 8.01 Termination Events . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.02 Consequences of Termination Event . . . . . . . . . . . . . 50
SECTION 8.03 Remedies of a Secured Party . . . . . . . . . . . . . . . . 51

ii
<PAGE>
Page
----

ARTICLE IX

MISCELLANEOUS
-------------

SECTION 9.01 Further Assurances . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.02 Indemnities . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.03 No Waiver: Remedies Cumulative. . . . . . . . . . . . . . . 53
SECTION 9.04 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.05 Consent to Jurisdiction: Waiver of
Immunities . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.07 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.08 Capital Markets Funding . . . . . . . . . . . . . . . . . . 54
SECTION 9.09 Severability . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.10 Attorney's Fees. . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.11 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.12 Limitation on Third Party
Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.13 Term of Agreement. . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.14 Entire Agreement; Amendment . . . . . . . . . . . . . . . . 55
SECTION 9.15 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.16 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 55

Exhibit A - Credit and Collection Policy
Exhibit B - Permitted Lockbox Address and Permitted Lockbox Bank
Exhibit C - Notice of Assignment
Exhibit D - Form of Renewal Note
Exhibit E - Form of Notice of Incremental Purchase
Exhibit F - Recent Dates for Lien Searches
Exhibit G - Corporate and "Doing Business" Names of Seller and
Guarantor
Exhibit H - Information Regarding Litigation, Etc.
Exhibit I - Form of Officer's Certificate of Seller
(Incremental Purchase)
Exhibit J - Form of Officer's Certificate of Guarantor
(Incremental Purchase)

iii
<PAGE>
AMENDED AND RESTATED LOAN PURCHASE AGREEMENT
--------------------------------------------
(HOLDBACK PROGRAM)
------------------
This LOAN PURCHASE AGREEMENT (Holdback Program) is executed as
of January 30, 1998 between UNITED RESOURCES, INC., an Oregon corporation, as
Seller ("United Resources" or "Seller") and NATIONAL CONSUMER COOPERATIVE BANK,
a financial institution organized under the laws of the United States ("Buyer").

RECITALS
--------

WHEREAS, Seller and Buyer entered into a certain Loan Purchase
and Servicing Agreement (Holdback Program) dated as of September 28, 1995 and
certain amendments thereto as of September 30, 1996 and December 30, 1996 (as
amended, the "Original Holdback Agreement"), which provides for United Resources
to sell and Buyer to purchase Loans satisfying the terms and conditions of the
Original Holdback Agreement and for United Resources to service the Loans sold
to Buyer;

WHEREAS, simultaneous with the execution of the Original
Holdback Agreement, United Grocers, Inc. ("United Grocers" or "Guarantor")
entered into a Guaranty Agreement (Holdback Program) (as amended, the "Original
Holdback Guaranty Agreement") with Buyer, wherein Guarantor provides to Buyer
certain guaranties with respect to the Loans;

WHEREAS, United Resources, United Grocers and Buyer desire to
make a number of significant changes to the Original Holdback Agreement and the
Original Guaranty Agreement;

WHEREAS, United Resources and Buyer have determined to enter
into this Amended and Restated Loan Purchase Agreement (Holdback Program) (this
"Agreement") to reflect and govern such changed program; and

WHEREAS, Buyer currently owns Loans purchased under the
Original Holdback Agreement and may purchase additional Loans pursuant to the
terms and conditions set forth in this Agreement.

NOW, THEREFORE, for full and fair consideration, the parties
hereto agree that this Amended and Restated Loan Purchase Agreement (Holdback
Program) shall read as follows:

ARTICLE I

DEFINITIONS
-----------

SECTION 1.01 Defined Terms. The following terms, as used
herein, have the following meanings:

"Additional Loan" shall mean that certain loan sold by United
Resources to NCB in an Incremental Purchase on September 30, 1996, which
Additional Loan satisfied the Loan eligibility

<PAGE>
30, 1996, which Additional Loan satisfied the Loan eligibility requirements set
forth in Section 4.02 of this Agreement on the applicable Closing Date.

"Aggregate Exposure" shall mean, for any Obligor Group, an
amount, without duplication, equal to the sum of (i) the aggregate Principal
Balance of all Loans with respect to which any member of such Obligor Group is
an Obligor or Loan Guarantor and (ii) the aggregate outstanding principal amount
of all promissory notes and evidences of indebtedness which are owed or
guaranteed by any member of the related Obligor Group to or for the benefit of
Buyer or which give Buyer exposure to the credit of any member of the related
Obligor Group.

"Applicable Rate" shall mean, for each Loan, during each
Interest Accrual Period, a per annum rate of LIBOR determined on the related
LIBOR Determination Date calculated on the basis of actual days elapsed and a
360-day year, plus (i) for each First Delivery Loan, 140 basis points and (ii)
for each Second Delivery Loan, 170 basis points.

"Available Funds" shall mean Collections, Principal
Prepayments, Payaheads, Net Liquidation Proceeds, Insurance Proceeds, Guaranty
Payments and Repurchase Proceeds.

"Bank Act" shall mean the National Consumer Cooperative Bank
Act, 12 U.S.C. ss.ss. 3001-3051, and any regulations and policies adopted
thereunder.

"Business Day" shall mean any day other than Saturday, Sunday
and a day on which banks in Washington, D.C. are authorized to close.

"Buyer" or "NCB" shall mean National Consumer Cooperative
Bank, a financial institution organized under the laws of the United States, and
its Successors and assigns.

"Cash Interest Expense" shall mean, for any period, gross
interest expense for such period determined in accordance with U.S. GAAP.

"Closing Date" shall mean the date of each Incremental
Purchase.

2
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.

"Collections" shall mean any and all amounts received from or
on behalf of the Obligors in respect of Loans and related Notes or Related
Documents during any applicable Due Period regardless of how received and
including, without limitation, receipt of Monthly Payments and payments from
guarantors.

"Consolidated Net Worth" shall mean, with respect to any
Person, as of any date of determination, the consolidated balance sheet "net
worth" of such Person determined in accordance with U.S. GAAP.

"CPLTD" shall mean, with respect to any Person, as of any
date, that portion of such Person's long-term Debt (that is, Debt with a term of
greater than one year) which matures and is due and payable within one year.

"Credit and Collection Policy" means, with respect to Seller
and Servicer, the credit, collection, enforcement and other policies and
practices of the Seller, relating to Loans, related Notes and Related Documents
existing on the Effectiveness Date and as set forth in Exhibit A hereto, as the
same may be modified from time to time with the consent of the Buyer, which
consent will not he unreasonably withheld.

"Credit Providers" shall mean the financial institutions party
to the Credit Agreement.

"Cut-Off Date" shall mean the first (1st) day of the month in
which each Incremental Purchase occurs.

3
<PAGE>
total liabilities as shown on the liability side of a balance sheet as of the
date as of which indebtedness is determined, (ii) indebtedness secured by any
Lien, whether or not such indebtedness shall have been assumed, (iii) 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 (iv) any other obligations of
such Person under Capital Leases. For all purposes of this Agreement, the Debt
of any Person shall include all recourse Debt of any partnership or joint
venture formed as a partnership where such Person is a general partner or is
otherwise liable for the Debt of such partnership or joint venture.

"Due Date" shall mean the day of the month on which the
Monthly Payment is due from the Obligor on a Loan.

"Due Period" shall mean, with respect to any Payment Date, the
calendar month preceding the month in which such Payment Date occurs.

"Effectiveness Date" shall mean January 30, 1998.

"Eligible Loan" shall mean a Loan as to which each applicable
representation and warranty in Section 4.02 is true and accurate on the
applicable Closing Date.

4
<PAGE>
"Environmental Laws" means all federal, state and local
statutes, regulations, ordinances, and requirements, now or hereafter in effect,
pertaining to environmental protection, contamination or cleanup, including
without limitation (i) the Federal Resource Conservation and Recovery Act of
1976 (42 U.S.C. ss. 6901, et seq.), (ii) the Federal Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), (iii)
the Federal Hazardous Materials Transportation Control Act (49 U.S.C. ss. 1801,
et seq.) , (iv) the Federal Clean Air Act (42 U.S.C. ss. 7401, et seq.) , (v)
the Federal Water Pollution Control Act, Federal Clean Water Act (33 U.S.C. ss.
1251 et seq.), (vi) the Federal Insecticide, Fungicide, and Rodenticide Act,
Federal Pesticide Act (7 U.S.C. ss. 136, et seq.), (vii) the Federal Toxic
Substances Control Act (15 U.S.C. ss. 2601 et seq.), and (viii) the Federal Safe
Drinking Water Act (42 U.S.C. ss. 300f et seq.), all as now or hereafter
amended.

"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.

"Existing Guaranty" shall mean the "Guaranty" provided by the
Guarantor in accordance with Article VII of the Existing Loan Purchase
Agreement.

"Existing Loan Purchase Agreement" shall mean the Amended and
Restated Loan Purchase Agreement (Existing Program) dated as of January 30,
1998, by and among United Resources, Inc., as seller, Grocers, Inc., as
guarantor, and NCB, as buyer, as the same may be amended and supplemented from
time to time.

"First Delivery Loans" shall mean the loans (including the
Additional Loan) sold and transferred by Seller to Buyer pursuant to the
Original Holdback Agreement on or before September 30, 1996.

"Government Approval" means an approval, permit, license,
authorization, certificate or consent of any Governmental Authority.

"Guarantor" shall mean United Grocers, Inc., an Oregon
corporation, or its successors or assigns.

"Guarantor Default" shall have the meaning set forth in
Section 5.01 of the Guaranty Agreement.

"Guaranty" shall mean the first loss guaranty of Liquidation
Losses provided by Guarantor in accordance with the Guaranty Agreement.

5
<PAGE>
"Guaranty Agreement" means the Amended and Restated Guaranty
Agreement (Holdback Program) dated as of January 30, 1998, by and between Buyer
and Guarantor, as the same may be amended and supplemented from time to time.

"Guaranty Amount" shall have the meaning given in the Guaranty
Agreement.

"Guaranty Collateral" shall mean the collateral in which the
Guarantor grants a security interest in favor of the Buyer pursuant to Section
2.03 of the Guaranty Agreement.

"Guaranty Fee" shall have the meaning given in Section 2.02 of
the Guaranty Agreement.

"Guaranty Payments" shall mean the amounts paid by Guarantor
to the Buyer pursuant to the Guaranty or the Repurchase Guaranty, as applicable.

"Hazardous Substances" means any substance or material defined
or designated as hazardous or toxic waste, hazardous or toxic material, a
hazardous, toxic or radioactive substance, or other similar terms, by any
federal, state or local environmental statute, regulation or ordinance presently
in effect, including but not limited to the Environmental Laws.
"Incremental Purchase" shall have the meaning ascribed to such
term in Section 2.01A hereof.

"Interest Accrual Period" shall mean, with respect to each
Payment Date, the period commencing on the first day of the month preceding such
Payment Date and ending on the last day of the month preceding such Payment
Date, except that, with respect to the first Payment Date, the initial Interest
Accrual Period shall commence on the Initial Closing Date.

"LIBOR" shall mean, for any Interest Accrual Period, the
reserve-adjusted London interbank rate for one-month Euro-Dollar deposits
determined by the Buyer for each interest Accrual Period in accordance with the
provisions of Section 5.09.

"LIBOR Determination Date" shall mean the second Business Day
prior to the commencement of each Interest Accrual Period.

6
<PAGE>
any real or personal property in which such Person has or hereafter acquires any
interest.

"Liquidated Loan" shall mean any Defaulted Loan as to which
NCB has determined that all amounts which it reasonably and in good faith
expects to recover have been recovered from or on account of such Loan;
provided, however, that a Defaulted Loan which has not been determined to have
become a Liquidated Loan within three months after becoming a Defaulted Loan
shall be deemed a Liquidated Loan on the third month anniversary date of such
Loan becoming a Defaulted Loan. A Loan deemed to be a Liquidated Loan shall be
due and payable on the date on which such Loan so deemed.

"Liquidation Losses" shall mean, with respect to any
Liquidated Loan, on any date of determination, the amount by which (A) the sum
of (i) the Principal Balance of such Loan, (ii) accrued and unpaid interest
thereon at the Applicable Rate and (iii) unreimbursed reasonable fees and
expenses incurred by NCB in servicing the liquidation of such Defaulted Loan,
exceeds (B) the Net Liquidation Proceeds and Insurance Proceeds thereon, if any.

"Loan" shall mean each loan originated by Seller in the
ordinary course of its business and sold and transferred (in its entirety or
through a participation interest therein) to the Buyer pursuant to this
Agreement, together with the rights and obligations of a holder thereof,
payments thereon and proceeds therefrom, the Loans subject to this Agreement
being identified on the Loan Schedule. "Loan" shall consist of First Delivery
Loan and Second Delivery Loan and also include any Renewal Loan accepted by the
Buyer under this Agreement. "Loan" shall also include a Loan sold and
transferred by Seller under the Original Holdback Agreement and owned by Buyer
on the Effectiveness Date.

"Loan File" means the documents pertaining to a Loan,
including the related Note and Related Documents delivered to the Buyer or its
agent in accordance with Section 2.01 of this Agreement in connection with the
sale of the Loan by Seller and the Renewal Note and Related Documents delivered
to the Buyer pursuant to Section 2.02 of this Agreement.

7
<PAGE>
"Loan Interest Rate" shall mean, with respect to any date of
determination, the then applicable annual rate of interest borne by a Loan,
pursuant to its terms, which, as of the applicable Closing Date, is shown on the
Loan Schedule.

"Loan Schedule" shall mean, the schedule of Loans delivered to
the Buyer at the time of each Incremental Purchase, such schedule identifying
each Loan to be purchased in such Incremental Purchase by the name and address
of the Obligor (and, if different from such address, the location of the grocery
store to which such Loan relates) and the following information with respect to
each such Loan: (i) the Principal Balance as of the close of business on the
applicable Closing Date, (ii) if a participation interest in such Loan is being
purchased hereunder, the percentage participation interest being purchased,
(iii) the account number on Seller's records, (iv) the original principal amount
of the Loan, (v) the date the Loan was made and original number of months to
maturity and the remaining number of months to maturity as of the applicable
Cut-Off Date, (vi) the Loan Interest Rate as of the applicable Cut-Off Date and
whether fixed or variable, (vii) when the first Monthly Payment was due, (viii)
the Monthly Payment as of the applicable Cut-Off Date, (ix) the remaining number
of months in the amortization period as of the applicable Cut-Off Date, (x) if
the Loan has a variable Loan Interest Rate, the margin which is added to the
Prime Rate or LIBOR, as applicable, to determine the Loan Interest Rate, and the
maximum and minimum Loan Interest Rates, if applicable, the Loan Interest Rate
adjustment frequency and the Loan payment adjustment frequency, (xi)
amortization method and period, (xii) the Aggregate Exposure which relates to
such Loan, (xiii) whether such Loan has Renewal Loan provisions, and (xiv)
whether such Loan is secured by real estate Collateral.

"MAI" shall mean Member of the American Institute of Real
Estate Appraisers.

"Maximum Purchase Amount" shall mean (i) with respect to First
Delivery Loans, $14,000,000, and (ii) with respect to Second Delivery Loans,
$10,000,000, unless otherwise increased or reduced by the parties hereto.

"Monthly Interest Amount" shall have the meaning given in
Section 5.04(c).

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<PAGE>
"Monthly Payment" shall mean the monthly payment of principal
and/or interest required to be made by an Obligor on the related Loan pursuant
to the terms of the related Note.

"Multiemployer Plan" shall mean, for any Person, a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is or was
at any time during the current year or the immediately preceding five years
contributed to by such Person or any member of a Controlled Group on behalf of
its employees and which is covered by Title V of ERISA.

"Net Liquidation Proceeds" shall mean Liquidation Proceeds net
of (i) any reimbursements to Buyer made therefrom for any expenses incurred in
liquidation loans and (ii) amounts required to be released to the related
Obligor pursuant to applicable law.

"New Origination Guaranty" shall mean the "Guaranty" provided
by Guarantor in accordance with the New Origination Guaranty Agreement.

"New Origination Loan Agreement" shall mean the Loan
Origination and Purchase Agreement dated as of January 30, 1998, by and between
United Resources, as seller, and NCB, as buyer, as the same may be amended and
supplemented from time to time.

"Note" shall mean any promissory note evidencing the
indebtedness of an Obligor under a Loan, and shall include a Renewal Note
accepted by the Buyer under this Agreement.

"Notice of Assignment" shall mean a Notice of Assignment
executed by Seller in substantially the form of the annexed Exhibit C.

"Obligor Default" shall mean (a) the failure by a Obligor to
pay when due (whether a Monthly Payment, at maturity, upon required prepayment,
acceleration, demand or otherwise) the Loan and the indebtedness evidenced by
related Note or any Related Document, or any interest or premium thereon which
failure continues after the applicable grace period, if any, specified in such
Note or Related Document relating to such Loan; or (b) the failure by an Obligor
to perform any term or covenant on its part to be performed under any Loan,
related Note or Related Document which failure continues after the applicable

9
<PAGE>
Related Document which failure continues after the applicable grace period, if
any, specified in the Note or Related Document, if the effect of such failure to
perform is to accelerate or to permit the acceleration of the maturity of the
indebtedness evidenced by such Note or Related Document; or (c) the occurrence
of an event or condition whereby the indebtedness related to the Loan of any
obligor shall be declared to be due and payable or required to be prepaid (other
than by regularly scheduled required prepayment) prior to the stated maturity
thereof.

"Original Holdback Agreement" shall have the meaning given in
the Recitals hereto.

"Obligor Group" shall include an Obligor and any of its
Affiliates and Subsidiaries.

"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.

"Payment Date" shall mean the twenty second (22nd) day of each
calendar month unless such day is not a Business Day, in which event, "Payment
Date" shall mean the next succeeding Business Day.

"Periodic Payment" shall have the meaning given in Section
5.04.

"Permitted Lockbox" shall mean a post office box or other
mailing location identified on Exhibit B to this Agreement maintained by a
Permitted Lockbox Bank for the purpose of receiving payments made by the
Obligors or such other post office box or mailing location as Buyer may
designate from time to time.

"Permitted Lockbox Bank" shall mean a bank identified on
Exhibit B to this Agreement or such other bank as Buyer may designate from time
to time.

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<PAGE>
"Plan" shall mean, for any Person, at any time, an employee
pension benefit plan, other than a Multiemployer Plan, which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code and is either (i) maintained by such Person, any Subsidiary of such Person
or any member of a Controlled Group for employees of such Person or any member
of such Controlled Group or (ii) maintained pursuant to collective bargaining
agreement or other arrangement under which more than one employer makes
contributions and to which such Person or any member of a Controlled Group is
then making or accruing an obligation to make contributions or has within the
preceding five (5) plan years made contributions.

"Primary Collateral" shall mean that portion of the Collateral
in which Seller had, prior to the sale and assignment hereunder, first priority
perfected security interests; provided that real estate Collateral shall not be
considered Primary Collateral unless the related Loan has Minimum Documentation.

"Principal Balance" shall mean, with respect to any Loan, at
any date of determination, (i) the principal balance of the Loan (or if a
participation interest in such Loan is being purchased hereunder, the product of
(a) the percentage applicable participation interest specified with respect to
such Loan in the applicable Loan Schedule times (b) the principal balance of the
Loan) outstanding as of the applicable Cut-Off Date, after application of the
principal payments received on or before such date, minus (ii) the sum of (a)
the principal portion of the Monthly Payments received during each Due Period
ending prior to the most recent Payment Date, which were distributed pursuant to
Section 5.04 on any previous Payment Date, and (b) all Principal Prepayments,
Payaheads, Insurance Proceeds, Net Liquidation Proceeds, Guaranty Payments,
payments under the Existing Guaranty and New Origination Guaranty and Repurchase
Proceeds to the extent applied by NCB as recoveries of principal which were
distributed pursuant to Section 5.04 on any previous Payment Date.

"Prior Note" shall have the meaning given in the definition of
"Renewal Note".

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<PAGE>
"Property" shall mean the Loans, the related Notes, Related
Documents, Collateral pledged to secure the Loans, and other rights, title and
interest of Seller conveyed and sold pursuant to Section 2.01(a) or conveyed and
accepted by Buyer pursuant to Section 3.02 hereof.

"Purchase Price" shall have the meaning given in Section 3.01.

"Rating Agency" shall mean Standard & Poor's Corporation,
Moody's Investors Service, Inc., or any Successor of either, or any other
nationally recognized rating agency.

"Renewal Balance" shall mean for each Renewal Note, the
Principal Balance evidenced thereby on its Renewal Date.

"Renewal Date" shall have the meaning given in the definition
of "Renewal Note."

"Renewal Loan" shall mean a loan evidenced by a Renewal Note.

"Renewal Note" shall mean a Note accepted by Buyer (i) which
is substantially in the form of the annexed Exhibit D (ii) which is executed by
all of the Obligors and Loan Guarantors of a note related to a Loan previously
sold to Buyer ("Prior Note") which Prior Note was to be paid in full on the date
the Renewal Note first becomes effective ("Renewal Date"); (iii) which evidences
an obligation to repay a principal amount equal to or less than the principal
amount required to be paid by the Obligor under the Prior Note on the Renewal
Date; (iv) which provides for monthly principal payments in amounts not less
than the monthly principal payments required pursuant to the terms of the Prior
Note; (v) which provides that on and after the first Renewal Date after the
purchase by the Buyer hereunder, the related Loan will fully amortize over the
remaining term to maturity; and (vi) which remains subject to and secured by all
of the Related Documents applicable to the Prior Note (as the same may be
amended and restated by the terms of the Renewal Note).

"Repurchase Amount" shall mean the amount set forth as such in
Section 2.01(e).

"Repurchase Guaranty" shall mean the guaranty of Seller's
repurchase obligation provided by Guarantor pursuant to the Guaranty Agreement.

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<PAGE>
"Repurchased Loans" shall mean all Loans purchased by or on
behalf of Seller, whether through a payment of Repurchase Proceeds by Seller
pursuant to Sections 2.01(e), 2.02(c), 3.02, 4.05, 7.02, 7.03, 7.04 and 8.02, or
through a payment by the Guarantor on its Repurchase Guaranty pursuant to the
Guaranty Agreement.

"Repurchase Proceeds" shall mean the amounts received from
Seller with respect to a Repurchased Loan.

"Responsible Officer" shall mean when used with respect to the
Buyer, Guarantor or Seller, the chairman of the Board of Directors, any vice
chairman of the Board of Directors, the chairman of the executive committee, any
vice chairman of the executive committee, the president, any vice president
(whether or not designated by numbers or words added before or after the title
"vice president"), the secretary, the treasurer, any assistant treasurer, or any
other officer or assistant officer of the Buyer, Guarantor or Seller customarily
performing functions similar to those performed by the Persons who at the time
shall be such officers, respectively.

"Second Delivery Loans" shall mean the loans sold and
transferred by Seller to Buyer pursuant to the Original Holdback Agreement or
this Agreement on and after December 30, 1996.

"Security Documents" shall have the meaning given in the
Credit Agreement.

"Seller" shall mean United Resources, Inc., an Oregon
corporation, and its Successors and assigns.

"Subsidiary" shall mean, with respect to any Person, any
corporation, limited liability company or partnership directly or indirectly
controlled by such Person. For the purposes of this definition, "controlled by"
shall mean the possession, directly or indirectly of the power to direct or
cause the direction of the management and policies of such Subsidiary, whether
through the ownership of voting securities, by contract or otherwise.

"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.

"Termination Event" shall have the meaning given in Section
8.01.

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<PAGE>
"Unfunded Vested Liability" shall mean, with respect to any
Person and any Plan, at any time, the amount (if any) by which (a) the present
value of all vested nonforfeitable benefits under such Plan exceeds (b) the fair
market value of all Plan assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plan, but only to the extent that
such excess represents a potential liability of such Person, any Subsidiary or
any member of the Controlled Group to the PBGC of the Plan under Title IV of
ERISA.

"U. S. GAAP" has the meaning specified in Section 1.03.

SECTION 1.02 General Principles Applicable to Definitions.
Definitions given in Section 1.01 shall be equally applicable to both singular
and plural forms of the terms therein defined and references herein to "he" or
"it" shall be applicable to Persons whether masculine, feminine or neuter.
References herein to any document including, without limitation, this Agreement,
a Loan, a Note and a Related Document shall be deemed a reference to such
document as it now exists, and as, from time to time hereafter, the same may be
amended.

[End of Article I]

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ARTICLE II

THE COMMITMENT
--------------

SECTION 2.01 Loans Sold and Purchased as of Effectiveness
Date; Agreement to Purchase and Sell Loans. (a) Seller and Buyer acknowledge
that prior to the Effectiveness Date, under the terms of the Original Holdback
Agreement, Seller did assign, sell, set-over, transfer and otherwise convey, and
Buyer did purchase Loans and that such Loans and related property identified on
the Loan Schedule are owned by Buyer as of the Effectiveness Date. At the time
of each Incremental Purchase pursuant to Section 2.01A hereof, Seller does
hereby assign, sell, set-over, transfer and otherwise convey to the Buyer,
without recourse (but subject to Seller's covenants, representations, warranties
and indemnities specifically provided herein), all of Seller's right, title and
interest in, to and under (i) each Loan purchased on the date of such
incremental Purchase and any and all monies of whatsoever nature payable
pursuant to each such Loan after the applicable Cut-Off Date, including payments
on the related Note, all Insurance Proceeds, any Net Liquidation Proceeds, other
Collections, and any other amounts payable in connection with the termination of
such Loan, (ii) all rights, powers, and remedies of Seller under or in
connection with each such Loan, whether arising under the terms of such Loan, by
statute, at law or in equity, or otherwise arising out of any default by the
Obligor under such Loan, including all rights to exercise any election or option
or to make any decision or determination or to give or receive any notice,
consent, approval or waiver thereunder, (iii) all security interests and lien
rights of Seller in each item of Collateral pledged to secure any such Loan, all
additions, alterations, accessions or modifications thereto or replacement of
any part thereof, and all intangibles and other rights associated with the
Collateral, (iv) all rights of Seller under each Related Document, in each case
as the same may be modified, amended, supplemented or restated from time to
time, (v) all documents of title, books and records concerning the foregoing
property (including all computer programs, tapes, disks and related items
containing any such information), and (vi) all proceeds, products, rents or
profits of the foregoing of any nature whatsoever, including all Insurance
Proceeds and Net Liquidation Proceeds (with each Renewal Loan, related Renewal
Note and Related Documents conveyed by Seller and accepted by Buyer pursuant to
Section 3.02 hereof, collectively, the "Property"). The foregoing transfer,
sale, assignment and conveyance does not constitute and is not intended to
result in the creation, or an assumption by the Buyer, of any obligation of
Seller or any other Person in connection with any Loan, the related Note,
Related Documents or Collateral or under any agreement or instrument relating
thereto, including any obligation to any Obligor.

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<PAGE>
(b) In connection with each transfer, sale and assignment of
Loans, the Buyer hereby directs Seller to deliver to the Buyer as of the date of
each Incremental Purchase the Loan Files with respect to the Loans transferred
and sold on the date of each such Incremental Purchase, which shall include, but
not be limited to, the following:

(ii) executed original counterparts of the Related
Documents, together with executed originals of all modifications or
amendments thereof;

(iii) irrevocable power of attorney of Seller to the
Buyer to execute, deliver, file, record or otherwise deal with the
Collateral for the Loans in accordance with this Agreement;

(iv) documents evidencing or related to any insurance
policies; and

(v) with respect to Loans secured by mortgages on
real property, Buyer shall have received (A) either: (i) the original
mortgage, with evidence of recording thereon, (ii) a copy of the
mortgage certified as a true copy by a Responsible Officer of Seller
where the original has been transmitted for recording until such time
as the original is returned by the public recording officer or duly
licensed title or escrow officer or (iii) a copy of the mortgage
certified by the public recording office in those instances where the
original recorded mortgage has been lost; (B) either: (i) the original
assignment of mortgage from Seller endorsed as follows: "National
Consumer Cooperative Bank," with evidence of recording thereon
(provided, however, that where permitted under the laws of the
jurisdiction wherein the mortgaged property is located, the assignment
of mortgage may be effected by one or more blanket assignments for
Loans secured by mortgaged properties located in the same county), or
(ii) a copy of such assignment of mortgage certified as a true copy by
a Responsible Officer of Seller where the original has been transmitted
for recording (provided, however, that where the original assignment or
mortgage is not being delivered to the Buyer, each such Responsible
Officer may complete one or more blanket certificates attaching copies
of one or more assignments of mortgage relating to the mortgages
originated by Seller); and (C) either: (i) originals of all intervening
assignments, if any, showing a complete chain of

16
<PAGE>
title from the originator to Seller, including warehousing assignments,
with evidence of recording thereon if such assignments were recorded,
(ii) copies of any assignments certified as true copies by a
Responsible Officer of Seller where the originals have been submitted
for recording until such time as the originals are returned by the
public recording officer, or (iii) copies of any assignments certified
by the public recording office in any instances where the original
recorded assignments have been lost; and (D) all available
documentation relating to appraisals and environmental surveys.

(c) In addition, concurrently with or prior to each
Incremental Purchase, Seller agrees to cause any UCC-1 financing statements,
UCC-3 assignments or other instruments necessary to perfect the ownership or
security interests granted and assigned by Seller to the Buyer in the Loans and
other Property transferred and sold on the date of each such Incremental
Purchase (other than UCC-1 financing statements naming the Obligors under the
Loans as debtors) to be filed or recorded in all such appropriate places as are
required to protect the Buyer's interest in such Loans and such other Property,
and to deliver a file-stamped copy of such financing statements or other
evidence of such filings to the Buyer. Seller and Buyer agree that with respect
to each Loan, Related Document and item of Primary Collateral, Seller will make
all filings and take all such other actions necessary to perfect Buyer's first
priority security interest therein, and, with respect to each item of Collateral
which is not Primary Collateral, Seller will make all filings and take all such
other actions necessary to perfect Buyer's security interest therein to the same
level of priority enjoyed by the Seller at the time of the Incremental Purchase
of the related Loan.

(d) It is the intention of the parties to this Agreement that
each conveyance of Seller's right, title and interest in and to the Property
pursuant to this Agreement shall constitute a purchase and sale and not a loan.
If, notwithstanding the foregoing, the conveyance of the Property to the Buyer
hereunder is characterized by any third party as a pledge, the parties intend
that Seller shall be deemed hereunder to have granted to the Buyer a first
priority perfected security interest in all of Seller's right, title and
interest in, to and under the Loans, the Notes, the related Collateral and
Related Documents, and all monies due or to become due with respect thereto
after the applicable Cut-Off Date, and that this Agreement shall constitute a
security agreement under applicable law.

(e) If the Buyer determines that any document or documents
constituting a part of a Loan File are missing or defective (that is, mutilated,
damaged, defaced, incomplete, improperly dated, clearly forged or otherwise
physically altered) with respect to any Loan in any respect which materially and
adversely affects the interests of Buyer, then Buyer shall

17
<PAGE>
promptly notify Seller, whereupon Seller shall have a period of 30 days, within
which to correct or cure any such defect. If any such material defect has not
been corrected or cured in all material respects as described below,
notwithstanding any other provision of this Agreement, Seller will repurchase
the related Loan from the Buyer at a price equal to the sum (without
duplication) of (i) the difference between (A) the Principal Balance of such
Loan and (B) the aggregate of the principal portion of the Monthly Payments then
received and retained by Buyer (after taking into account any payment of
principal made by the related Obligor on such day), plus (ii) an amount equal to
the interest accrued at the applicable Loan Interest Rate on such Repurchased
Loan through the last day of the Due Period during which such repurchase occurs,
to the extent such amount was not previously received during such Due Period
from the Obligor as a Monthly Payment (the "Repurchase Amount"). The Repurchase
Amount shall be paid by Seller to the Buyer in immediately available funds by
the last day of the Due Period during which such repurchase obligation arises
and, upon receipt by Buyer of such deposit, Buyer shall release or cause to be
released to Seller the related Loan Files and shall execute and deliver or cause
to be executed and delivered such instruments of transfer or assignment of such
Loan, the security interest in the related Property, in each case without
recourse, representation or warranty, as Seller shall reasonably request (as
shall be prepared by and at the expense of Seller).

SECTION 2.01A Incremental Purchase. (a) Prior to September 30,
1996, in accordance with the provisions of the Original Holdback Agreement,
Seller sold and Buyer purchased the First Delivery Loans and Property related
thereto, such Loans having an aggregate Principal Balance at the time of the
final sale and purchase thereof not in excess of the applicable Maximum
Purchase Amount. On and after September 30, 1996 and prior to the Effectiveness
Date, in accordance with the provisions of the Original Holdback Agreement,
Seller sold and Buyer purchased Second Delivery Loans and Property related
thereto. Subject to the terms and conditions hereof, including Sections 3.04,
3.05 and 3.07 hereof, the Seller may at any time on and after the Effectiveness
Date prior to September 30, 1997 (or such later date as is approved by Buyer)
sell to the Buyer and the Buyer shall purchase from the Seller certain
identified Second Delivery Loans and Property related thereto. Each sale and
purchase of Loans under the Original Holdback Agreement hereunder is referred
to as an "Incremental Purchase." Each Incremental Purchase shall be for a
principal amount of at least $1,000,000 (or such lesser amount as is approved
by Buyer) (other than the final Incremental Purchase which may be in such
lesser amount as agreed to by Buyer or such other lesser amount as is approved
by Buyer). Buyer shall not be obligated to make an Incremental Purchase (or any
portion thereof) with respect to Second Delivery Loans to the extent such
Purchase (or any portion thereof), together with all previous Incremental
Purchases of Second Delivery Loans, would exceed the applicable Maximum
Purchase Amount.

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<PAGE>
(b) Seller shall provide the Buyer with written notice of its
intention to request an Incremental Purchase in the form of Exhibit E hereto no
later than ten (10) Business Days before each Incremental Purchase and shall
provide Buyer with at least five (5) Business Days to review the Loan Files
relating to each Incremental Purchase. Upon satisfaction of all terms and
conditions contained herein, Buyer shall pay to Seller the Purchase Price of
each Incremental Purchase on the applicable Closing Date.

(b) The parties to this Agreement intend that the conveyance
of each Renewal Loan and related Property by Seller and acceptance thereof by
Buyer shall constitute a purchase and sale and not a loan.

(c) If any document or documents constituting part of a Loan
File relating to a Renewal Loan are missing or defective as described in
section 2.01(e) hereof, Buyer shall have the same rights against Seller as
provided in such Section 2.01(e).

[End of Article II]

19
<PAGE>
ARTICLE III

CLOSING PROCEDURE; CONDITIONS TO PURCHASE
-----------------------------------------

SECTION 3.01 Payment. The "Purchase Price" for each Loan shall
be paid as follows: (i) Buyer shall pay to Seller on the applicable Closing
Date, 75% of the Principal Balance of such Loan and (ii) on each Payment Date
following such Closing Date, Buyer shall pay to Seller 25% of the sum of (a) the
principal portion of the Monthly Payment actually received from or on behalf of
the related Obligor during the related Due Period, (b) any Principal Prepayment
and Payahead actually received during the related Due Period and (c) Insurance
Proceeds, Net Liquidation Proceeds, Guaranty Payment with respect to the related
Due Period, but only to the extent Buyer has received an amount equal to the
total Purchase Price paid on such Loan on or before such Payment Date together
with interest accrued thereon at the Applicable Rate to such Payment Date;
provided, however, that Buyer shall not he obligated to pay any Purchase Price
on the Closing Date if the applicable conditions specified in Section 3.04
hereof have not been satisfied and shall not be obligated to make any further
payments to the Purchase Price on and after (1) the occurrence of a Termination
Event or a Guarantor Default or an event which with the passage of time would
become a Termination Event or Guarantor Default or (2) the date on which the
Guaranty Amount has been reduced to zero. Notwithstanding the foregoing, Buyer
shall make further payments to the Purchase Price of Loans on and after the
occurrence of any of the events specified in the preceding sentence at such time
as the aggregate unpaid Purchase Price of the Loans exceeds the aggregate
Principal Balance of the Loans (including Liquidated Loans as to which there
remain unpaid Liquidation Losses). Such further payments to the Purchase Price
shall be made to the extent of such excess on the Payment Dates from the amounts
described in clause (ii) of the first sentence of this Section 3.01.

SECTION 3.02 Acceptance - Renewal Loans. For each Loan with
provisions for renewal on a Renewal Date, no later than thirty (30) days before
the Renewal Date for such Loan, Seller shall provide Buyer with a notice that
(i) identifies the Loan and related Note by original dated date, face amount,
Loan Interest Rate and name of Obligor, (ii) identifies the Renewal Date of such
Loan, and (iii) states whether all or any part of the Principal Balance of such
Loan will be renewed on the Renewal Date, and if the Loan is to be renewed, the
anticipated Renewal Balance. No later than five (5) Business Days before the
Renewal Date for any Loan to be renewed, Seller shall deliver to Buyer the
Renewal Note and other documents required by Section 2.01 hereof. On the
applicable Renewal Date for any Loan which is to be renewed, Buyer shall,
subject to satisfaction of the delivery requirements of Section 2.02 and the
conditions set out in Section 3.04, accept a Renewal Note from Seller (in lieu
of receiving the Renewal Balance) as payment in full of a portion of

20
<PAGE>
the Principal Balance of the Prior Note equal to the Renewal Balance. In the
event that Seller has caused a Renewal Note to be executed but the conditions
precedent to acceptance thereof set out in Section 3.04 have not been satisfied
or waived by the Renewal Date, Seller shall on such Renewal Date repurchase such
Renewal Loan on the same terms as stated in Section 2.01(e).

SECTION 3.03 Effective Date for each Purchase. Each sale made
pursuant to Sections 2.01 and 2.01A of the Original Holdback Agreement was
effective, and each sale made pursuant to Sections 2.01 and 2.01A shall be
effective, and all right, title and interest in the Loans and the related
Property so sold passed or shall pass, as applicable, to Buyer at such time as
Buyer shall pay, as applicable, the portion of the Purchase Price in respect
thereof due on the applicable Closing Date.

SECTION 3.04 Buyer's Conditions Precedent to Acceptance. The
obligation of Buyer to pay the applicable portion of the Purchase Price on each
Closing Date and to accept the Renewal Loans and Notes on any applicable Renewal
Date is subject to the fulfillment on such Closing Date or Renewal Date, as the
case may be, of each of the following conditions (relating only to the Loans
purchased or renewed on each such Date):

(a) Buyer shall have received the original Notes or Renewal
Notes, as the case may be, and such Notes shall have been duly endorsed by
Seller without recourse or warranty except as provided herein, and of the
Related Documents;

(c) The Buyer shall have received a duly executed Notice of
Assignment in the form annexed hereto as Exhibit C addressed to each Obligor of
a Note related to a Loan;

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<PAGE>
mortgage may be effected by one or more blanket assignments for Loans secured by
mortgaged properties located in the same county), or (ii) a copy of such
assignment of mortgage certified as a true copy by a Responsible Officer of
Seller where the original has been transmitted for recording (provided, however,
that where the original assignment of mortgage is not being delivered to Buyer,
each such Responsible Officer may complete one or more blanket certificates
attaching copies of one or more assignments of mortgage relating to the
mortgages originated by Seller); and (C) either: (i) originals of all
intervening assignments, if any, showing a complete chain of title from the
originator to Seller, including warehousing assignments, with evidence of
recording thereon if such assignments were recorded, (ii) copies of any
assignments certified as true copies by a Responsible Officer of Seller where
the originals have been submitted for recording until such time as the originals
are returned by the public recording officer, or (iii) copies of any assignments
certified by the public recording office in any instances where the original
recorded assignments have been lost; and (D) all available documentation
relating to appraisals and environmental surveys;

(e) Seller has, or on the applicable Closing Date will have,
(1) a first priority perfected security interest in each item of Primary
Collateral, free from any lien, security interest, encumbrance or other right,
title or interest of any Person, and (2) a perfected security interest in each
other item of Collateral, subject to the prior liens, security interests and
encumbrances existing on, and identified to and approved by the Buyer on the
applicable Closing Date. Seller shall, on the applicable Closing Date, transfer
its security interest in the Primary Collateral and such other Collateral as is
governed by the Uniform Commercial Code or required by the Buyer, Collateral
subject to the rights of the holder of title in and to such Collateral and of
the Obligors in such Collateral under the Loans, related Notes and Related
Documents (and in the case of Collateral which is not Primary Collateral,
holders of prior liens), and the Seller, as agent for the Buyer, shall defend
Buyer's security interest in and to the Collateral related to any Loan against
all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to that of obligors or Buyer;

(f) On each applicable Closing Date, at least 80% (determined
on the basis of aggregate Principal Balance) of the Loans purchased on such
Closing Date must be secured by Collateral which is (i) inventory and/or
furniture, fixtures and equipment and (ii) Primary Collateral;

(g) On each applicable Closing Date, at least 80% (determined
on the basis of aggregate Principal Balance) of the Loans purchased on such
Closing Date must have a twenty-one month payment history and such history must
have been provided to the Buyer in a form acceptable to the Buyer;

22
<PAGE>
(h) The Buyer shall have received Uniform Commercial Code
financing statements on Form UCC-3 executed by Seller as "Assignor" evidencing
the assignment to the Buyer by Seller of all security interests in personal
property, arising in favor of Seller under the Related Documents, on the
Collateral relating to the Loans (other than security interests in Seller's
capital stock and patronage dividends) in form and content sufficient for filing
with the applicable location for central filing in the state where the related
form UCC-1 is filed;

(i) The Buyer shall have received Assignments of Deeds of
Trust executed by Seller as "Assignor" evidencing the assignment to Buyer by
Seller of all security interests in real property arising in favor of Seller
under the Related Documents in form and content sufficient for filing in the
real property recording districts in which such real property is located;

(j) The Buyer shall have received evidence reasonably
satisfactory to Buyer that the security interests arising in favor of Seller
under the Related Documents and the Collateral therein described (other than
Seller's capital stock and patronage dividends) have been duly perfected by the
filing of all such Uniform Commercial Code financing statements and the taking
of all such other or additional acts as may be necessary to create a valid and
perfected lien enforceable against all third parties in all jurisdictions to
secure each Obligor's respective obligations to Seller under the Loans, related
Notes and Related Documents and evidence reasonably satisfactory to Buyer;

(k) The Buyer shall have received evidence reasonably
satisfactory to Buyer that the security interests arising in its favor under
this Agreement in the Loans, related Notes, related Collateral (other than
Collateral which is not governed by the Uniform Commercial Code of the
applicable jurisdictions, unless Buyer, in its sole discretion, requires
otherwise), the Related Documents and the proceeds thereof has been duly
perfected by the filing of all such Uniform Commercial Code financing statements
and the taking of all such other or additional acts as may be necessary to
create a valid and perfected lien of first priority enforceable against all
third parties (other than (i) prior lien holders in the case of Collateral which
is not Primary Collateral and (ii) is Collateral which is not governed by the
Uniform Commercial Code) in all jurisdictions to secure all of Seller's
obligations to Buyer;

(l) No Termination Event, and no event which with the giving
of notice or passage of time or both would constitute a Termination Event shall
have occurred and be continuing, and a Responsible Officer of Seller shall have
so certified to Buyer in writing;

(m) Each representation and warranty of the Seller set forth
in Section 4.01, 4.02 or 4.03 shall be true and correct in all material
respects, and a duly Responsible Officer of Seller

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<PAGE>
shall have so certified to Buyer in writing in substantially the form of Exhibit
J hereto;

(n) Each representation and warranty of Guarantor set forth in
Article 3.01 of the Guaranty Agreement hereof shall be true and correct in all
material respects, and a duly Responsible Officer of Guarantor shall have so
certified to Buyer in writing in substantially the form of Exhibit J hereto;

(o) Buyer shall have received the Loan Schedule relating to
the Loans purchased on the applicable Closing Date required by this Agreement
and it shall be in a form reasonably acceptable to Buyer;

(p) Seller shall have paid all fees and expenses, including
Buyer's out-of-pocket expenses and the fees of Buyer's counsel, incurred in
selling the Loans pursuant to this Agreement; and

(q) The Guaranty Amount shall not have been reduced to zero.

SECTION 3.05 Additional Delivery Requirements for
Effectiveness Date. The obligation of the Buyer to perform any of its
obligations under this Agreement shall be further subject to satisfaction of
each of the following delivery requirements on the Effectiveness Date (or on the
date specified below) to the reasonable satisfaction of Buyer:

(a) Buyer shall have received amendments to the Uniform
Commercial Code financial statements filed in connection with the Original
Holdback Agreement on Form UCC-3 naming Buyer as "Secured Party" and executed by
Seller as "Debtor" covering the Loans and Related Property sold and to be sold
under this Agreement (by reference to the Loan Schedules attached to this
Agreement) in form and content sufficient for filing in the appropriate offices
in the States of Oregon, Washington and California;

(b) Buyer shall have received an opinion of counsel for Seller
dated such date and in a form reasonably acceptable to Buyer;

(c) Buyer shall have received an opinion of Counsel for
Guarantor dated such date and in a form reasonably acceptable to Buyer;

(d) Buyer shall have received in form and substance reasonably
satisfactory to it a certified copy of a resolution adopted by the Board of
Directors of Seller, authorizing the execution, delivery and performance of this
Agreement together with evidence of the authority and specimen signatures of the
persons who have signed this Agreement and such other evidence of corporate
authority as Buyer may reasonably require;

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<PAGE>
(e) Buyer shall have received in form and substance reasonably
satisfactory to it, a certified copy of a resolution adopted by the Board of
Directors of Guarantor, authorizing the execution, delivery and performance of
this Agreement;

(f) Buyer shall have received officers' certificates from
Seller and Guarantor in forms reasonably acceptable to Buyer;

(h) Buyer shall have received Exhibit G containing information
relating to the corporate and "doing business" names of the Seller and Guarantor
in States of Oregon, Washington and California;

(i) Buyer shall have received the Guaranty Agreement duly
executed by the Guarantor;

(j) Buyer shall have received a duly executed counterpart of
Existing Loan Purchase Agreement together with opinions and counsel to United
Resources and United Grocers to the effect that such Existing Loan Purchase
Agreement is the legal, valid and binding obligation of United Resources and
United Grocers, enforceable against both such parties in accordance with its
terms;

(k) Buyer shall have received a duly executed counterpart of
that certain New Origination Loan Agreement dated the date hereof, by and
between United Grocers and NCB, together with an opinion of counsel to United
Grocers to the effect that such Agreement is the legal, valid and binding
obligation of United Grocers; enforceable against United Grocers in accordance
with its terms;

(l) Buyer shall have received a duly executed counterpart of
that certain New Origination Guaranty Agreement, together with an opinion of
counsel to United Grocers to the effect that such Agreement is the legal, valid
and binding obligation of United Grocers, enforceable against United Grocers in
accordance with its terms;

(m) Buyer shall have received a Loan Schedule listing all of
the Loans sold by Seller and purchased by Buyer under the Original Holdback
Agreement, and owned by Buyer as of the Effectiveness Date;

(n) Buyer shall have received certified copies of requests for
information or copies (Form UCC-11) (or a similar search report certified by
parties acceptable to Buyer) dated a date reasonably near the Effectiveness Date
listing all effective

25
<PAGE>
(n) Buyer shall have received certified copies of requests for
information or copies (Form UCC-11) (or a similar search report certified by
parties acceptable to Buyer) dated a date reasonably near the Effectiveness Date
listing all effective
financing statements which name Seller or Guarantor as debtor and which are
filed in jurisdictions in which the filings were made pursuant to item (a)
above, together with copies of such financing statements (none of which shall
cover any Loan or Related Property);

(o) Buyer shall have received executed copies of the Credit
Agreement and the Security Documents; and

(p) Buyer shall have received a receipt-stamped
acknowledgement copy of a Uniform Commercial Code financing statement on Form
UCC-1 naming Buyer as "Secured Party" (subordinate to Credit Providers) and
executed by Guarantor as "Debtor" covering the Guaranty Collateral, from the
appropriate offices in the State of Oregon.

SECTION 3.06 Seller's Conditions Precedent to Sale. The
obligation of Seller to sell Loans on each Closing Date shall be subject to the
fulfillment of each of the following conditions on such Closing Date to the
reasonable satisfaction of Seller:

(a) Seller shall have received the portion of the Purchase
Price required to be paid on such Closing Date, as provided in Section 3.01; and

(b) Each representation and warranty of Buyer set forth in
Section 4.4 shall be true and correct in all material respects, and a duly
authorized officer of Buyer shall have so certified to Seller in writing.

[End of Article III]

26
<PAGE>

ARTICLE IV

REPRESENTATIONS AND WARRANTIES
------------------------------

SECTION 4.01 Seller's Corporate Representations and
Warranties. Seller represents and warrants to Buyer as of the Effectiveness Date
and as of each Closing Date and as of any Renewal Date as follows:

(a) Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Oregon, is doing
business only under the corporate and "doing business as" names listed in
Exhibit G hereto, and is qualified to do business in each other jurisdiction
where the conduct of its business or the ownership of its properties requires
such qualification, and has full corporate power, authority and legal right to
carry on its business as presently conducted, to own and operate its properties
and assets, to execute, deliver and perform this Agreement and to sell the Loans
and related Property.

(b) The execution, delivery and performance by the Seller of
this Agreement and any assignment, the endorsement the Notes and the sale of any
Loans, related Notes and Related Documents and the security interest in the
related Collateral hereunder have been duly authorized by all necessary
corporate action of Seller, do not require any shareholder approval or the
approval or consent of any trustee or the holders or any Debt of Seller, except
such as have been obtained (certified copies thereof having been delivered to
Buyer), do not contravene any law, regulation, rule or order binding on it or
its Articles of Incorporation or Bylaws and do not contravene the provisions of
or constitute a default under any indenture, mortgage, contract or other
agreement or instrument to which Seller is a party or by which Seller or any of
the Loans, related Notes or Related Documents may be bound or affected.

(d) This Agreement has been duly executed and delivered by
Seller and constitutes, and any assignment and any endorsement of a Note when
duly executed and delivered will constitute, the legal, valid and binding
obligation of the Seller enforceable against Seller in accordance with its
terms.

(e) Except as described in Exhibit H hereto, there are no
actions, proceedings, investigations, or claims against or affecting Seller now
pending before any court, arbitrator or

27
<PAGE>
other Governmental Authority (nor to the knowledge of Seller has any thereof
been threatened nor does any basis exist therefor) which if determined adversely
to Seller would be likely to (i) have a material adverse effect on the financial
condition or operations of Seller (ii) have a material adverse effect on
Seller's ability to perform its obligations under this Agreement, (iii) impair
or defeat the Buyer's security interest in any of the Property conveyed pursuant
to this Agreement. With respect to the litigation described in Exhibit H hereto,
a determination in such litigation that is materially adverse to the Seller or
Guarantor would not have a material adverse effect on the financial condition or
operations of Seller or on Seller's ability to perform its obligations under
this Agreement, and would not impair the Buyer's security interest in the
Property.

(f) The consolidated balance sheet of the Seller and its
Affiliates and Subsidiaries as at September 27, 1996, and the related statements
of income and retained earnings of Seller and its Affiliates and Subsidiaries
for the fiscal year then ended, copies of which have been furnished to Buyer,
fairly present the financial condition of Seller and its Affiliates and
Subsidiaries as at such date and the results of operations of Seller and its
Affiliates and Subsidiaries for the fiscal year then ended, all in accordance
with U.S. GAAP consistently applied. Since that date, there has been no material
adverse change in the financial condition or operations of Seller or any of its
Subsidiaries or Affiliates.

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<PAGE>
imposed by Section 502 or Section 2003(a) of ERISA; no Pension Plan or
trust created thereunder has been terminated, and there have been no
"reportable events" (as that term is defined in Section 4043 of ERISA)
since the effective date of ERISA; no Pension Plan or trust created
thereunder has incurred any "accumulated funding deficiency" (as such term
is defined in Section 302 of ERISA) whether or not waived, since the
effective date of ERISA; the required allocations and contributions to
Pension Plans will not violate Section 415 of the Code; and Seller has no
withdrawal liability to any trust created pursuant to a multi-employer
pension or benefit plan and would not be subject to any withdrawal
liability in excess of One Million Dollars ($1,000,000) if it withdrew from
any such plan or if its participation therein were otherwise terminated.

(j) Uniform Commercial Code financing statements have been
duly filed in all places where filing is necessary and all other or additional
acts have been taken as are necessary to perfect Buyer's interests arising
hereunder and under the assignments in and to the Loans and related Property and
the lien created hereby constitutes a valid and perfected lien of first priority
in and to all of the Loans and related Property (other than in Collateral which
is not Primary Collateral or not governed by the Uniform Commercial Code, in
which case Buyer has only such interest as the Seller had and disclosed to Buyer
on the applicable Closing Date and other than Seller's security interest in its
capital stock and patronage dividends) and is enforceable against all third
parties (other than third parties whose interests in Collateral which is not
Primary Collateral are prior to Seller's interests therein on the applicable
Closing Date) in all jurisdictions as security for all obligations of Seller to
Buyer under this Agreement.

(k) Seller has good and marketable title to the Loans and
related Notes designated for sale to Buyer hereunder, the Related Documents and
the proceeds thereof, free and clear of all liens and encumbrances and Seller
has not transferred in any manner whatever to any Person (other than Buyer) and
has not created or permitted any lien, pledge, charge, security interest,
ownership interest, participation interest or any other interest of any nature
whatever (other than in favor of the Buyer) in respect of the Loans, the related
Notes, the Related Documents or the proceeds thereof.

29
<PAGE>
fact or omit to state any material fact necessary in order to make the
statements contained herein or therein not misleading.

(n) To the best of Seller's knowledge, all properties of
Seller and each Subsidiary of Seller and Seller's and such Subsidiary's use
thereof comply in all material respects with zoning and use restrictions and
with applicable laws and regulations relating to the environment including,
without limitation, the Environmental Laws. Without limiting the foregoing to
the best of Seller's knowledge, no Hazardous Substances have been generated,
manufactured, refined, transferred, stored, treated, transported, handled,
managed, discharged or disposed of, whether by Seller or, by any other Person
onto, upon, over, beneath or from any real property owned by Seller or other
premises owned, leased, operated, used or held at any time by Seller
(collectively, the "Premises") or any of the ground water beneath the Premises
which in any fashion might result in the Buyer incurring or suffering at any
time any loss, liability, damages, or obligations including liability for
cleanup and recovery costs and expenses. To the best of Seller's knowledge,
there are no past or present events, conditions, circumstances, activities,
practices, incidents or actions at or in connection with the Premises or any of
the ground water beneath the Premises which could reasonably be expected to
interfere with or prevent continued compliance with any laws or regulations
pertaining to underground storage tanks or any other Environmental Laws or give
rise to any legal liability or otherwise from the basis of any claim, action,
suit, proceedings, hearing or investigation against or affecting Seller under
the Environmental Laws. To the best of Seller's knowledge, there has been no
disposal from the Premises by Seller or any other Person directly or indirectly
of any Hazardous Substances to, on or in any site currently listed or formally
proposed to be listed on the National Priorities List under Superfund or any
site listed on any priority cleanup list compiled by any Governmental Authority.
Seller will not be (and to the best of Seller's knowledge, has not been)
involved in any operations at or near the Premises which operations when
conducted in accordance with applicable law could lead to: (a) the imposition of
liability under Environmental Laws on borrower or any subsequent owner of the
Premises or (b) the creation of a Lien on the Premises under Environmental Laws
or under any similar laws or regulations.

30
<PAGE>
(p) Neither Seller nor any Subsidiary of Seller is in
violation of or subject to any contingent liability on account of any laws,
statutes, rules, regulations and orders of any Governmental Authority. Neither
Seller nor any Subsidiary of Seller is in material breach of or default under
any agreement of which it is a party or which is binding on it or any of its
assets.

(s) Seller is "eligible" to borrow from NCB under the
provisions of the Bank Act.

(a) The information with respect to each Loan set forth in the
applicable Loan Schedule, together with any documentation supporting such
information, is true and correct;

(c) Each Loan was originated in the United States and Monthly
Payments on such Loan are payable on the first day of each month in U.S. Dollars
by an Obligor domiciled in the United States;

(d) Each Note will have a Loan Interest Rate that is either
(i) a variable rate based on the Prime Rate or LIBOR, adjusted at least
annually, or (ii) a fixed rate that has been

31
<PAGE>
approved by NCB in its sole discretion, and each Note having a variable Loan
Interest Rate will have a minimum Loan Interest Rate (A) in the case of a
variable rate based on the Prime Rate, the Prime Rate minus 100 basis points and
(B) in the case of a variable rate based on LIBOR, LIBOR plus 175 basis points;

(f) No Obligor has been delinquent (after giving effect to any
grace period) in payments on its Loan, any other loan made by Seller or Buyer to
such Obligor, or any open account at any time in the three months preceding the
applicable Closing Date;

(g) (1) With respect to each First Delivery Loan, no Obligor
has been delinquent in payments on its First Delivery Loan, in excess of 45 days
at any time during the year (or if originated less than one year earlier, since
the date of origination) preceding the applicable Closing Date; (2) with respect
to Second Delivery Loans, no more than 20% of the Obligors have been delinquent
in payments on the Loans in excess of 30 days at any time during the 21-month
period (or if originated less than one year earlier, since the date of
origination) preceding the applicable Closing Date; and (3) with respect to all
Loans, no Obligor has been delinquent in payments on any other loans made by
Seller or Buyer to such Obligor or any open account for a period in excess of 45
days at any time during the year (or if originated less than one year earlier,
since the date of origination) preceding the applicable Closing Date.

(h) The Loan is not subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of the related Note, Related Document or any
related Collateral, or the exercise of any right thereunder, render either the
related Note, Related Document or any related Collateral unenforceable in whole
or in part, or subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;

32
<PAGE>
(j) At least one of the Obligors with respect to each Loan (i)
is a member in good standing of United Grocers, Inc. and (ii) to the best of
Seller's knowledge, shall have provided to Seller complete and accurate
information relating to Obligor's financial condition and shall have suffered no
material adverse changes in its financial condition or otherwise since the date
the Loan was originated;

(k) Each Loan has a remaining term to maturity of no greater
than 10 years from the applicable Closing Date;

(l) The Note related to each Loan provides that the principal
be amortized monthly over the term of such Note with an amortization period of
no greater than 10 years and with either level monthly payments of principal and
interest or principal plus interest, provided that, in the case of a Loan with
(i) an amortization period longer than its term to maturity (but in no event
longer than a 10-year amortization period) and (ii) renewal provisions, a
balloon payment at maturity or on the Renewal Date, as applicable, is
permissible;

(m) Each Loan, related Note, related Collateral and Related
Documents pursuant to which Collateral is pledged to Seller is the legal, valid
and binding obligation of the Obligor thereof and is enforceable in accordance
with its terms, except only as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law), none of
which will prevent the ultimate realization of the security provided by the
Collateral or Related Document, and all parties to each Loan had full legal
capacity to execute all Related Documents and convey the property therein
purported to be conveyed;

(n) The terms of the Loan, related Note and each Related
Document pursuant to which Collateral was pledged have not been impaired,
altered or modified in any respect, except by written instrument which has been
recorded, if necessary, to protect the interest of the Buyer and which has been
delivered to the Buyer;

(o) The proceeds of the Loan have been fully disbursed, and
there is no obligation on the part of the Seller to make future advances
thereunder. Any and all requirements as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses incurred in
making or closing or recording the Loans were paid;

(p) The Obligor with respect to each Loan and each other
member of its Obligor Group has a positive net worth as accounted for under U.S.
GAAP, consistently applied, and has no present intention to seek relief under
the federal bankruptcy laws;

33
<PAGE>
(q) There is no default, breach, violation or event of
acceleration existing under the Loan, related Note or Related Document and no
event which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or event of
acceleration, and the Seller has not waived any such default, breach, violation
or event of acceleration;

(r) Each Loan requires each of the Obligor and Loan Guarantor
thereunder at its own costs and expense to maintain the Collateral pledged to
secure the related Loan in good repair, condition and working order, and to the
best knowledge of Seller, each Obligor and Loan Guarantor under a Loan is
currently in compliance with this requirement;

(s) Seller has, or on the applicable Closing Date will have,
(1) a first priority perfected security interest in each item of Primary
Collateral, free from any lien, security interest, encumbrance or other right,
title or interest of any Person, and (2) a perfected security interest in each
other item of Collateral, subject to the prior liens, security interests and
encumbrances existing on, and identified to and approved by the Buyer on the
applicable Closing Date. Seller shall, on the applicable Closing Date, transfer
its security interest in the Primary Collateral and such other Collateral as is
governed by the Uniform Commercial Code or required by the Buyer subject however
to the rights of the holder of title in and to such Collateral and of the
Obligors in such Collateral pledged under the Related Documents (and, in the
case of Collateral which is not Primary Collateral, holders of prior liens), and
Seller, as agent for Buyer, shall defend Buyer's security interest in and to
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest therein adverse to that of the Obligors or the Buyer.

(t) Either (i) the Obligor and Loan Guarantor has, under the
terms of each Loan, consented to a sale and assignment of the Loan, the related
Note and Related Documents and the sale or grant of a security interest in and
to the Loan and the Collateral relating thereto, or (ii) none of the Loan, the
related Note or any Related Documents requires the consent of approval of notice
to the Obligor or Loan Guarantor with respect to the assignment and transfer by
Seller of Seller's right, title and interest in and to the Loan, the related
Note, any Related Document and Collateral;

(u) The Notes and Related Documents delivered to Buyer on the
applicable Closing Date are true, correct, and complete original counterparts of
all instruments and documents evidencing or in any way relating to the Loan and
related indebtedness referred to therein; except as approved by the Buyer, such
Notes and Related Documents are in substantially the form of the documents
previously delivered to Buyer in connection with the execution of the original
Holdback Agreement; except as included with the instruments and documents so
delivered, such Notes and

34
<PAGE>
such Related Documents have not been amended; and each such Note and Related
Document to which Obligor or Loan Guarantor is a party bears the original
signature of such Obligor and Loan Guarantor;

(v) Uniform Commercial Code financing statements have been
duly filed in all places where filing is necessary, and all other or additional
acts have been taken as are necessary to perfect Seller's security interests
arising pursuant to the Related Documents in the Primary Collateral and such
other Collateral as is governed by the Uniform Commercial Code or is required by
Buyer and such security interests constitute a valid and perfected lien in and
to all of the Collateral of first priority (subject to no prior or equal liens
or interests) in the case of all Primary Collateral and of the same level of
priority as that enjoyed by the Seller on the applicable Closing Date in the
case of all other Collateral as is governed by the Uniform Commercial Code or
required by Buyer, and will be enforceable against all third parties in all
jurisdictions as security for the respective obligations of Obligors to Seller
under their respective Notes and Related Documents;

(w) Seller has heretofore caused all copies of the Loans,
related Notes and Related Documents in its possession to be separately
identified and distinguished from Seller's other loans, and on the applicable
Closing Date, Seller will cause each copy of each Note, related Collateral and
Related Document in its possession to be identified with an appropriate legend
clearly disclosing the fact that such Loan, the related Notes, Related Documents
and Seller's security interest in the related Collateral have been sold and
assigned to the Buyer and the Buyer is the owner thereof, and any original
copies of any Note, related Collateral or Related Document coming into the
possession of Seller will he delivered to Buyer;

(x) With respect to any Loan secured by a mortgage on real
property, each mortgage is a valid and subsisting lien of record on the
mortgaged property subject only to a first mortgage lien on such mortgaged
property previously disclosed to Buyer and subject in all cases to such
exceptions that are generally acceptable to prudent and experienced lenders in
connection with their regular commercial lending activities, and such other
exceptions to which similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect the benefits
of the security intended to be provided by such mortgage;

(y) With respect to each Loan secured by a mortgage on real
property, each original mortgage was recorded, and all subsequent assignments of
the original mortgage have been recorded in the appropriate jurisdictions
wherein such recordation is necessary to perfect the lien thereof as against
creditors of Seller; and

35
<PAGE>
(z) The Aggregate Exposure listed with respect to each Loan
and related Obligor Group in the applicable Loan Schedule is true and correct
and is in no case greater than $4,000,000 in the case of First Delivery Loans
and $5,000,000 in the case of Second Delivery Loans.

SECTION 4.03 Seller's Renewal Date Representations and
Warranties. Seller represents and warrants to Buyer as of each Renewal Date on
which the Seller has designated any Renewal Note for acceptance as follows:

(a) As of the applicable Renewal Date, all applicable
representations and warranties in Section 4.02 hereof are confirmed as to such
Renewal Loan.

(c) As of the applicable Renewal Date, no event has occurred
and is continuing which would permit the Seller to accelerate the maturity of
any Obligor's obligations under the applicable Renewal Loan or under the Prior
Note or the Related Documents.

(d) The Notes and Related Documents delivered to Buyer on or
prior to the applicable Renewal Date are true, correct, and complete original
counterparts of all instruments and documents evidencing or in any way relating
to the Loan and the related indebtedness referred to therein; except as included
with the instruments and documents so delivered, such Notes and Restated
Documents have not been amended; and each such Note and each such Related
Document to which an Obligor or Loan Guarantor is a party bears the original
signature of the Obligor or Loan Guarantor.

36
<PAGE>
(g) Uniform Commercial Code financing statements have been
duly filed in all places where filing is necessary, and all other or additional
acts have been taken as are necessary to perfect the Seller's security interests
arising pursuant to the Related Documents in the Collateral and such security
interests constitute a valid and perfected lien in and to all of the Collateral
of first priority (subject to no prior or equal liens or interests) in the case
of all Primary Collateral and of the same level of priority as that enjoyed by
the Seller on the Closing Date on which the Loan was first sold and assigned
hereunder in the case of all other Collateral, and will be enforceable against
all third parties in all jurisdictions as security for the respective
obligations of Obligors to the Seller under their respective Notes and Related
Documents.

(i) The Note related to the Renewal Note provides for full
amortization over its remaining term to maturity.

SECTION 4.04 Buyer's Representations and Warranties.
Buyer represents and warrants to Seller as follows:

(d) This Agreement has been duly executed and delivered by
Buyer and constitutes the legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms.

37
<PAGE>
SECTION 4.05 Repurchase Upon Breach of Certain Representations
and Warranties. (a) The representations and warranties and agreements of Seller
set forth in Sections 4.01, 4.02 and 4.03 with respect to the Seller and each
Loan and related Property shall continue so long as such Loan remains
outstanding. Upon discovery by either Seller or Buyer that any of such
representations or warranties was incorrect as of the time made, the party
making such discovery shall give prompt notice to the other party. In the event
any defect, misrepresentation or omission materially and adversely affects the
interest of Buyer, Seller shall eliminate or cure the circumstance or condition
causing the defect within 10 days of the discovery thereof or, repurchase such
Loan and the related Property.

(b) Any such repurchase of a Loan and the related Property by
Seller shall be accomplished in the manner set forth in Section 2.01(e) and at a
price equal to the Repurchase Amount.

[End of Article IV]

38
<PAGE>
ARTICLE V

SERVICING AND COLLECTION
------------------------

SECTION 5.02 Documentation and Servicing; Maintenance of
System and Lien Priority.

(a) Buyer shall use the same diligence and practices in
documenting, servicing and collecting the Loans, the related Collateral and the
Related Documents as it uses in documenting, servicing, and collecting all other
indebtedness evidenced by notes and related documents held for its own account
and, in any event, shall endeavor to collect or cause to be collected from each
Obligor the amounts as and when due and owing under such Obligor's Note and
Related Documents. In performing its duties hereunder, Buyer shall take such
actions with respect to the Loans, Notes and Related Documents as, in its
reasonable business judgment, it may deem advisable to maintain or enhance
receipt of timely Collections thereunder. In addition, Buyer shall use its best
efforts to collect on any Defaulted Loan so as to maximize Liquidation Proceeds
and notwithstanding that a Guaranty Payment may have been received with respect
to a Defaulted Loan, shall diligently pursue all efforts to collect on such
Loan, including by liquidating Collateral and by seeking to collect any
deficiency against the related Obligor.

(c) Buyer agrees to take all actions, including lien searches
and, continuation statement filings, necessary or desirable to ensure that the
liens arising pursuant to the Related Documents and securing repayment of any
Obligor's indebtedness evidenced by a related Note will be maintained as
continuously perfected first priority (except in the case of Collateral which is
not Primary Collateral, in which event Buyer shall take all actions to maintain
the priority sold and assigned hereunder) security interests (except as
otherwise approved by Buyer) in all applicable jurisdictions.

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SECTION 5.03 Lockboxes. Seller hereby agrees (i) to instruct
all Obligors to cause all Monthly Payments, Payaheads and Principal Prepayments
on account of Loans to be mailed directly to a Permitted Lockbox; and (ii) to
use its best effort not to suffer or permit any funds other than such Monthly
Payments, Payaheads and Principal Prepayments to be mailed to Permitted
Lockboxes;

SECTION 5.04 Payment of Guaranty Fees; Periodic Payments and
Other Amounts. (a) On each Payment Date, the Buyer shall remit to Guarantor the
Guaranty Fee; provided, however, that upon the occurrence and continuation of a
Guarantor Default, Buyer shall not be required to remit the Guaranty Fee to the
Guarantor.

(b) Buyer shall be entitled to retain on each Payment Date
from amounts received as (i) collections and other Available Funds (other than
Guaranty Payments) during the related Due Period and (ii) Guaranty Payments on
or before such Payment Date, the Periodic Payment; provided, however, that upon
the occurrence and continuation of a Guarantor Default, the Buyer shall be
entitled to retain all Collections and other Available Funds. In addition, Buyer
shall at all times be entitled to retain late fees and penalties received with
respect to Loans.

(1) As used herein and in the Guaranty Agreement,
"Periodic Payment" means for any Payment Date the sum of, for each
Loan, (a) the principal portion of the Monthly Payment actually
received during the related Due Period, other than the portion of the
Principal Balance of a Prior Note which, at the time it became due,
constituted the Renewal Balance under a Renewal Note; (b) any Principal
Prepayment, Payahead, Insurance Proceeds and Net Liquidation Proceeds
actually received during the related Due Period; (c) the principal
portion of any Guaranty Payment or Repurchase Proceeds with respect to
the related Due Period; and (d) the Monthly Interest Amount for the
related Interest Accrual Period.

(2) As used herein and the Guaranty Agreement,
"Monthly Interest Amount" on any Payment Date shall mean an amount
equal to the sum of, for each Loan the product of (i) the Principal
Balance of such Loan during the related Due Period, times (ii) the
Applicable Rate times (iii) a fraction, the denominator of which is
three hundred sixty (360), and the numerator of which is the actual
number of days in the related Interest Accrual Period.

SECTION 5.05 Applicable Rate. As used in this Agreement and
the Guaranty Agreement, "Applicable Rate" for each Loan shall be determined as
follows. The Applicable Rate shall be established as of each LIBOR Determination
Date and shall be

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<PAGE>
applicable for the next succeeding Interest Accrual Period without regard to
changes thereafter occurring during such Interest Accrual Period in the
principal amounts outstanding under the Notes, in the Principal Balance of Loans
purchased, or in LIBOR. Buyer shall, after the determination of the Applicable
Rate on each LIBOR Determination Date, notify Seller and Guarantor of such
Applicable Rate; provided, however, that any failure of Buyer to give such
notice shall not affect Seller's or Guarantor's obligations hereunder or under
the Guaranty Agreement.

The Applicable Rate for each Loan shall be computed and
applied on the basis of a year of three hundred sixty (360) days for the actual
number of days occurring in the applicable Interest Accrual Period. For each
Interest Accrual Period, the Applicable Rate for each Loan shall mean an
interest rate per annum equal to the sum of (a) either (i) 140 basis points for
a First Delivery Loan or (ii) 170 basis points for a Second Delivery Loan and
(b) LIBOR in effect on the applicable LIBOR Determination Date. For purposes
hereof, the Buyer will determine LIBOR by 12:00 noon, Eastern Standard Time, on
each LIBOR Determination Date on the basis of quotations provided by four
Reference Banks as of 11:00 A.M. (London time) on such LIBOR Determination Date
as such quotations appear on the display designated as page "LIBO" on the
appropriate display on the Bloomberg Financial Markets System (or such other
page as may replace the LIBO page on that service for the purpose of displaying
London interbank offered rates of major banks). LIBOR as determined by Buyer is
the arithmetic mean of such quotations (rounded, if necessary, to the nearest
whole multiple of 0.0625% per annum). If on any LIBOR Determination Date at
least two but fewer than all of the Reference Banks provide quotations, LIBOR
will be determined in accordance with the provisions set forth above on the
basis of the offered quotations of those Reference Banks providing such
quotations. If on the LIBOR Determination Date only one or none of the Reference
Banks provides such offered quotations, LIBOR will be: (i) the rate per annum
(rounded, as aforesaid) that the Buyer determines to be either (x) the
arithmetic mean of the offered quotations that leading banks in the City of New
York selected by Buyer are quoting at or about 11:00 A.M. London time on the
relevant LIBOR Determination Date for one month Dollar deposits to the principal
London office of each of the Reference Banks or those of them (being at least
two in number) to which such offered quotations are, in the opinion of Buyer,
being so quoted or (y) in the event that Buyer can determine no such arithmetic
mean, the arithmetic mean of the offered quotations that leading banks in the
City of New York selected by Buyer are quoting at or about 11:00 A.M. London
time on such LIBOR Determination Date to leading European banks for one month
Dollar deposits; or (ii) if the banks selected as aforesaid by Buyer are not
quoting as described in clause (i) above, LIBOR for such Interest Accrual Period
will be LIBOR as determined on the previous LIBOR Determination Date. "Reference
Banks" shall mean four major banks in the London interbank market selected by
Buyer.

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SECTION 5.06 Access to Certain Documentation and Certain
Information Regarding the Loans. Seller will provide to Buyer access to the
documentation in its possession regarding the Loans, such access being afforded
without charge but only during normal business hours at the offices of Seller or
its designee or agent, as designated by Seller.

[End of Article V]

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ARTICLE VI

SELLER'S COVENANTS
------------------

SECTION 6.01 Covenants. At all times prior to the later of (i)
the Termination Date or (ii) the date on which all obligations of the Seller
under this Agreement and of the Guarantor under the Guaranty Agreement have been
performed in full, Seller agree to do all of the following unless the Buyer
shall otherwise consent in writing.

(b) Compliance with Laws. To comply in all material respects
with all laws, regulations, rules and orders of Governmental Authorities
applicable to Seller, 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 Buyer for the payment thereof in the event the contest is
determined adversely to the Seller.

(c) Other Obligations. To pay and discharge before the same
shall become delinquent (after giving effect to all applicable grace periods)
all Debt, taxes and other obligations for which Seller, is liable or to which
its income or property is subject and all claims for labor and materials or
supplies which, if unpaid, might become by law a Lien upon the assets of Seller,
except any thereof whose validity or amount is being contested in good faith by
the Seller, in appropriate proceedings upon stay of execution of the enforcement
thereof, with provision having been made to the satisfaction of Buyer for the
payment thereof in the event the contest is determined adversely to the Seller,
and except other Debt, taxes and other obligations which, in the aggregate do
not exceed One Million Dollars ($1,000,000); provided, however, the covenant
included in this Section 6.01(c) shall not extend to any obligation of Seller,
identified in Section 6.01(k) or 8.01(f).

(d) Visitation; Records. At any reasonable time and from time
to time, to permit Buyer to examine and make copies of and abstracts from
Seller's records, and books of accounts relating to the Loans, the related Notes
and Related Documents and to visit the properties of Seller, and to discuss the
affairs, finances and accounts of Seller, as they relate to the transactions
contemplated by this Agreement with any of its officers. Seller, will keep
adequate records and books of

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accounts in which complete entries will be made, in accordance with U.S. GAAP,
reflecting all financial transactions of Seller, as they relate to the
transactions contemplated by this Agreement. Seller's records relating to the
Loans will be clearly marked with a legend to the effect that such records
pertain to Loans sold to Buyer.

(e) Financial Information. To deliver to Buyer (i) as soon as
available and in any event within one hundred (100) days after the end of each
fiscal year of Seller, the balance sheet of Seller, as of the end of such fiscal
year (which may be on a consolidating basis with the financial statements of
United Grocers) and the related statements of income and retained earnings and
statement of changes in the financial position of Seller, for such year,
accompanied by the audit report thereon by independent certified public
accountants (which report shall he prepared in accordance with U.S. GAAP and
shall not be qualified by reason of restricted or limited examination of any
material portion of Seller's records, and shall contain no disclaimer of opinion
or adverse opinion); (ii) as soon as available and in any event within fifty
(50) days after the end of each fiscal quarter of Seller the unaudited balance
sheet and statement of income and retained earnings of Seller as of the end of
such fiscal quarter (including the fiscal year to the end of such fiscal
quarter), accompanied by a certificate of the chief financial officer of Seller,
that such unaudited balance sheet and statement of income and retained earnings
have been prepared in accordance with U.S. GAAP and present fairly the financial
position and the results of operations of Seller as of the end of and for such
fiscal quarter; and that since the fiscal year-end report referred to in clause
(i) above there has been no material adverse change in the financial condition
or operations of Seller as shown on the balance sheet as of said date; (iii) as
soon as available and in any event within three (3) days after the end of each
calendar month (other than a month that is the last month of a calendar quarter)
and within fifty (50) days after the end of each calendar quarter, the unaudited
balance sheet and statement of income and retained earnings of Seller as of the
end of such month (including the fiscal year to the end of such month)
accompanied by certificate of the chief financial officer of Seller stating that
such unaudited consolidating balance sheet and statement of income and retained
earnings have been prepared in accordance with U.S. GAAP and present fairly the
financial position and the results of operations of Seller as of the end of and
for the fiscal year to the end of such month and that since the fiscal year-end
report referred to in clause (i) above there has been no material adverse change
in the financial condition or operations of Seller as shown on the balance sheet
as of said date; (iv) within fifty (50) days after the end of each calendar
quarter, a certificate signed by the chief financial officer of Seller, stating
that as of the close of such fiscal year no Termination Event or other event
which, with notice or lapse of time or both would have become a Termination
Event had occurred and was continuing; (v) within one hundred twenty (120) days
after the end of each fiscal year of Seller a report setting

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forth information relating to Seller's portfolio, as the case may be of loans
originated or acquired in the ordinary course of its business and owned by
Seller during the related fiscal year, including loan balances by types of
loans, numbers of loans by types of loans, interest rates of loans by type and
loss and delinquency experience; and (vi) such other statements, reports and
other information as Buyer may reasonably request concerning the financial
condition and the servicing and collection operations of Seller.

(f) Notification. Promptly after learning thereof, to notify
Buyer of (i) the details of any action, proceeding, investigation or claim
against or affecting Seller instituted before any court, arbitrator or
Governmental Authority or, to Seller's knowledge, threatened to be instituted,
which if determined adversely to Seller would be likely to have a material
adverse effect on the business, operations or financial condition of Borrower,
or to result in a judgment or order against Seller (in excess of insurance
coverage and when combined with all other pending or threatened claims), of more
than One Million Dollars ($1,000,000) or to impair or defeat the security
interest of the Buyer in any of the Property or the Guaranty Collateral or any
rights of Seller in the Property; (ii) any substantial dispute between Seller or
any of its Subsidiaries and any Governmental Authority; (iii) any labor
controversy which has resulted in or, to Seller's knowledge, threatens to result
in a strike which would materially affect the business operations of Seller or
any of its Subsidiaries; (iv) if Seller, 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 (a) and (b) 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
Seller, attains knowledge thereof) which might constitute grounds for
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (v) any representation or warranty set forth
in Section 4.02 or 4.03 which proves to have been incorrect in any material
respect when made; (vi) Seller's material breach of its obligations under this
Agreement; (vii) any Obligor Default (other than a payment default); (viii) any
Loan that has become a Defaulted Loan (other than by a payment default); (x) any
circumstance or event of which Seller has actual knowledge which materially
impairs or might reasonably be expected to impair an Obligor's ability to repay
or perform its obligations under, the related Loan; or (x) the occurrence of any
Termination Event or other event which, with notice or lapse of time or both,
would constitute a Termination Event.

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<PAGE>
preference, or gross receipts) and for all expenses, including reasonable legal
fees, actually incurred by Buyer in connection with the preparation or
modification of this Agreement, or the sale of any Loans, related Notes and
Related Documents or the security interest in the related Collateral hereunder
or the enforcement by judicial proceedings or otherwise of any rights of the
Buyer hereunder; (ii) obtain and promptly furnish to Buyer evidence of all such
Government Approvals as may be required to enable Seller to comply with its
obligations under this Agreement; and (iii) execute and deliver all such other
instruments and perform all such other acts as Buyer may reasonably request to
carry out the transactions contemplated by this Agreement.

(i) Liquidation, Merger, Sale of Assets, Etc. To not
liquidate, dissolve or enter into any merger, consolidation, joint venture,
partnership or other combination nor sell, lease, dispose of such portion of its
business or assets (excepting sales of goods in the ordinary course of business
and excepting sales of the Loans to the Buyer) as constitutes a substantial
portion thereof; provided, however, so long as no Termination Event or event
which with the passage of time or the giving of notice or both would constitute
a Termination Event shall have occurred and be continuing or will occur as a
result of such merger or consolidation, Seller, may merge or consolidate with
any Person or sell all or substantially all of its business or assets to any
other Person so long as (A)(i) Seller or United Grocers' shall be the surviving
or continuing corporation or (ii) if Seller shall not be the surviving or
continuing corporation or shall sell all or substantially all of its assets to a
Person such surviving, continuing or purchasing Person shall be

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<PAGE>
incorporated under the laws of the United States or any jurisdiction thereof,
shall assume in writing all obligations of the Seller under this Agreement,
shall be eligible to borrow from NCB pursuant to the provisions of the Bank Act
and shall have a Consolidated Net Tangible Assets not less than the Seller prior
to the merger or consolidation, and (B) at the time of such consolidation,
merger or sale and after giving effect thereto no Termination Event shall have
occurred and be continuing.

(k) ERISA Compliance. To not and not allow any member of its
Controlled Groups or any Plan of any of them to: (i) engage in any "prohibited
transaction" as such term is defined in Section 4.06 or Section 2003(a) of
ERISA; (ii) incur any "accumulated funding deficiencies" (as such term is
defined in Section 3.02 of ERISA) whether or not waived; (iii) terminate any
Pension Plan in a manner which could result in the imposition of a Lien on any
property of the Seller or any member of its respective Controlled Groups
pursuant to Section 4068 of ERISA; or (iv) violate state or federal securities
laws applicable to any Plan.

(o) Bank Act Eligibility. To remain "eligible" to borrow from
NCB pursuant to the provisions of the Bank Act.

(p) No Changes. To make no change in the Credit and Collection
Policy, which change would impair the collectibility of any material amount of
the Loans; make no material change in

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<PAGE>
the Credit and Collection Policy without prior written consent of the Buyer, or
change its name, identity or corporate structure in any manner which would make
any financing statement or continuation statement filed in connection with this
Agreement or the transactions contemplated hereby seriously misleading within
the meaning of Section 9-402 (7) of the UCC of any applicable jurisdiction or
other applicable laws unless it shall have given Buyer at least 45 days' prior
written notice thereof and unless prior thereto it shall have caused such
financing statement or continuation statement to be amended or a new financing
statement to be filed such that such financing statement or continuation
statement would not be seriously misleading; to make no material change in the
terms of the Notes and Related Documents relating to the Loans without the prior
written notice to and consent of Buyer.

(q) Security Interest. To transfer to Buyer, at Buyer's
request, a security interest in all or any specified portion of that Collateral
securing any Loan which was not transferred to Buyer on the applicable Closing
Date (transferring to Buyer the same interest as the Seller had and disclosed to
Buyer on the applicable Closing Date) and to provide evidence reasonably
satisfactory to Buyer that all actions as are necessary or appropriate to
perfect Buyer's security interest in such Collateral have been taken.

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<PAGE>
SECTION 6.02 Special Covenant of Seller. At all times prior to
the later of (i) the Termination Date or (ii) the date on which all obligations
of the Seller under this Agreement and Guarantor under the Guaranty Agreement
have been performed in full, Seller agrees not to (a) make or own (including a
participation in) any loan to any Obligor or member of its Obligor Group unless
such Obligor's or member's obligation, as the case may be, to repay such loan is
subordinate to such Obligor's or member's obligation, as the case may be, to
repay the Loan or Loans made to such Obligor and sold to Buyer under this
Agreement and (b) own a corporation or other business entity that makes loans to
an Obligor or member of its Obligor Group if such Obligor's or member's
repayment obligation on such loan is senior to its obligation to repay the Loan
or Loans made to Obligor or its member and sold to Buyer hereunder.

[End of Article VI]

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ARTICLE VII

SELLER OBLIGATIONS AND REPURCHASE OPTIONS
-----------------------------------------

SECTION 7.01 Purchase of Interest Rate Protection. Seller
hereby agrees to provide interest rate protection for Buyer, in the form of a
swap agreement, hedge, cap, guaranteed rate contract or other similar device or
agreement (each, an "Interest Rate Agreement"), or any combination of the
foregoing, or any other plan acceptable to Buyer (an "Interest Rate Protection
Plan"), if, for any three (3) consecutive months during the term of this
Agreement, the Prime Rate in effect on the LIBOR Determination Date for each
such month is equal to or less than the sum of the LIBOR on such Date and 200
basis points. An Interest Rate Agreement, if any, must satisfy the following
requirements: (i) have a term of 36 months (or such fewer number of months as
remain in the term of this Agreement); (ii) be provided by a party or parties
who is or are either rated "A" or higher by a Rating Agency or acceptable to
Buyer; (iii) be accompanied by an opinion of counsel to provider to the effect
that the Interest Rate Agreement is a legal, valid and binding Agreement of
provider, enforceable in accordance with its terms; (iv) provide for an interest
payment during each Interest Accrual Period at least equal to the related LIBOR
plus 200 basis points; and (v) be delivered by the Payment Date in the month
immediately following the month in which the requirement of this Section 7.01
takes effect. An Interest Rate Protection Plan must he coterminous with this
Agreement.

SECTION 7.02 Optional Repurchase of Defaulted Loans and after
Obligor Default. In addition to the other repurchase obligations contained
herein, Seller will have the option to repurchase any Loan sold by Seller to
Buyer if (i) such Loan is a Defaulted Loan or (ii) an Obligor Default has
occurred and has then been continuing for at least thirty (30) days or (iii)
Buyer has received notice of any adverse event as described in Section 6.01(f)
hereof. Such Loan shall be repurchased by Seller from Buyer by the last day of
the Due Period during which Seller receives notice of any such Defaulted Loan or
the occurrence and continuation of an Obligor Default or notice of adverse
event, as the case may be. Such repurchase shall be accomplished on the same
terms as set forth in Section 2.01(e) and at the Repurchase Amount.

SECTION 7.03 Minimum Balances. On any Payment Date, Seller may
elect to repurchase all Loans for their aggregate Principal Balance, if as of
such Payment Date, the aggregate Principal Balance is less than five percent
(5%) of the Maximum Purchase Amount. If Seller elects to repurchase the Loans
pursuant to this Section 7.03, Seller shall provide Buyer with thirty (30) days
prior written notice. The Repurchase Amount shall be paid by Seller to Buyer in
immediately available funds prior to 12:00 noon, Washington, D.C. time. Any
resale of a Loan and related Property pursuant to this Section 7.03 shall be

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<PAGE>
without recourse or warranty of any kind except that Buyer shall he deemed to
have warranted that such Loans and related Property are free and clear of all
liens or claims resulting from or arising out of its acts or omissions (other
than acts of Buyer resulting from Seller's failure to perform as required by
this Agreement or claims of Buyer's creditors.

SECTION 7.04 Optional Repurchase of Special Loans. The
Existing Loan Purchase Agreement provides for United Resources, Inc. to sell and
NCB to purchase loans satisfying the loan eligibility requirements of the
Existing Loan Purchase Agreement, including certain Loans initially expected to
be sold and purchased pursuant to the Original Holdback Agreement and this
Agreement. In the event that any of the Loans relating to the Rays'/C&K Markets
purchased by the Buyer pursuant to this Agreement satisfy the loan eligibility
requirements of the Existing Loan Purchase Agreement, Seller shall have the
right to repurchase any such Loans having aggregate Principal Balance of not
greater than $2,000,000 at the time and Repurchase Amount described in Section
7.02. Pursuant to the terms of the Existing Loan Purchase Agreement, Seller will
have the right to sell and Buyer will have the obligation to purchase the Loans
relating to the Rays'/C&K Markets on the terms specified in such Agreement.

SECTION 7.05 Transfer of Interests. Immediately upon the
payment of the required Repurchase Amount, all right, title and interest in the
Loans being repurchased shall pass to Seller and such Loans shall cease to be
"Loans" for all purposes of this Agreement. Any resale of a Loan and related
Property pursuant to the terms of this Article VII shall constitute the
simultaneous resale by Buyer and repurchase by Seller of all Loans and related
Property.

[End of Article VII]

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ARTICLE VIII

TERMINATION EVENTS
------------------

SECTION 8.01 Termination Events. The occurrence of any of the
following events shall constitute a "Termination Event" hereunder.

(a) Breach of Covenant. Seller shall fail to perform or
observe any covenant, obligation or term of Articles VI or IX or of Section
2.01(e), 2.02, 3.02, 4.05 or 7.01 of this Agreement and, except in the case of a
breach of Section 6.01(c) or Section 6.01(f) (iii), (iv) or (v), such failure
shall remain unremedied for thirty (30) days after written notice thereof shall
have been given to Seller by Buyer; or

(b) Guarantor Defaults. Guarantor shall fail to perform or
observe any obligation, covenant or term of the Guaranty Agreement and such
failure shall remain unremedied for thirty (30) days after written notice
thereof shall have been given to Guarantor by Buyer; or

(d) Involuntary Bankruptcy, Etc. An order for relief shall be
entered against either Seller, Guarantor or any Subsidiary or Affiliate of
Seller or Guarantor under Title 11 of the United States Code, as now constituted
or hereafter amended, which order is not stayed; or upon the entry of an order,
judgment or decree by operation of law or by a court having jurisdiction in the
premises which is not stayed adjudging it a bankrupt or insolvent under, or
ordering relief against it under, or approving as properly filed a petition
seeking relief against it under the provisions of any other now existing or
future applicable bankruptcy, insolvency or other similar law of the United
States of America or any State thereof or of any other country or jurisdiction
providing for the reorganization, winding-up or liquidation of corporations or
any arrangement, composition, extension or adjustment with creditors, or
appointing a receiver, liquidator, assignee, sequestrator,

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<PAGE>
trustee or custodian of the Seller, Guarantor or any Affiliate or Subsidiary of
Seller or Guarantor, or of any substantial part of the property of Seller,
Guarantor, or any Affiliate or Subsidiary, as the case may be, or ordering the
reorganization, winding-up or liquidation of its affairs, or upon the expiration
of one hundred twenty (120) days after the filing of any involuntary petition
against it seeking any of the relief specified in Section 8.01(c) or this
Section 8.01(d) without the petition being dismissed prior to that time; or

(e) Insolvency, Etc. Either Seller, Guarantor or any Affiliate
or Subsidiary of the Seller or Guarantor shall (i) make a general assignment for
the benefit of its creditors or (ii) consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, or custodian of all or
a substantial part of the property of Seller, Guarantor, or any Affiliate or
Subsidiary, as the case may be, or (iii) admit its insolvency or liability to
pay its debts generally as they become due, or (iv) fail generally to pay its
debts as they become due, or (v) take any action (or suffer any action to be
taken by its directors or shareholders) looking to the dissolution or
liquidation of Seller, Guarantor, or any Affiliate or Subsidiary, as the case
may be; or

(f) ERISA. Seller, Guarantor, any Subsidiary of Guarantor, or
any member of the Controlled Group shall fail to pay when due an amount amounts
aggregating in excess of One Million Dollars ($1,000,000) which it shall have
become liable to pay to the PBGC or to a Plan under Section 515 of ERISA or
Title IV of ERISA; or notice of intent to terminate a Plan or Plans (other than
a multi-employer plan, as defined in Section 4001(3) or ERISA), having aggregate
Unfunded Vested Liabilities in excess of One Million Dollars ($1,000,000) shall
be filed under Title IV of ERISA by Seller, Guarantor or any Subsidiary of
Guarantor, as the case may be, any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate any such Plan or Plans; or

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<PAGE>
(h) Material Adverse Changes; Extraordinary Situation. An
event shall occur which results in a material adverse change in Seller's or
Guarantor's financial condition or operations or an extraordinary situation
shall occur which gives the Buyer reasonable grounds to believe that Seller or
Guarantor may not, or will be unable to, perform or observe in the normal course
its obligations under this Agreement; or

(j) Change in Control. Except as permitted under Section
6.01(i) hereof, or clause (v) of Article IV of the Guaranty Agreement, 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
Seller or Guarantor.

SECTION 8.02 Consequences of Termination Event. If any
Termination Event shall occur and be continuing, then in any such case and at
any time thereafter so long as any such Termination Event shall be continuing,
Buyer may, at its option, immediately terminate Buyer's commitment to accept
Renewal Notes and to make any Incremental Purchases hereunder.

In addition, upon the occurrence of any Termination Event
specified in (c), (d) or (e) of Section 8.01, subject to the provisions of
Section 9.13, this Agreement shall automatically and immediately terminate.

SECTION 8.03 Remedies of a Secured Party. Following the
occurrence of a Termination Event, the Buyer shall have all remedies provided by
law and without limiting the generality of the foregoing shall have the
following remedies: (a) the remedies of a secured party under the Uniform
Commercial Code; (b) the right to make notification and pursue collection or, at
Buyer's option, to sell all or any part of the Loans and related Property; (c)
the right to exercise all of owner's or secured party's rights under the Loans
and related Property; and (d) to
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<PAGE>
the extent that notice shall be required by law to be given, Seller agrees
that a period of twenty (20) days from the time the notice is sent shall be
a reasonable period of notification of a sale or other, disposition of the
Loans and related Property.

[End of Article VIII]

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<PAGE>
ARTICLE IX

MISCELLANEOUS
------------

SECTION 9.01 Further Assurances. Each party hereto agrees to
execute and deliver to the other party and to perform all such other acts as the
other party may reasonably request to carry out the transactions contemplated by
this Agreement. Without limiting the foregoing, Buyer agrees to endorse without
recourse the Note related to any Loan being resold to Seller pursuant to
Articles II, IV or VII, and to execute assignments and related Uniform
Commercial Code financing statements to evidence the assignment of the Related
Documents to Seller.

SECTION 9.02 Indemnities. (a) Seller will defend and hereby
indemnify Buyer and its successors, assigns, servants and agents (hereinafter
"Indemnitees") against and agree to protect, save and keep harmless and make
whole each thereof, from any and all liabilities, obligations, losses, damages,
penalties, claims, actions, suits, costs (including any net increase in the tax
liability of an Indemnitee resulting from its receipt of indemnity payments made
under this Section 9.02), expenses and disbursements, including reasonable
attorneys' fees, of whatsoever kind and nature imposed on, incurred by or
asserted against any Indemnitee in any way relating to or arising out of (i)
this Agreement or any of the documents entered into in connection herewith; (ii)
Buyer's interest in the Loans or related Property purchased or accepted
hereunder or the enforcement of any claims thereunder; (iii) any claim made by
any Obligor, or any other party, related to the Loans or related Property
purchased or accepted hereunder, or the administration of the transactions
evidenced by such Loans and related Property or related to any other
transactions between the Obligors or their affiliates and Seller or its
affiliates; or (iv) any environmental claim or liability relating to any real
property securing any Loans.

(b) The foregoing indemnities with regard to any particular
Indemnitee shall not extend to any liability, obligation, loss, damage, penalty,
claim, action, suit, cost, expense or disbursement (i) that results from the
willful misconduct or gross negligence of such Indemnitee or from any breach of
any representation or warranty made by such Indemnitee herein; (ii) that
constitutes any tax based on any Indemnitee's net income, items of tax
preference or gross receipts (except with respect to indemnity payments
hereunder); or (iii) that consists of the failure of any Obligor to pay its
obligations under the Notes as they become due unless such failure results from
a claim of such Obligor against Seller, Guarantor, or any Subsidiary or
Affiliate of any of them, or Buyer otherwise indemnified against hereunder. Any
indemnity payments required under this Section 9.02 shall be paid within thirty
(30) days following notice thereof from the Indemnitee to Seller (which notice
shall describe in reasonable detail the matter with

56
<PAGE>
respect to which indemnification is required and shall set forth the
computation used in determining the amount of the indemnity payment). All
of the rights and privileges of each Indemnitee under this Section 9.02,
and the rights, privileges and obligations of Seller hereunder, shall
survive the expiration or other termination of this Agreement.

SECTION 9.03 No Waiver: Remedies Cumulative. No failure by the
Seller or Buyer to exercise, and no delay in exercising, any right, power or
remedy under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or remedy under this Agreement
preclude any other or further exercise thereof or the exercise of any other
right, power, or remedy. The rights and remedies provided herein are cumulative
and not exclusive of any right or remedy provided by law.

SECTION 9.04 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.

SECTION 9.05 Consent to Jurisdiction: Waiver of Immunities.
Buyer and Seller hereby irrevocably submit to the jurisdiction of any state or
federal court sitting in the District of Columbia or the State of Oregon in any
action or proceeding brought to enforce or otherwise arising out of or relating
to this Agreement and irrevocably waive to the fullest extent permitted by law
any objection which they may now or hereafter have to the laying of venue in any
such action or proceeding in any such forum, and hereby further irrevocably
waive any claim that any such forum is an inconvenient forum. The parties agree
that a final judgment in any such action or proceeding shall be conclusive and
may he enforced in any other jurisdiction by suit on the judgment or in any
other manner provided by law.

SECTION 9.06 Notices. All notices and other communications
provided for in this Agreement shall be in writing or (unless otherwise
specified) by telex, telegram or cable and shall be sent for next Business Day
delivery to each party at the address set forth under its name on the signature
page hereof, or at such other address as shall be designated by such party in a
written notice to each other party. Except as otherwise specified, all such
notices and communications if duly given or made shall be effective upon
receipt.

SECTION 9.07 Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective Successors and
assigns. Notwithstanding the foregoing, Seller may not assign or otherwise
transfer all or any part of its rights or obligations hereunder without the
prior written consent of Buyer, and any such assignment or transfer purported to
be made without such consent shall be ineffective. Buyer may not sell its rights
hereunder, or the Loans and related Property or participations therein without
the consent of Seller,

57
<PAGE>
except that by executing this Agreement, Seller shall be deemed to have
consented to the sale and assignment of the Loans and related Property to NCB
Retail Finance Corporation or other special purpose entity established by Buyer.

SECTION 9.08 Capital Markets Funding. Seller hereby agrees to
cooperate with Buyer in making such modifications to this Agreement and the
Related Documents, in executing such other documents and certificates, in
causing to be prepared and delivered such opinions, certificates, financial
reports and letters, and in taking such other actions, including changing
accounting firms, as are reasonably necessary to achieve capital markets funding
of the Loans and the related Property or to improve the execution of such
funding.

SECTION 9.09 Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall as to such
jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties waive any
provision of law which renders any provision hereof prohibited or unenforceable
in any respect.

SECTION 9.10 Attorney's Fees. In the event it is necessary for
any party hereto or its Successors or assigns to institute suit in connection
with this Agreement or the breach thereof, the prevailing party in such suit
shall be entitled to reimbursement for its reasonable costs, expenses and
attorney's fees incurred including fees incurred on any appeal.

SECTION 9.11 Setoff. In addition to any rights now or
hereafter granted under applicable law, upon the occurrence of any Termination
Event, Buyer is hereby authorized by Seller at any time, without notice to
Seller, to set off and to appropriate and to apply to the amounts then owed by
Seller hereunder or by Guarantor under the Guaranty Agreement, as the case may
be, to Buyer any and all deposits (general or special, including, but not
limited to, indebtedness evidenced by certificates of deposit, whether matured
or unmatured, but not including trust accounts) and any other indebtedness at
any time held or owing by Buyer to Seller.

SECTION 9.12 Limitation on Third Party Beneficiaries. No
provision, warranty, representation, or agreement herein, whether express or
implied, is intended to or shall be construed as conferring upon any Person not
a party hereto (including, without limitation, any Obligor) any rights or
remedies whatsoever.

58
<PAGE>
SECTION 9.13 Term of Agreement. This Agreement shall terminate
upon the earlier to occur of (i) the reduction of the aggregate Principal
Balance of the Loans (including Liquidated Loans as to which there remain unpaid
Liquidation Losses) to zero or (ii) the date on which this Agreement is
automatically terminated following the occurrence of any of the specified
Termination Events pursuant to Section 8.02; provided, however, that (a) the
rights accrued to the Buyer prior to such termination, (b) the obligations of
the Guarantor under the Guaranty Agreement and (c) the indemnification
provisions set forth in Section 9.02 shall be continuing and shall survive any
termination of this Agreement.

SECTION 9.14 Entire Agreement; Amendment. This Agreement
comprises the entire agreement of the parties and may not be amended or modified
except by written agreement of the parties hereto. No provision of this
Agreement may be waived except in writing and then only in the specific instance
and for the specific purpose for which given.

SECTION 9.15 Headings. The headings of the various provisions
of this Agreement are for convenience of reference only, do not constitute a
part hereof, and shall not affect the meaning or construction of any provision
hereof.

SECTION 9.16 Counterparts. This Agreement may be executed in
any number of identical counterparts, any set of which signed by all parties
hereto shall be deemed to constitute a complete, executed original for all
purposes.

[End of Article IX]

59
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Loan Purchase Agreement (Holdback Program) to be executed
by their respective officers or agents thereunto duly authorized as of the date
first above written.

UNITED RESOURCES, INC., as Seller

By:/s/George P. Fleming
------------------------------
Its: President
--------------------

By:/s/Mark Tweedie
------------------------------
Its: Asst. Secretary
--------------------

Notice Address:
6433 S.E. Lake Road
Portland, Oregon 97222
Attention: President

NATIONAL CONSUMER COOPERATIVE BANK, as Buyer

By:
------------------------------
Its:
--------------------

Notice Address:
1401 Eye Street, N.W.
Suite 700
Washington, D.C. 20005

ACKNOWLEDGEMENTS:

UNITED GROCERS, INC., as Guarantor

By:/s/Charles E. Carlbom
------------------------------
Its: President & CEO
--------------------

By: /s/Mark Tweedie
------------------------------
Its: Asst. Secretary
--------------------

<PAGE>

EXHIBIT B
to
Amended and Restated
Loan Purchase
Agreement
(Existing Program)

NOTICE OF ASSIGNMENT
--------------------

DATE:
MAKER:
ADDRESS:

Dear :

United Resources, Inc. ("United Resources") has entered into an amended and
restated loan purchase agreement (the "Facility") with National Consumer
Cooperative Bank ("NCB"). Under this amended Facility, United Resources will
sell loans and related collateral and documents to NCB. In a change from the
existing facility, the amended Facility provides that NCB will assume loan
servicing and credit functions.

This letter is written to notify you that on , 199 , your note(s)
described below has/have been sold to NCB;

Note No. Principal Balance Note Date
------- ----------------- ---------

together with the Securities Agreement(s) and all other documents or instruments
securing or supporting payment of the Note(s) ("Related Documents").

Under the amended Facility, two major items must be kept in mind:

1. All terms and conditions of your present Note(s)
remain intact.

2. Upon receipt of this Notice, please make all
payments of principal and interest on your Note(s) to
[Insert Lockbox Address].

Sincerely,

UNITED RESOURCES, INC.

- ----------------------------

<PAGE>
EXHIBIT C
to
Amended and Restated
Loan Purchase
Agreement
(Holdback Program)

NOTICE OF ASSIGNMENT

DATE:
MAKER:
ADDRESS:

Dear :

This letter is written to notify you that on , 199 , your note(s)
described below has/have been sold to NCB;

Note No. Principal Balance Note Date
------- ----------------- ---------

together with the Securities Agreement(s) and all other documents or instruments
securing or supporting payment of the Note(s) ("Related Documents").

Under the amended Facility, two major items must be kept in mind:

1. All terms and conditions of your present Note(s)
remain intact.

2. Upon receipt of this Notice, please make all
payments of principal and interest on your Note(s) to
[Insert Lockbox Address].

Sincerely,

UNITED RESOURCES, INC.

- ------------------------------

<PAGE>
EXHIBIT E
to
Amended and Restated
Loan Purchase
Agreement
(Holdback Program)

Form of Purchase Notice
For Incremental Purchase

[Letterhead of United Resources, Inc.]

A. Proposed Closing Date for incremental
Purchase:

B. Principal Balance of Loans requested to be
Purchased:

C. Total Purchase Price................................... $

1. Purchase Price to be paid on Closing Date
(75% of Principal Balance)................... $

2. Holdback portion of Purchase Price........... $

D. Remaining Maximum Purchase Amount (excluding
the requested Incremental Purchase).................... $

E. Certifications:

1. The information relating to the Loans requested to be purchased included
on the Loan Schedule attached hereto is true and correct.

2. The above information is true and correct pursuant to the terms of the
Amended and Restated Loan Purchase Agreement (Holdback Program) dated as
of January 30, 1998 (the "Agreement"), between United Resources, Inc., as
Seller, and National Consumer Cooperative Bank, as Buyer.

3. The representations and warranties of United Resources, Inc. in Section
4.01 of the Agreement and of United Grocers, Inc. in Section 3.01 of the
Amended and Restated Guaranty Agreement (Holdback Program) dated as of
January 30, 1998, between the Guarantor and National Consumer Cooperative
Bank, are true and correct on the date hereof.

<PAGE>
4. On the applicable Closing Date, United Resources, Inc. will certify as to
the truth and correctness of the representations and warranties contained
in Section 4.02 [and 4.03, if a Renewal Date] of the Agreement with
respect to the Loans sold and assigned on such Closing Date and will
cause to be delivered to National Consumer Cooperative Bank an opinion of
counsel stating that a first priority perfected security interest has
been given to Buyer (with acceptable exceptions noted therein).

United Resources, Inc.

By:
------------------------
Authorized Officer

United Grocers, Inc.

By:
------------------------
Authorized 0fficer

Date of Notice:

E-2

<PAGE>

EXHIBIT I
to
Amended and Restated
Loan Purchase
Agreement
(Holdback Program)

FORM OF OFFICER'S CERTIFICATE

OF SELLER

FOR EACH CLOSING DATE

[Letterhead of United Resources, Inc.]

I, , the undersigned of UNITED RESOURCES,
INC. (the "Seller"), an Oregon corporation, do HEREBY CERTIFY to National
Consumer Cooperative Bank (the "Buyer"), in connection with the sale and
transfer of Loans pursuant to that certain Amended and Restated Loan Purchase
Agreement (Holdback Program) dated as of January 30, 1998 (the "Agreement"), by
and between the Seller, and the Buyer, on (the "Closing Date"), as
follows:

1. , is the duly elected and qualified
of the Seller and the signature below is his/her genuine signature.

2. All of the terms, covenants, agreements and conditions of
the Agreement to be complied with and performed by the Seller at or before the
Closing Date have been complied with and performed.

3. The representations and warranties of the Seller contained
in Sections 4.01, 4.02 [and 4.03, if a Renewal Date] of the Agreement are true
and correct as if made on the date hereof.

4. The Seller has not filed or consented to the filing of any
UCC-1 Financing Statement relating to the Loans and, to the best of the
Company's knowledge, no such Financing Statements have been filed, other than
Financing Statements naming National Consumer Cooperative Bank as secured party.

5. Neither a Termination Event nor an event which, with the
giving of notice or the passage of time, would constitute a Termination Event
has occurred and is continuing on the date hereof.

Capitalized terms used herein and not otherwise defined shall
have the meanings specified in the Agreement.

Certified this day of , 1997.

UNITED RESOURCES, INC.

----------------------

<PAGE>
EXHIBIT J
to
Amended and Restated
Loan Purchase
Agreement
(Holdback Program)

FORM OF OFFICER'S CERTIFICATE

OF GUARANTOR FOR EACH

CLOSING DATE

[Letterhead of United Grocers, Inc.]

I, , the undersigned of United Grocers,
Inc. (the "Guarantor"), an Oregon corporation, do HEREBY CERTIFY to National
Consumer Cooperative Bank (the "Buyer"), in connection with the sale and
transfer of Loans pursuant to that certain Amended and Restated Loan Purchase
Agreement (Holdback Program) dated as of January 30, 1998 (the "Agreement"), by
and between United Resources, Inc., as Seller, and the Buyer, and the Amended
and Restated Guaranty Agreement (Holdback Program) dated as of January 30, 1998
(the "Guaranty Agreement"), by and between the Guarantor and the Buyer, on
, (the "Closing Date") as follows:

1. , is the duly elected and qualified
of the Guarantor and the signature below is his/her genuine signature.

2. All of the terms, covenants, agreements and conditions of
the Agreement to be complied with and performed by the Guarantor at or before
the Closing Date have been completed and performed.

3. The representations and warranties of the Guarantor
contained in Section 3.01 of the Guaranty Agreement are true and correct as if
made on the date hereof.

4. Neither a Guarantor Default nor an event with which the
giving of notice or the passage of time or both would constitute a Guarantor
Default has occurred and is continuing on the date hereof.

5. The Guaranty Amount on the Closing Date (following
the sale and purchase of Loans on such Date) is $ .

Capitalized terms used herein and not otherwise defined shall
have the meanings specified in the Agreement.

CERTIFIED THIS day of , 1997.

UNITED GROCERS, INC.

----------------------